Snippets from the Telecom Situation in India
At the height of the Reliance imbroglio, the brothers has split apart and all of a sudden, the complex shareholding pattern was revealed; how Reliance India Limited financed the telecom venture of the Mukesh Ambani. Once the resolution was in sight, the charges leveled by Anil Ambani camp in the media ceased to exist. I had been reiterating all the time that much of the media exposure is either paid or favors granted at a later stage. I am glad that the family has rallied behind the two warring brothers and the dispute seems to be heading for resolution. In that case, the telecom venture would land in favor of the younger brother. How would that make a difference? I had earlier mentioned that Reliance had entered in the GSM market in the North East, albeit on a low scale. What wasn’t mentioned was that it was owned and managed by Anil Ambani. By all accounts, the service quality was good enough despite being the lone service provider. I am not aware of the kind of services it offers now. Given the fact that Anil has limited exposure in Telecom, it would be worth seeing as to how he steers the company in the present times.
Clearly, he would have to carry out restructuring at the managerial levels and get in the new team. For too long, Reliance has had to pay out excess money over and above the original license fees. That it chose CDMA over GSM is not disputable. The fact is that it needs to inject urgency in the broadband roll out. BSNL is snapping up its potential customers rapidly. Let us see how this one works out. Finally, when it comes to managing the company, according to media reports, Anil Ambani is more on hands person being able to project a younger profile of the company. As I say it again, telecom is fast changing field here and it would be too premature to say as to how the company would change its fortunes for the better.
TRAI did something that was not expected out of it. It actually admonished VSNL over its decision to challenge the telecom order reducing the international bandwidth rates. For a company used to monopoly for too long, artificially high prices for International bandwidth was a cash cow. TRAI has gone on record saying that the domestic bandwidth prices are to be reduced by the end of this month. VSNL has been cut to size, for a company with Tata brand name; it paints a sorry picture when it comes to execution of projects. Suddenly in tier two cities, it develops cold feet, even though their infrastructure is excellent. But more on that later.
Would broadband become cheaper by that account? Well, as the media goes gaga over the reduced prices and paints a rosy picture of the broadband reach, let us face it. Reliance, Bharti and VSNL own the international gateways. Bharti offering its services under Airtel Broadband can easily offer unlimited data at reduced prices. Yet, it fails to do so. Bharti has always been watching the situation and drops its prices in anticipation of the loss of revenue from existing customers. I remember they had made a positive buzz in the market when they reduced the STD rates for long distance calls. However, it was already in the air that BSNL was looking forward for doing the same. It was enough to fill up the columns in the news papers as to how the true potential has been achieved in the Indian telecom market. At that time, this website was not there too, to refute the “facts”!
Bharti did it again this time with the broadband offering at Rs.249/- only. Yet, the download limit for the same? Remains a few hundred MB. Is that cheap or cost effective even for sparing use? Yet, it was enough to guarantee Airtel enough headlines. In the final analysis, Airtel has been a me too player rather than taking proactive approach in the market. For example, they could have one offering across the board. 512 kbps unlimited starter pack for a fixed sum. I would gladly wait for Airtel in that case. And BSNL would be forced to follow suit; would be “real competition” in terms of speed and customers.
The same argument goes for VSNL. Yet, one can understand their frustration. They are being forced to play on an uneven ground. Setting up a brand new infrastructure in terms of metro Ethernet is expensive. They are forced to provide DSL subscription after laying down their own loops. Herein lies the tragedy of Indian telecom. Unbundle the local loops; force the telcos to offer dirt-cheap prices for broadband access, which would have a multiplier effect in the economy. The bulk of the customers would invest in a Personal Computer only if there are guaranteed returns on investment. As people became aware of what mobile telephones can do to their businesses or perhaps to their lives, it was being considered as a worthy investment. As the benefits of the broadband trickle in over the period of time, it would virtually create a boom. This is what I analyze the trends as. Therefore, infrastructure duplication is avoidable in the long run and some day or the other BSNL would be forced to part with its local loop. British Telecom did the same thing. Yet, no one is happy in Britain with the government owned services.
The current estimate of number of broadband users is around 20-30000 only. That is indeed a minuscule percentage. The estimated number of subscribers in the next 5 years would depend on the proactive approach of the companies. Yet, the figure thrown around in terms of millions is a figment of imagination indeed. For that low cost computing is necessary. How is that possible? Well, that is another matter really. Finally Reliance broadband. The exact date is still not certain. Could be it be next month or two or by the end of the year? This is not certain at any rate as of now. Still waiting for a decent Internet access.