Can it happen?

On first reading, Telecom Minister Dayanidhi Maran’s “One India” announcement, which will result in a situation where tariffs will be same whether you call local or long distance within the country, is great news and proof of what’s called the “death of distance”.

Apart from going down very well with everyone, the move will stimulate the economy and probably lead to a sharp rise in telephone traffic as well.

The problem however is that, apart from the fact that Mr Maran has no powers to do what he proposes to, this will result in serious complications in the spread of telephony in rural areas. That may be why Mr Maran told the press, “You read between the lines”.

The issue of jurisdiction first. Since the Telecom Regulatory Authority of India (Trai) was set up, the government has no role in tariff setting.

Second, long-distance tariffs in the country were, in any case, set to go down; by how much has been an open question. Earlier this year, Trai came out with an order reducing the charges on domestic leased lines, by around 70 per cent at the peak—as a result of this order, the peak cost for carrying a long-distance call fell from Rs 1.10 per minute to just 30 paise.

So it was a matter of time before Trai reduced the corresponding “carriage charge” in the long-distance tariff. Indeed, Trai’s consultation paper of March 17 specifically talks of the need to review “carriage charges”.

In which case, Mr Maran is either just taking credit for what he thinks the regulator would do (fair enough for a politician) or giving it a directive (not allowed under the law).

One question that comes up if long-distance rates are to fall (either because of Trai or Mr Maran) is what this does to the economics of Bharat Sanchar Nigam Limited (BSNL), which is the only telco that is putting up phones in rural areas today and providing low-rental phones to different sections of the population.

Till now, Trai has awarded BSNL an annual access deficit charge (around Rs 5,500 crore) because BSNL is said to be cross-subsidising low-rental phones with the profits on long-distance phones, and these have been falling over the years. If long- distance rates are now to fall by half, BSNL’s revenues will plummet.

It will also not be possible to lower long-distance call rates to those of local calls as long as there is an ADC (of 30 paise per minute) on long-distance calls.

One solution that suggests itself is to raise the single rate for local calls, but that will be a political hot potato and probably not justified, either. “One India” may sound good, but Mr Maran may not have fully comprehended the enormity of what he has announced.