Villages miss telecom wave

REALITY CHECK PART V

While the government of Prime Minister Atal Bihari Vajpayee can credit itself for having overseen India's transformation to one of the fastest growing telecom markets in the world, it has failed to address the lack of basic communication infrastructure in rural areas.

Though the 1999 target of attaining a tele-density of 7 per cent by 2005 has been achieved two years in advance, the success has primarily been limited to the urban areas, which have gained from the proliferation of cellular telephony services.

However, the target of providing village public phones in 600,000 villages, supposed to be achieved by 2000, is yet to be met. Not only has the government let off private basic operators, originally entrusted with the task of setting up village telephones, it has in fact rewarded them by exempting them from all rural rollout obligations and allowing them to provide full-fledged mobile services by unifying telecom licences.

The move succeeded in resolving the legal wrangles choking the sector and earning nearly Rs 2,500 crore for the government. However, the previous four years of regulatory muddle following to the government's decision to allow mobility to fixed-line operators had drained the resources of many telecom companies.

The government has also dawdled on the issue of increasing the foreign direct investment cap in the sector from 49 per cent to 74 per cent. Though the Cabinet has taken up the issue a number of times, it has not been able to overcome opposition from the swadeshi lobby.

Nevertheless, the growth in the Indian telecom industry has been phenomenal. The New Telecom Policy of 1999 has proved to be a watershed one and the government can take a bow for achieving most of the objectives laid out in the document, despite initial hiccups.

Most of these policy decisions were aimed at increasing competition and driving down prices. As a result, the number of mobile operators have gone up from 2 in 1999 to an average of 5 in 2004. Reliance Infocomm, Bharat Sanchar Nigam Ltd, Bharti Tele-Ventures, Hutch and Tata Teleservices have emerged as the leading operators.

On an average, mobile tariffs have fallen 87 per cent from Rs 16 a minute to Rs 2 a minute, consequently the mobile subscriber base has now crossed 33 million from about 1.5 million in 1999. The current growth rate of 2 million new users every month makes India the fastest growing market anywhere in the world.

Similarly, the long-distance telephony business was thrown open to private players with the result that peak time STD rates have fallen from Rs 24 a minute to an average of Rs 3 a minute and ISD tariffs have come down from Rs 42 a minute to Rs 7 a minute.

To promote Internet usage, the government has played a proactive role by allowing Internet telephony and easing entry conditions by setting the licence fee at a Re 1. This has led to the user base going up from just over 200,000 in 1999 to over 4 million now.

However, other sectors like V-SAT (very small aperture terminals) and paging continue to look towards the government for direction. While most paging companies have shut shop and transformed themselves into call centre companies, V-SAT providers are not doing too well, with the Indian Space Research Organisation having a monopoly over satellite transmission.

Performance indicators

STRENGTHS

• Cellular subscriber base up from 1.5 million to 33 million
• Mobile tariffs down from Rs 16 to Rs 2 a minute, long-distance rates down 80 per cent
• Telecoms sector sees overall annual growth of over 30 per cent
• Tele-density targets achieved two years in advance
• Convergence roadmap ready in keeping with the times

CONCERNS

Digital divide between urban and rural users widen; 93 per cent of India do not have access to telecom infrastructure

Village telephone targets not achieved

Paging, V-SAT and fixed-line telephony on the decline

No clarity over the hike in FDI cap from the existing 49%

PSUs including BSNL, MTNL, C-DoT, ITI see slide in profits