Controversy

September 16, 2002
Free competition proposal in cellular raises p-telcos fears

Rajendra Prabhu

NEW DELHI -- The IT-Communication Minister Pramod Mahajan’s stand that incumbent government owned BSNL and MTNL networks would not play elder brother (senior partner) to private telcos (p-telcos) in the competition game, has whipped up fears among cellular operators that the government is out to squeeze them to submission. They are also questioning the fairness in the pricing of services by government owned companies, calling it predatory.

"In the true spirit of co-opetition, the private sector is keen to walk hand-in-hand with its senior partner, the public sector to develop the telecom sector," insists a leading operator who prefers to remain anonymous. The operator points out that for "free and fair competition," "adequate safeguards to prevent the dominant PTT operator -- who has huge monopoly surpluses as well as 99 percent control over bottleneck facilities -- from misusing its powers to indulge in anti-competitive practices" should be put in place by the government and the regulator.

The cellular operators position' is that the private sector is fully prepared to compete with public sector on equitable terms. The p-telcos apprehend that the ministry is leading the charge of the public sector companies against the private sector. The media reports on the minister’s pronouncements have given the impression of the government companies using predatory pricing as a tool to beat down the rivals.

The apprehension has arisen not only out of the minister’s statements but reports that BSNL is planning a large scale venture into WLL with limited mobility throughout the country that will be provided at a cut rate rental of Rs 200 per month and with incoming calls free. WLL will charge only Rs 1.20 for a three-minute call within a radius of 200 km as against the cellular phone charges four times that amount. As BSNL is also ready to roll out its cellular services throughout the country as the third operator at a rate lower than what cellular operators are now charging, the p-telcos are concerned that the incumbent would use its vast cashflow to cross-subsidize the service and beat down the rivals.

Cellular operators claimed earlier that p-telcos had already brought in over Rs 20,000 crores to set up state-of-the-art digital mobile network and delivered world class cellular mobile telephony to over eight million people and benefited the government with over Rs 10,000 crores in taxes, license fees, etc. Nowhere in the world is there a policy for unlimited competition in the cellular industry, the cellular operators say. On an average, three to four operators are permitted in each geographic area, the world over.

In their view it would be "irrational and unjustified" to introduce additional players into cellular until the spectrum requirements of existing players are adequately met, they claim. The existing players who have applied for adequate spectrum are still waiting for the allotment. For instance, the experience of the fourth cellular operator in New Delhi -- who has put in Rs 800 crores of investment -- is still waiting for the spectrum allotment for his services to begin.

While the NTP states that the entry of new operators in cellular would be determined by the regulator from time to time, the government was embarking on a free for all in cellular. It is obvious that this is against the policy laid down. The government's move is also seen as a violation of the contractual obligation under which service providers and government agreed to move from license fee to revenue sharing in 1999.

One of the several grouses that the government often has against the p-telcos is that they are not moving into rural areas. On the other hand, the cellular operators contend that at no time they undertook such an obligation, but have provided coverage to over 8,000 villages. The government's move is coming at a time when the regulator himself has determined that the existing tariffs were not cost based. In fact, they were far below cost already. The cellular industry itself has proposed rural telephony based on wireless connectivity, but has received no response even after 18 months.