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Telecom reforms a mixed bag - Views on News from Equitymaster
 
 
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  • Aug 14, 2000

    Telecom reforms a mixed bag

    The week has started with a buzz for the telecom sector with the Government taking another step towards deregulation of the industry. Its announcement however, has received varied opinions from the industry leaders.

    The Government announced that it would permit the national long distance operators (NLDO) to carry intra-circle traffic. This however, will have to be done in mutual agreement with fixed service providers (FSP's). Although the Government has attempted to walk its talk it has received flak from the existing operators.

    As per the Government announcement NLDOs will have to tie up with FSPs to provide intra-circle services. Currently, there are only a handful of private FSPs. Further, their scale of operations is still very small. This leaves only the DoT as the true FSP player.

    The announcement entails that the NLDO's will have to negotiate with the DoT and arrive at a mutually accepted agreement. With DoT having last mile connectivity it is in a stronger bargaining position. Further, there is apprehension as to whether the DoT will agree to a mutually beneficial revenue sharing agreement. Thus the announcement has raised mixed reactions from the private players.

    Another section of the industry, which is disappointed with the announcement, is the cellular operators. The announcement allows NLDO's access to both inter and intra-circle connectivity. It however is silent on the issue of permitting cellular operators inter-circle connectivity. For the cellular players, this is a double whammy, it increases the competition in their intra-circle market and fails to expand their market into the inter-circle.

    Despite the criticism the announcement is in the direction of second-generation reforms, which the Government plans to achieve. One only hopes the initiative does not result in a situation similar to that suffered by the cellular industry.

     

     

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