India Telecom

November 24, 2005
Baijal critical of USO fund’s fixed line-centric policy

NEW DELHI -- Support from the Universal Service Obligation (USO) fund should be given to wireless operators for promoting rural connectivity. For this, the present USO policy that is fixed line centric must change, explained Pradip Baijal, chairman, TRAI.

Baijal, who was one of the panelists at an ASSOCHAM AGM discussion on “Resurgent India: Whose time has come,” said, “We have to make the rural connectivity a function of the private sector, not just the public sector.”

At the panel discussion, Planning Commission deputy chairman, Dr. Montek Singh Ahluwalia, along with several other participants, pointed at the success of the telecom sector as an excellent example of public-private partnership. Dr. Ahluwalia said that this methodology should be applied in other infrastructure areas also. According to Mahendra K. Sanghi, outgoing president of the chamber, infrastructure requirements would be above US$ 15 billion in the short term.

Dr. Ahluwalia also rolled out a massive expansion program for the road network in our country. He said that this plan would leverage the public-private partnership model in its goal of converting all four-lane roads into six lane ones. A similar expansion and modernization of our ports would also follow. The expenditure on the road alone could be Rs.1.75 trillion over five to six years with another Rs. 600 billion on ports.

Dr. Ahluwalia wasn’t particularly optimistic on the power sector where competition was “not yet in sight” – this is despite the fact that the new electricity act is two and a half years old. India needs to raise investment from 25 percent of GDP to 45 percent, Dr. Ahluwalia said. According to Hari Shankar Singhania, chairman of the JK group, “state governments are trying to protect their inefficiency in the power sector” by delaying on reforms.

Getting back to the telecom sector, the next big thing is going to be the next generation network based on IP, said Baijal. “IP based NGN is cheaper and many more services could be run on these networks. But for that to happen the scheme of unified licences, which the TRAI has recommended, has to be implemented” Baijal pointed out. These recommendations have been pending with the government for over a year now.

Whereas the public sector in telecom invested Rs.1 trillion in 50 years, the private sector has invested Rs. 60 billion in only 10 years, the TRAI chief pointed out. He commended the initiatives like ITC’s e-Chaupal for reaching out into the rural areas.

“Policy must change for promoting rural communications,” Baijal remarked. Mobile operators will go into the rural areas only if the policies are favorable. “We will have only a one time expenditure of Rs. 90,000 million.” Huge operation in rural connectivity was possible without subsidy. What it would give the public would be lowest costs for different services and for operators huge volumes would enable low ARPU of even just four dollars a month profitable. Presently, the ARPU was eight dollars a month. The government was already earning a third of its revenue in service tax from the telecom sector.

“Telecom is a foster child of the private sector and the regulator,” commented Rajiv B. Lall, MD and CEO of the Infrastructure Development Finance Corporation (IDFC). “Competition must create a demonstrable success as has happened in telecom and domestic airlines” to become acceptable to the public,” Rajiv Lall pointed out. In telecom, tariffs have come significantly down. In domestic air service, fares have been reduced and over 250 planes are in service. Consumers must see similar benefits of competition in the power sector otherwise “it will not succeed”.

Contact:
TRAI
www.trai.gov.in