I can buy soap or garments from scores of different manufacurers. But I can get a telephone service from only one supplier — he government. Inevitably, the monopoly supplier is inefficient and callous. The telephone goes dead twice a month, and the size of my bills often makes me feel that some crooked linesman is transferring calls from somebody else’s meter to mine. If a soap manufacturer sells me unsatisfactory soap. I can always go to a rival. But not. alas. if I am sold an unsatisfactory telephone service.
Why not? Because, according to conventional wisdom, telephones a natural monopoly, in which competition is not feasible. Laying exchanges and lines is very costly — maybe Rs 30.000 per le — so it is not economic for dozens of telephone companies to lay parallel cables to each house (just as it is not feasible for dozens of railway companies to lay parallel tracks between Delhi and Bombay). And if there has to be a monopolist, a government-controlled one may well be less exploitative than a private one. That has always been the justification for the monopoly of Department of Telecom DOT).
However, technology does not stand still, and new inventions have now destroyed the status of telecom as a natural monopoly. No longer is it necessary for every telecom company to lay expensive cables to every house. Much of the task can now be done cheaply by wireless, (which will not suffer water seepage during the monsoon like old-style cables, and which does away with the need to keep digging up roads to lay cables). The cost of wiring has anyway fallen dramatically with new technologies. And telecom companies can also ride piggy-back cheaply on other sons of cable network’s — for TV computers, data transmission and so on.
NEW TECHNOLOGY: A new technology called PCN is coming in, which could make it economic for literally dozens of telecom companies to offer services to every household. And the pace of technology is changing so rapidly that almost any system that looks good today may be obsolete tomorrow. In this milieu, it is impossible to say in advance what technology will prove best, and we need open competition between different technologies to determine which satisfies customers most.
So. why are we going through a complex, time-consuming and probably corrupt system of tendering for new telecom systems? Why are we laying down specific technologies for newcomers to follow? Why don’t we deli cense telecom and allow any company to enter, and let the consumer decide which are the best ones deserving to survive? This will be quite compatible with the existing limits on foreign equity participation.
In theory. India is liberalising telecom by ending the government monopoly and permitting one more private operator in every circle. Over and above this, private parties are bidding for rights for cellular phones and pagers. While this may be more liberal than a government monopoly, it limits competition, lets the government choose the winners rather than consumers, and leads to endless delays, court-cases and accusations of kickbacks.
The government claims that India has proceeded faster in liberalsing telecom than many other countries, including the USA. I can only say that vested interests exist everywhere, and the fact they are strong in the USA or any other country is no good reason for caving in to them India. Britain and New Zealand have already permitted free entry of any telecom supplier, with an independent regulator ensuring fair competition by capping the cost of phone calls. India heeds a similar system of open competition subject to a price cap and independent regulation. Despite its size. India has very few phones by global standards: it is just starting down the telecom road. This means it is not saddled with the baggage of past technologies, and can leap-frog over other countries to get the most modern. flexible, competitive system in the world.
Competition may mean that there is not enough space for everybody in the spectrum of airwaves available for transmission.
The traditional objection is that private, companies will exploit only the metres and neglect rural areas. However, at least one US company sees a huge potential in the rural market, which can be cheaply served by new technologies. Experimentation and innovation through competition is superior to licensing as a, way of ensuring that cheap, appropriate rural systems come up.
What if private companies fail to go rural? Then the government should levy a cess, say 2 paise per call in urban areas, and use this to finance its own rural services. Access makes delicensing entirely compatible with providing services to remote areas.
Competition may mean that’ there is not enough space for everybody in the spectrum of airwaves available for trans–mission. In that case the spectrum’ should be auctioned (as in the USA). Fortunately, new technologies make transmission possible using less and less of-the spectrum.
Mr Sam Pitroda says there could be problems in technology com-patability if too many competitors come in. Maybe so. But let competitors innovate to produce compatible technologies! and 1st the best man win. In such a case, consumers will be sampling services and deciding what is best, not a government committee. That is surely a fairer, faster more desirable outcome.