ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Telecom Demonopolisation

Nowhere in the world has a government telecom department and an incumbent telephone company submitted itself willingly to demonopolisation. Concerned government functionaries, employees and their unions and populist parties and politicians have opposed demonopolisation. But notwithstanding the cacophony, determined and clear-headed ministers acting in the public interest have been demonopolising telecom. They see telecom as electronic and photonic infrastructure for transportation of dematerialised, electronified information (voice, text, image and data). It should be ubiquitous, broad-band, high-speed and inexpensive. Only a multi-policy of competing companies can ensure this. India must put in peace such a policy, ignoring vested interests, and institute an objective sector regulator with enough teeth.

Telecoms in India have been until very recently characterised by huge waiting lists for telephones (hovering at about 3 million) for years, periodically raised application deposits1 ranging from Rs 3,000 to Rs 30,000, prices and non-introduction of new services that communication and computer technologies have been making available all over the world. There was total monopoly of the government Department of Telecoms (DOT) over every aspect: research, design and development; production of telecom equipment; investment in and ownership of the network; provision of services besides policy-making which included licensing also. This totalitarian nature of the regime for telecommunications in India has been becoming increasingly painful to those who need communication and the penalties that it has been imposing on the economy, governance and especially trade and commerce came to be realised from the latter half of the 1980s. A gradual and halting roll-back of the total monopoly seemed necessary and wise to mitigate the harsh situation. The production of telecom equipment was first demonopolised. There was large-scale entry of and investment by private companies to produce a variety of telecom equipment: telephone cables, telephone instruments, switches, customer premises equipments like EPBXs. Eventually by 1992 production of radio and optical fibre transmission equipments needed to interconnect cities was also demonopolised. As a result of competition in the manufacture and supply of telecom equipments, prices came down dramatically to one-third to 80 per cent of what DOT was paying to the monopoly state-owned telephone companies (ITI, HCL and HTL). The paradox of millions of unfulfilled applications, abundance of inexpensive telecommunications equipment and no new telecom services prodded government as well as the political intelligentsia to rethink the fundamentals. They realised that the reason for the poverty of services was inadequate investment in telecom network and services by the monopolist DOT. Investment by the DOT could be stepped up only by generating surpluses, that is, increasing prices of services far above costs. Over 45 per cent of the DOT’s revenues are such generated surpluses. But even these huge surpluses (currently over Rs 9,000 crore per year) are not adequate to give telephones on demand. The paradox could be ended only by demonopolising the investment in network and provision of services, just like in regard to manufacture of telecom equipment. This is the basis of the National Telecom Policy (NTP)-1994. The NTP threw open all the services that did not exist (called ‘value-added’ services to allay the fears of and opposition from unions and leftists) for provision by competing private sector companies. Basic or plain old telephone services (POTs) through wires and cables was also demonopolised by stipulating that the private sector would ‘supplement’ the DOT’s investments in this sector. The proclaimed aim of the NTP (then and now in 1999 too) is to give telephones on demand (i e, no waiting) at affordable prices. It excluded, by administrative instruction, the DOT and its companies MTNL, ITI, HCL, HTL, etc, from providing the value-added services. The policy aimed at the flow of huge sums of capital for construction of telecom networks and provision of services from domestic and foreign companies.


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