ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Competition in International Long Distance Telecom Services

Critique of TRAI’s Proposals

The recommendation of the Telecom Regulatory Authority of India (TRAI) to permit entry of private companies into international long distance (ILD) telecom services is to be welcomed, all the more because no limit is proposed on the number of licensees providing ILD services. However, many of the conditions it is seeking to impose on the licensees do not meet the cardinal test which should be: is the consumer going to be disadvantaged if this condition is not imposed?

In August 2000, the prime minister had declared that basic telecom service within the country and international long distance (ILD) services would be open to unlimited competition effective from April 1, 2001 and 2002, respectively. Such demonopolisation was inevitable consequent upon almost all the major countries, including India, acceding to the WTO and signing the Information Technology Agreement in 1996. The question was when and under what conditions the service would be opened to competition. Since 1984 when the world’s largest telecommunications traffic producing countries, the US, Japan and UK decided to end monopolies in telecoms, the first segment that was demonopolised was international telecoms followed by national long distance (NLD) and finally, the basic or fixed telephony. The reason is that the international segment requires the least capital and the equipment required could be brought into service in a few months and not years. International transmission capacity from anywhere to anywhere in the world could be obtained through communication satellites, three score of which are in the geostationary orbit with ample capacity and falling prices. International gateway switching equipment do not cost much. For example: In India the total investment in the international segment is less than Rs 2,700 crore (gross) whereas within the country it is over Rs 90,000 crore. Also, international and national long distance calls had always been priced several times their cost. Much of the difference between the cost and price is being used to subsidise local calls and also to extend the network into rural and remote areas and subsidise the services there. Competition from new entrants will bring down the prices and therefore the amount available to subsidise rural and remote area telephony and local subscribers. Until appropriate mechanisms are placed in position to build up a subsidy fund, countries delay the opening up of international and national long distance to competition. That is what India has done. By now ideas are clear as to how we can constitute a Universal Access or Service Fund (UA/S) by a levy on gross revenues of telecom companies so that we have a safety net for the ‘telecom poor’.

The recommendations of the TRAI laying parameters (these have been accepted by the government) for entry of private companies into ILD services are generally good but they could be better. Some of them could be dropped altogether. We will comment on the important and significant parameters.

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