Consumer's flag

Last Friday was a bad day for the Tatas, at least as far as their telecom business is concerned. Though the International Court of Arbitration had ruled against the Tata-owned VSNL on May 17, it was only on Friday that the news was out and the judgement reached newspaper offices. The same day, the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) ruled that the selling of long-distance calling cards in the country by VSNL was illegal as it was not permitted under its licence. This was what the Telecom Regulatory Authority of India (Trai) had ruled earlier, but VSNL had challenged this before the TDSAT. The TDSAT, on the same day, also restrained Star from offering its bouquet of channels on any DTH platform (the TDSAT’s next hearing is in July) and this is likely to delay the July launch of the Tata Sky DTH.

The issue of coincidence apart, both the VSNL case and the DTH case relate to the same principle of uncompetitive practice. In the VSNL case, Flag Telecom had argued that VSNL controlled the landing stations through which voice/data enter or leave the country and that it was not getting equal access to this. And in the DTH case, the appeal by Zee TV’s DTH service Dish TV was that the Star bouquet was not being made available on its DTH platform. Since the arbitration courts have ruled that FLAG can upgrade the capacity of its cable at the VSNL landing station and that VSNL will have to provide access to FLAG on reasonable terms and conditions, you can expect bandwidth costs to fall quite dramatically. Since VSNL has up to three months to implement the judgement, it will also remove a major irritant in Indo-US relations as the issue of monopoly cable landing stations has been taken up by none other than the US.

All of this highlights the crucial role of regulators in a sector where the first mover has a major advantage that, if not regulated, can be used to crush new entrants. When, in the mid-1990s, the country brought in private sector players into telecom, one of the big hurdles they faced was with regard to connecting with the dominant player Bharat Sanchar Nigam Ltd (BSNL). Unless the firms were able to connect to BSNL’s huge network, there was no way they would survive. Yet that is precisely what they were not able to do. It took a lot of effort, and this has not been fully resolved even now, but the interconnection finally became a lot easier and Trai then introduced cost-based interconnection that made it impossible to discriminate between different types of users. In the case of the power sector, it is precisely this issue of “open access” that regulators are not able to address despite it being mandated in the Electricity Act, and that is why there is such little choice for consumers. And the lack of competition, naturally, ensures that tariffs remain high. The sooner regulators wake up to this reality, and governments allow them to enforce their recommendations, the better it will be for the consumer.