Articles
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)
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