[Reader-list] The Telecom 'Revolution' - All for the elite's sake?

[Harsh Kapoor]

The Praful Bidwai Column for the week beginning Jan 7

The Telecom 'Revolution'

All for the elite's sake?

By Praful Bidwai

It's nothing short of a "revolution", we were told when long-distance 
telephone rates in India were cut by unprecedented margins last 
month. First, the private cellular operators' alliance, IndiaOne, 
announced it was going to reduce mobile-to-mobile national 
long-distance (NLD) tariffs by 50 percent. The mobile handset, a 
trade-mark of the upwardly mobile Indian, was proclaimed to have 
become "downwardly mobile" as the "poor man's telephone". For a lot 
of people, who were wonder-struck by the five- to ten-fold decrease 
in the prices of fancy cellular handsets over the past four years, 
the prediction rang true.

Private mobile telephony, it was said, would wrench India out of the 
cesspool of global telephone laggards, with an abysmally low telecom 
density of four lines per hundred people. India would soon join the 
league of the middle-level developing countries.

Just days later, on December 28, the giant public sector Bharat 
Sanchar Nigam Ltd (BSNL) hit back with a whopping 60 percent-plus cut 
in its static telephone tariffs. A peak-time Mumbai-Delhi call will 
now cost only Rs 9 per minute, in place of Rs 24. A Delhi-Chandigarh 
or Hyderabad-Madras call will cost 59 percent less. This too was 
ecstatically welcomed as the greatest-ever "bonanza" for telephone 
subscribers. The pendulum had now swung from wireless telephony to 
terra firma--the good old land-based line.

Nevertheless, "the consumer is king", proclaimed free-market 
enthusiasts, euphorically forecasting a 70 percent increase in 
long-distance dialling and hence NLD revenues, and eventually India's 
telephone connectivity. They predict the private sector will now be 
lured to invest in a big way not just in the mobile business, but 
even in basic telephony. Never mind that the "Information Technology 
Revolution" has lost some of its steam. Telephony will give it a 
boost; it could even provide another shortcut to rapid growth.

The time has come to pour some wintry-cold water over the "telecom 
revolution" euphoria. The tariff cuts will of course be a bonanza for 
the top one-seventh of India's telecom consumers. But the cuts will 
slow down, not accelerate, overall telephone development. It is not 
hard to understand this apparent paradox. India's primary telephone 
system, comprising 35.4 million DoT (department of 
telecommunications) subscribers, relies on a system of 
cross-subsidies. It costs about Rs 25,000 to install a new telephone 
line, but you can buy one outright for a mere Rs 8,000 to 15,000, or 
rent one by depositing Rs 1,000-3,000 in the cities (Rs 500 in remote 
villages) and then paying a low monthly rent (varying from Rs 50 to a 
maximum Rs 250).

DoT doesn't make up this difference through grants from the 
government--it pays handsome dividends to it--but generates it out of 
its NLD profits. NLD revenues account for about half the total 
revenue of Rs 25,000 crores earned by DoT subsidiaries, BSNL and MTNL 
(which is confined to Mumbai and Delhi). This is socially desirable 
and progressive, because it allows DoT to lay new lines in small 
towns and villages, and keep local call rates low. A good 40 percent 
of all DoT subscribers have "zero-calls" bills--i.e. are covered by 
the free calls allowance, because they use the telephone frugally.

At the other end of the spectrum are high-use customers such as 
corporations, governments and rich individuals, totalling five 
million. These form only 15 percent of all subscribers, but yield 
three-fourths of DoT's revenue. Being relatively well-off or entitled 
to organised sector perquisites, they can afford to make frequent 
long-distance calls. It is only rational that they should subsidise 
the poorer subscribers in the short run. In the long run, they 
themselves benefit through increased connectivity, lower tariffs and 
improved service. This is a desirable subsidy. It is this mechanism 
that has allowed DoT to add 4.5 to 5 million new lines to the 
national network each year.

At our present stage of telecom development, there is simply no 
substitute for a mechanism like this. Only five percent of all Indian 
homes are telephonically connected. This proportion is abysmally low. 
It represents an avoidable waste of social time and resources, 
including energy. Telecommunications growth entails real cost-saving 
through avoided physical movement. Growth of telephony is an 
essential component of contemporary economic development. To enable 
ordinary people to communicate via telephone lines, or through 
devices (like computers) linked to them, is to empower them. This was 
one rational major goal of the 1994 National Telecom Policy.

The government has itself undermined the goal by allowing private 
operators to prey upon public networks, and by lowering long-distance 
tariffs. (For details, see this Column on Oct 20, 2000) It wrote off 
Rs 7,000 crores in fees payable by private companies. It has unfairly 
deprived DoT of Rs 3,000 crores. Making mobile phones cheaper solves 
little. Mobiles rarely represent a net addition to the network. Most 
of their owners are existing DoT subscribers.

The beneficiaries of all these policies are less than 10 million 
individuals--in a country of 1,000 million. Private companies have 
provided just 4.2 lakh new lines (compared to DoT's 35 million). They 
indulge in cherry-picking: concentrating on super-rich clients who 
want value-added services, wholly ignoring the majority. Their rural 
connections total an appalling 300! They evade our already lax and 
scarcely-enforced service quality regulations. They are now illegally 
digging up roads and pavements to lay cables. Some have announced 
grandiose schemes. (The Tatas have a Rs. 3,500 crore investment plan 
for four circles, and Reliance and Bharti Telecom are getting into 
"broad-band" services, including "convergence"). But it is doubtful 
if these will see the light of day.

In the past, private operators had grossly overestimated the likely 
rise in telecom demand and made bids for a ludicrously high Rs 
160,000 crores. They won't be able to compete with DoT's low rates, 
but will nevertheless drive down its surplus from Rs 9,000 crores to 
Rs 3,000 crores. Rural telecom expansion will slow down. Equity will 
take a big hit.

Equity has been one of the biggest losers from many of our recent 
economic policies and social practices. The elite, comprising less 
than five percent of the population, has been the biggest gainer. 
This class increasingly preys upon national resources, and returns 
little to the common pool. It has been the main beneficiary of the 
past decade's tax breaks and reduced imposts on consumer durables 
ranging from cars to air-conditioners. Its income has more than 
doubled in the past five years or so (for instance, thanks to the 
Fifth Pay Commission) although poverty has deepened in much of the 
country. The elite has developed a positive stake in the prevalence 
of low wages, child labour and economic serfdom.

Having established its dominance at the macro level, this class is 
now aggressively taking over the public or common sphere--quite 
literally. All of our urban spaces are being reshaped to brazenly 
favour the property-owning elite. Thousands of crores are being spent 
on flyovers. Mumbai has 55 of these under construction, Delhi has 30, 
and Chennai has 18. These are tilted against public transport. The 
"beautification" drives launched in many cities further discriminate 
against the majority and pamper the elite. As if these were not 
enough, rich car-owners now monopolise whole pavements.

Go to the average Delhi "colony", from Mayur Vihar to Punjabi Bagh, 
and see for yourself how every square yard of pavement space has 
become someone's private parking place. Disputes over "ownership" can 
lead to murder. City centres and public squares are being demolished 
to build shopping arcades and amusement parks from which the majority 
is excluded. Even green public spaces are "reserved" in many cities 
for those who can pay. Meanwhile, private clubs and golf courses are 
being built on public land. So are posh schools and hospitals.

Our elite has fattened itself on entrenched hierarchies and 
discrimination, as well as subsidised education. But roughly 60,000 
of our brightest students go abroad each year even for non-specialist 
degrees that can be easily earned in India. It is hard to find a 
joint secretary to the government whose children are not studying 
abroad, or planning to. This would be bad enough even if it didn't 
represent a drain of resources. But it involves that too. The Reserve 
Bank turns a blind eye to this. And no one asks how an officer 
earning Rs 18,000 a month can finance his son/daughter's 
$30,000-a-year fees in America.

This dualism is utterly repugnant--morally, socially and politically. 
It is corroding our democracy, and breeding a culture of arrogance 
and apathy among the privileged, and resentment among the majority. 
This is evident in our cities, with their lack of safety, growing 
crime, and widespread squalor. Stress in school and at home, 
aggression in the street, and insecurity in the workplace, have 
become common features of our daily lives. Not even the wealthiest 
are free from these. Ultimately, gaping inequalities and unaddressed 
injustices will catch up with everyone unless we radically change our 
policies. Or else, we may be doomed under the present Right-wing 
juggernaut to go the Argentinian way--towards economic collapse and 
social chaos.--end--