Competition lowering rates....
Open the gates
The ongoing price war between two leading PSUs, MTNL and
VSNL, is an indication of the benefits of competition. The internet
sector has presented a stark contrast to the basic and cellular
sectors where competition has been hobbled by restrictive entry
policies and an uncertain policy environment has restricted
competition.
In a sense, the development of the internet sector is an
indication of a positive learning effect on the part of the
government. Licences were freely issued and the licence fee is
nominal. Consequently, the internet has seen a level of
competition and innovative tariff packages which basic and
cellular services sector are yet to see. It is worth noting that the
drastic fall in tariffs began when the internet sector was thrown
open to the private sector. The resultant competition has forced
down tariffs. While VSNL remains by far the leading ISP with a
subscriber base of over 3,00,000, private ISPs like Satyam
(1,00,000) and Bharti-BT (50,000) are beginning to build up
numbers.
The priority for the government should be to frame a cogent
gateway policy for ISPs. While the private sector has been
allowed to set up gateways in principle, the actual process has
been excruciatingly slow. While security guidelines have been
drawn up, the modalities of allocating bandwidth to the ISPs is
still being finalised.
As of now, government policy is to prefer Indian satellites
followed by satellites — such as Intelsat — in which VSNL has
an equity stake. Foreign satellites would only be preferred if
these two options are not available. As a matter of principle, this
restriction should go and ISPs should be free to negotiate with
satellite providers. The allocation of frequency bandwidth on
Indian satellites, on Intelsat and on submarine cables is through
VSNL, a restriction which also needs be removed. VSNL is a
rival to the private ISPs. The latter should not be dependent on
VSNL for a crucial aspect of their operations. India is poised for
an internet boom. The government should do whatever possible
to help the process along. |
