Memoranda for Submission to the Chief Ministers of the Two Telugu States.


BSNL/MTNL in Perilous State are Mill-stones Round Government’s Neck


Dt:  26/4/22


BSNL/MTNL  in Perilous State

are Mill-stones Round Government’s Neck

Dr T.H.Chowdary*


In the momentous year  (momentous because George  Orwell  wrote the book “Nineteen Eighty Four” in which he postulated that in that year,  there would be three super -powers  -    Eurasia  that is, USSR; Asia  that is, China and Oceania that is, US and its  American allies, any two of which will be alternately at war  with the  third power and all  the history books which would have gone  electronic by that time, would be texting that it had been so  ……) telecommunication services  in  England, Japan and the  USA as well as in Germany and  some other countries underwent  a profound transformation . These were all monopiles until that time. In Japan and  England they were state-owned companies  and monopolies. They were  privatized ,  and subjected to competition from indigenous newly established private company . In the US the historic mammoth American Telegraph and Telephone  Corporation (AT&T) was stripped of its  monopoly and also broken into seven regional companies  one long distance  companies all of which was subjected to competition  by the newly founded other private companies .


2. India had its  first telephones  in 1884 in Calcutta, Mumbai, Madras and  Ahmedabad all established by private companies.  The  telegraph system was built, owned and operated by the Department of  Posts & Telegraphs ( P&T) . The telephone systems were interconnected by the  P&T  and  subjected to licence conditions . 


3. By 1947, we had about 100,000 telephones in several  large cities of India.  By 1994 we had  10 mln telephones; that is one telephone per 100 people.  The applicants waiting for a telephone connection  were   many.  The telephone rates  were being raised  again and again   to suppress the demand as well as subsidize the deficits in the postal  operations. This unsufferable and injurious situation  /agitated me while working  within the   department   but  under a pseudo name I went on  a public information  campaign that the monopoly should be ended, the telecoms should be   converted  into a  corporation and subjected to competition under a statutory regulator. I had also been informing and  urging successive communication  ministers as well as  Prime Ministers Rajiv Gandhi and  P V.Narasimha Rao  and late  Sri Atal Behari Vajpayi about why and   how changes should be brought  .


4. It was Rajiv Gandhi took the first step for corporatization by  establishing the state-owned  Mahanagar Telecom Nigam Ltd (MTNL) and Videsh Sanchar Nigam Ltd ( VSNL) .  Sri P V Narasimha Rao that  promulgated the   National Telecom Policy in 1994 (NTP’94) . While leaving the DOT as it is, he let in  licensed private companies  to provide services that DOT was not able to provide till then -  radio paging,  mobile radio telephone (cell phones) voice, mail, e-mail etc, …. The DOT was deadly opposed to the entry of private companies into the sector fearing that its  monopoly power prestige will ultimately be ended. 


5. Sri Atal Behari Vajpayi  took the boldest step of  converting  the DOT’s telecom services into Bharat Sachar Nigam Ltd (BSNL)  and  ending its monopoly  on every type of  service including  national  and international  subscribing  dialing besides wired telephones . During the UPA government (2004-14); the ministry with its privilege  of granting licences was grabbed by the regional party, DMK.  It utilized the power of licensing to garner unearned  money for itself and granted    limitless licenses in questionable manner. Ignoring the corruption, the country saw   severest competition with over 12 private telephone companies (P-Telcos) competing fiercely. In the  year 2010-11 as many as  228 mln telephones  the highest in any  country in a year were given.  Every type of  service that is available elsewhere in the  world became available to Indians . New business  methods like prepaid subscriptions  put a telephone  into the hands of almost every adult person . We now have about  1200 mln telephones in the country  for 1330 mln people,  a tele-density of over  90%.  While   in 1994,  the per telephone  per year  revenue to the DOT was Rs. 10,000, it was 100% of  the per capita income . Today, the per capita income is above  Rs. 1,30,000 and the average  revenue  per user (ARPU)  per year  is  Rs. 1,500 .  It is 1.1% of the per capita income.   That is why even beggars are having a cell phones.


6. Fierce competition led to the  death of  several P-Telcos. From 12 in the year  2010, we are now having 3 P-Telcos ( R-Jio, Bharti Air Tel and Vodafone-Idea and the government - owned BSNL & MTNL).  All over the world the abolition of  monopolies led to the emergence of  multiple competing companies. But within about 25 years,  in all the countries -  USA, Japan, Australia,  Germany, France, Italy…) 90% of the  market is held by two companies  and 10% by several.  That means  de-monopolization led to multiplicity and after 25 years to mere duo-poly . The same thing is happening in our country. The entry of R-Jio heralded the progress towards duopoly in India. The reasons for the death of the companies  in India  are many  but most  of them are due to  vengeful,  oppressive conditions  in the licenses, notwithstanding  the Telecom Regulatory Authority of India ( TRA) and the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).


7. Let us see  the condition of the  former monopoly,  currently known as BSNL and  MTNL both state-owned  companies . As long  as they were monopoly  they were doing wonderfully well. Subjected to competition the civil servant -operated  PSUs  are withering . The BSNL has been loosing  in fact, hemorrhaging year after year and has accumulated losses of over Rs. 90,000 cr (like the  former  state-  owned  Air India). The MTNL  has accumulated losses of over Rs.40,000 cr.  Measures like  voluntary retirement have not saved the BSNL& MTNL . Their  combined share of  the market  is about 10% and declining.


8. Government  is giving spectrum to BSNL free and Rs.40,000 cr for introduction of  4G  mobile telephone services while its  private  company rivals are about to  launch 5G services . Government  had not been able to  bestow BSNL  with all that capital that is required to  roll out  4G & 5G services and at the same time make up its losses.  Yet they want to keep it the bleeding company alive. And the government is  most irrationally keeping BSNL alive notwithstanding what happened to  government -owned   Air India which had to be  sold  to the  Tatas. The   intellectual  minister Sri Vasant Sathe had this to say about  state-owned companies :


Public Sector Undertakings


Academicians have attributed several traditional strengths to the public sector .

They primarily are:


-ability to survive without profit

-state-ownership gives than immortality

-wages and high bonuses can be paid over by continuously incurring losses

-government  ownership gives full benefit of a monopoly

                                                                                                  -Vasant Sathe,  

Restructuring of Public Sector in India


9. It is  unwise,  if not cruel for the government to  pump money into BSNL &MTNL to keep them alive.  The voluntarily retired   personnel are getting pensions while at the same time  many of them are employed by several local  private enterprises   to whom the  maintenance and operations  are outsourced   by the  BSNL &MTNL.  The VRS people  are  lucky . They are  getting pensions  as well as respectable emolument from the local private  enterprises.

10.  One way  of ending  the continuing  burden of  providing for the debt and  losses by the   tax monies of  GOI, is  to de-corporatize  the BSNL  and  departmentalise it. Government  has  the  CPWD to construct its  buildings  and maintain them. So can   government  have  departmentalized telephone services  by the de-corporatising BSNL into DOT .  They will loose  most of the private subscribers  still with them, but retain  government  subscribers.  This scheme can be worked in greater detail for its viability and vitality.


11. The death of the  P-Telcos  is mostly the  result  of the DOT’s doing. For eg: it is auctioning  Radio Spectrum. The Radio Spectrum is not produced by the  government’s DOT. It is generated by the  P-Telcos . What moral right has the government got  to auction what it does not produce and own ? A myth has  been spread that radio  spectrum is a “limited  resource”. This is entirely untrue. It is regenerated again and again and  re- used in  spatially separated  areas called,  cells. All this is done by the  P-Telcos themselves. What the government has to do is like what traffic  police do to regulate traffic.    Government can  give  licenses to P-Telcos and according to  international  and national  regulations allot  frequency bands to be  generated and used by the P-Telcos, so that  not more than one  company uses the same spectrum band  in the same area. It can   specify which company   can use what bands in which licensed  areas.  It is the cost of  this  regulation that is  a legitimate  charge that the P-Telcos  have to bear. And nothing more.  Today  about 30% of what  subscribers are paying  to the  Telcos goes to the   government  as costs of  spectrum, its usage and regulation. In other countries it is  less than 10%.  It is this  heavy burden and revenue  sharing that has crippled many Telcos and led to their death and is causing distress to the  serving P-Telcos. Government does  auction sunlight or wind from which electricity is produced.  Why should ut auction radio-spectrum which it does nor produce.


12. It is not wise to keep  BSNL & MTNL alive by oxygenating them with government money.  The mighty USA  and lesser powers like the UK  don’t have  state-owned   Telcos; their  security is not  imperiled.  There are  several ways in which governments can have their own  captive communication systems with secure inter -connections with the  privately-owned public systems.  (1,606 words)