There have been a whole lot of problems with the government's telecom-licensing policies. Companies have long been complaining of the licensing system, and various alternatives, like revenue sharing, have been mooted. But revenue sharing too amounts to a double tax, and the net result is increased costs to the consumer. Since telecom is such an important element in a country's overall productivity, it is necessary for the government to sit and work out a scheme of arrangement with the licence holders so that the existing arrangements can be changed.If necessary, the government should treat licence fees as advance taxes so that licencees' objection to induction of new players is removed. The alternative, a truly competitive telecom system, exists in Finland. That country's telecom model proves that competition provides innovative service along with low prices. Finland has about 50 local firms, which provide services against each other.
This has led to Finland having the world's highest ownership of 33mobile phones for every 100 people, more public payphones per head than anywhere else in Europe and the world's highest Internet penetration. Two main groups compete directly to have a piece of the cake, Telecom Finland (still state- owned) and Finnet (a group of 46 firms). Licensing has been abolished, the main objective being to free the telecom sector and making telecommunication services like any other industry.
This means anybody can enter the telecom business by just notifying the concerned ministry and accepting some nominal obligations. For instance, it is only mandatory for the telecom-service provider to give emergency services. All this has led to Finland having very low call charges, where the customer can choose between a fixed line or a wireless service.
The Finland model if replicated in India would lead to the following. Firstly, there will be firms willing to build their own backbone networks (optic fibre) or set up their own microwave link. Cable operators could also get into the act.Secondly, companies could rent spare-network capacity from existing state monopolies like MTNL and DoT. This will put to rest any apprehensions regarding duplication of network, which would be a colossal waste of resources. Thirdly, a foreign firm faced with decreasing market share at home could contemplate entering the Indian market.
Fourthly, companies like Iridium and ASI would provide satellite telephony, provided of course, DoT lets go its monopoly. Initially, operational costs would be higher and profitability would be achieved only when capital costs are repaid. Many firms will bite the dust much earlier. But their networks would still be available for future use. Increased competition would reduce costs and even the existing players would benefit.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
Printer-friendly page
