Call disconnect

Once a leading service provider, BSNL has been quietly suffering losses and losing out on its subscriber base.

AMID the controversy over the sale of 2G spectrum to select private operators and the impact of such decisions on the telecom sector as a whole, the plight of one organisation has gone relatively unnoticed: Bharat Sanchar Nigam Limited (BSNL). The telecom public sector undertaking (PSU) has been quietly suffering losses and losing out on its subscriber base. The losses are not because of any inherent flaw in its delivery mechanisms. For instance, it gave stiff competition to its competitors in the first five years since its inception in 2002. But the government has been highly reluctant to subsidise the telecom PSU in the face of fierce competition though it is the only service provider in the far reaches of the country.

The BSNL Employees Union (BSNLEU) believes that the Central Bureau of Investigation (CBI) raid at Sanchar Bhavan, the headquarters of the Department of Telecommunications, in connection with the 2G spectrum allocation scam is an eyewash.Talking to Frontline, its general secretary P. Abhimanyu said that for the first time all the employees of the organisation, including officers, had jointly held a nationwide demonstration to protest against the manner in which the scarce resource of spectrum had been allocated and demanded a CBI investigation into it. In November 2010, BSNL was allotted the 3G spectrum after paying very high bidding rates.

The downfall of BSNL from being one of the leading service providers in landline and mobile connections, it is believed, began with the entry of A. Raja into the Communications and Information Technology Ministry. Two months after he took charge in May 2007, he cancelled a tender to purchase equipment to procure 45 million GSM (Global System for Mobile Communication) lines. His argument, said Abhimanyu, was that the rates were too exorbitant and that the government would lose Rs.10,000 crore if the tender was accepted. The idea was to short-change BSNL, he said.

But even before the tender was cancelled, it was taken to court by a service provider which was competing for the same lines. The matter was in limbo for six months before the tender finally got cancelled.

The mobile market at this juncture was adding one crore customers a year and BSNL was left behind. Until 2006, it performed rather well; the capacity crunch began after that. When BSNL made its foray in October 2002, private mobile operators were already in the market since 1995.

When the tender was cancelled, workers and officers of BSNL went on a one-day strike. Before that, a joint forum of the unions and associations of BSNL and MTNL (Mahanagar Telephone Nigam Limited, which provides services in Mumbai and Delhi) had written to the Minister explaining that the tender was a matter of life and death for the telecom PSUs. They reminded him that two years earlier, in mid-2005, the same tender was touted as the biggest telecom global tender thus far. A 60-million line capacity to be utilised over three years would have given 1.67 million cellular subscribers a month to BSNL's network, but the delay over the decision caused a revenue loss of Rs.110 crore, said Abhimanyu. This figure is arrived at by calculating the loss for two months at the rate of Rs.328 Average Revenue Per User (ARPU).

Following the persistence of the unions, the government agreed that BSNL could procure half the number of lines in the tender, that is, around 23 million lines. BSNL survived because of that, said Abhimanyu. But the next blow came when BSNL was about to finalise the tender for a 93-million line GSM equipment. Now, the government raised security concerns over a Chinese company the lowest bidder supplying equipment to border States such as Rajasthan and Gujarat. The government cancelled this tender too.

From 2006 onwards, the inability to purchase equipment finally affected BSNL's services and subscriber base. From the second position in the mobile segment, it soon got relegated to the fourth.

According to a decision of the government and the Planning Commission, BSNL was entrusted with the job of providing rural services. The BSNL union president said the PSU should be compensated because private companies were reluctant to go to rural areas. They have started going now with the help of the Universal Service Obligation Fund and towers erected by the government, he said.

The USOF was created in April 2002. According to the new telecom policy, the resources for this fund were to be raised through a universal access levy, which is a percentage of the revenue earned by operators under various licences. Universal Service Obligation was defined as access to telegraph services to people in rural and remote areas at affordable prices.

Access Deficit Charge

Then the government did something very strange, the unions feel. Under the pretext of a level playing field, in 2008, the Telecom Regulatory Authority of India (TRAI) decided to phase out the Access Deficit Charge fund a charge payable by private telecom operators to BSNL for sustaining its rural wireline network. The ADC, conceived in January 2003, essentially compensated basic telecom operators, BSNL in this case, for the services on which they do not recover the cost of operation; these services included telecom services in rural areas, local call charges and provisions for free calls. TRAI considered it essential to make telecom services affordable to the common man.

However, TRAI itself scrapped this on the grounds that it put an unfair burden on new entrants and distorted market conditions. It was further argued that the ADC was envisaged as a temporary arrangement with the limited objective of supporting the incumbents, that is BSNL, at the time of transition from a monopoly to a competitive environment. The then TRAI Chairman, Pradeep Baijal, is under the CBI scanner. The ADC fund itself was a decent collection; in 2003-04, BSNL got Rs.500 crore.

Unions' demand

The primary demand of the union, however, is the revival of BSNL. Abhimanyu explained how BSNL was being gradually reduced to a non-entity. A government proposal to unbundle services by providing private operators access to the wirelines laid down by BSNL was scuttled after the unions objected to it. As part of BSNL infrastructure, copper cables are present in all cities and towns. Private operators have been vying to use the Last Mile Local Loop facility of BSNL, which would allow them to provide broadband connections using BSNL's existing wireline connections without having to spend on laying cables.

A fine example of BSNL's reach was seen at the time of the Leh cloudburst last year. Only BSNL was able to restore telecommunication services; no private operator went there.

We issued a strike notice in January 2006, but called it off after a written assurance from the secretary of the DoT that the move [to unbundle services] will not be given a go-ahead, said Abhimanyu. The call charges at present are very low in the country and that is primarily because of BSNL. The unions believe that BSNL does act as a deterrent to attempts by private operators to cartelise. In 2007, when SMS rates and mobile charges were increased, TRAI did little, said Abhimanyu. When the matter went to court, TRAI said that it was watching the developments. That made the Supreme Court remark caustically that TRAI was only bird watching. We feel that BSNL was created in order to privatise the telecom sector completely, Abhimanyu said.

In January 2010, in order to revive BSNL, the Prime Minister set up a high-powered committee with telecommunications expert Sam Pitroda and HDFC chairman Deepak Parekh as its members, but no one from BSNL was present. One of the recommendations of this committee was the unbundling of BSNL. It also recommended a reduction in staff strength and the sale of 30 per cent of BSNL shares through some strategic partner, but not through an IPO (initial public offering).

The BSNLEU protested against this as well, and Minister Raja agreed to consult the unions before taking a decision. Ironically, the services of the Chinese company, which was prevented from supplying equipment to BSNL on the grounds of security, was taken up by another telecom provider. The government later agreed that BSNL could also procure equipment from this company. We are a government company. It takes at least one and a half years for the entire process of tender to come through and purchase the equipment. Private companies can strike deals over a cup of tea. We cannot do that, said the BSNLEU leader.

BSNL reaches out to millions of customers and provides a comprehensive range of telecom services that includes wireline, CDMA Mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services and IN Services. According to its website, it is the most preferred and reliable telecom company in the country today. Recently, it launched its 3G service, which is available in 240 cities in the north and east zones. This service is supposed to serve a socio-economic goal through applications like telemedicine, e-governance and e-education. Its network is everywhere except in Delhi and Mumbai.

The majority of the four lakh employees of BSNL are regular workers, while the majority of workers in the private telecom companies are on contract. BSNL is still the largest landline service provider, spreading its services more democratically, whereas private landline operators target high-end subscribers. Our reserves got completely depleted after bidding for the 3G spectrum. When we appealed to the government to subsidise us we were told that the level playing field would be disturbed. We selected non-profit circles as well compared with private operators who chose selective circles depending on profitability, said the BSNLEU general secretary.

The BSNLEU now fears that the government is moving slowly towards disinvestment. At present, BSNL accounts for only 11 per cent of the mobile segment. Even though the subscriber base has gone up, the share of BSNL as a percentage of the total market has fallen.