Reform in reverse

A woman in Shilarajnagar village in West Medinipur district of West Bengal making a call to her son in Punjab, using a WLL phone from her door-step. The Gram Sanchar Sevak operator and postman sits beside the caller. - PARTH SANYAL

The proposed amendment to the Indian Telegraph Act to permit cellular service providers access to the USO Fund will be an undesirable shift in the existing policy of using the funds for supporting community and household coverage.

THE access of rural consumers to telephone services at affordable rates is likely to be further restricted by Union Communications Minister Dayanidhi Maran's proposed amendment to the Indian Telegraph Act (ITA). The amendment will become yet another telecom reform measure that favours private operators - it will divert substantial resources available for providing basic telecom services in rural areas into the hands of mobile phone operators.

The amendment to permit cellular service providers access to the Universal Service Obligation (USO) Fund will be an important shift in the existing policy of using the funds for supporting community and household coverage.

In order to justify the opening up of USO funds to mobile operators, the Telecom Regulatory Authority of India (TRAI) has inflated tele-density figures by including mobile phone subscribers in its quarterly computations. Tele-density, which is the number of mainline telephones in use for every 100 persons, is a measure of available telecom access in a country. As per the standards of the International Telecommunication Union (ITU), mobile phones are not included in computing tele-density as they do not provide a realistic picture of telecom access.

TRAI, however, has chosen to do so. The reasons for this are not hard to find. High tele-density figures will strengthen the case for the proposed amendment. The Fund will subsidise their expansion in the rural sector by providing grants for mobile infrastructure in rural areas. However, there is no indication that the benefit of subsidies will pass on to the consumers through lower tariffs. Under the current provision of the ITA, USO subsidies are meant to service rural low-tariff landline subscribers.

There are several reasons for having denied mobile phone services access to the USO Fund. Perhaps the most important of these is that mobile phones are not a substitute product for household or community access phones but complement these products. Data from Western nations, which have high levels of tele-density, also indicate that mobile phones only supplement fixed lines.

The second reason is that if mobile operators can access public funds for their expansion in rural areas, then rich rural consumers will acquire more than one mobile phone. In urban areas, it is common to find many households that have more than one mobile phone though they are not supported by any subsidies. Experience shows that because of the network effect, the first households to obtain mobile phones in rural areas will be those that have already been covered by fixed-line telephones. Therefore, any policy permitting mobile phone services to avail themselves of USO Funds will only perpetuate the digital divide and delay the policy objective of universal service.

Third, even if the proposed amendment envisages that only the first mobile phones provided to hitherto uncovered households are eligible for support from the USO Fund (assuming such a clause can be monitored), it raises tariff issues. Tariffs of fixed (wired and wireless) telephones in rural areas would be far higher than the cheapest mobile tariff plan. Also, given the gender equations in rural households, it is not difficult to imagine who will have custody and access to the mobile phone.

Under Section 11 (a) (ix) of the TRAI Act, the authority has to ensure effective compliance of USO. TRAI collects performance-oriented data from various service providers on a quarterly basis to monitor the growth trend in the telecom sector and to decide upon proactive and suo motu measures to fuel the growth of telecom services in the country.

Contrary to TRAI's reports claiming that India's tele-density was around 10 in April 2005, the ITU's standards would indicate that India's tele-density has not crossed five. According to a TRAI press release dated April 8, the total number of fixed lines - including Fixed Wireless Telephones (FWTs) based on Wireless in Local Loop (WLL) technology - is 45.9 million. The total number of mobile phones (GSM- and CDMA-based) is 52.17 million. TRAI has added both these figures (98.08 million) while calculating India's tele-density. For 2004-05, the tele-density, according to TRAI, was 7.17, but according to the ITU it was only 4.63.

India has been a member of the ITU for nearly 140 years. TRAI is well aware that the ITU takes only mainline telephones into consideration in calculating tele-density figures. The ITU also recognises that no indicator is likely to present a perfect picture of telecommunication access. Only residential lines provide group or family access, and there are also a large number of fixed-lines in use in offices that may get factored in while calculating tele-density.

TRAI's methodology would result in a household with one fixed wire phone and four mobile phones getting counted five times instead of once. It has distorted tele-density figures for India in such a way as to suggest that exclusive growth of telecom access represents an inclusive growth as well.

There is also a special significance in calculating the tele-density of a country before reporting to the ITU. The higher the tele-density, the lower the settlement rate between service providers for carriage and termination of international traffic. Therefore, India stands to lose monetarily for misreporting its tele-density.

In fact, even the growth of mobile phone services may not be as high as projected by TRAI, since the methodology for accounting for the number of mobile phones in use is questionable. Around 74 per cent of the lines are pre-paid connections; but many of the pre-paid consumers, may have ceased to be subscribers or migrated to post-paid connections. Hence, it is problematic to compute the number of mobile phones in use merely by adding the total number of connections given out.

As a result of the proposed amendment, the USO Fund, which was meant to support consumers of basic services (fixed lines which have the lowest tariffs), will get diverted towards subsidising development of infrastructure in rural areas by mobile phone companies that offer "value-added services" at higher tariffs.

Mobile phones are for personal access, and it is common knowledge that the number of mobile phone users in a household increases with income. In fact, a senior executive of a mobile phone company has compared the mobile phone to a toothbrush, and said that every member of the family has to have his/her own mobile phone. Such being the nature of mobile phones, the market is bound to take care of the growth in mobile phone connections and the government need not subsidise them at the cost of universal service.