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Trai to unleash competition in long distance telephony - Views on News from Equitymaster
 
 
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  • Dec 14, 1999

    Trai to unleash competition in long distance telephony

    After having unleashed competition in the domestic local telephony sector, the Telecom Regulatory Authority of India (Trai) has recommended that the domestic long distance telephony sector be opened up for private investment.

    The highlights of the recommendation are:

    • Issue licenses for a period of 20 years, extendable by an additional 10 years
    • A two part entry fee of Rs 5 bn to be levied and a revenue sharing arrangement be entered into
    • The Department of Telecom Services (DTS), which will need to hive off its long distance business into a separate corporation, will also pay a licence fee at par with new entrants

    India's experience from the opening up of the mobile telephony and fixed line telephony services has been rewarding. The level of services offered by the companies have improved dramatically, and even the public sector companies like Mahanagar Telephone Nigam Limited (MTNL) have responded to competition. On the price front, the steps taken by the Trai have led to substantial reduction in costs of using such services.

    Although the tariffs for long distance telephony services have been rationalised by the Trai, there is an absence of competition in the sector. As a direct consequence, the service levels have failed to improve in line with other services.

    The decision to open up this aspect of telecom services will benefit the economy in terms of fresh inflow of resources for investment purposes and an improvement in service standards. Moreover, it will provide an opportunity to telecom companies to develop integrated telecom networks without having to depend on the DTS. These factors will stimulate the inflow of funds for investment in telecom infrastructure.

    With the government's fiscal position in dire straits and the telecom and other infrastructure sectors in need of large resources for investment purposes, the decision to open up sectors to private participation is a step in the right direction.

     

     

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