Sunday, November 06, 2005

Unbundling the Local Loop

In April 2004, TRAI, The Telecom Regulatory Authority of India, announced the broadband policy recommendations. The complete document is available in TRAI's website as a PDF file.

However, at that time, the government was in transition. Elections were held, Congress (I) and its coalition partners formed the government at the centre and Dayanidhi Maran of DMK became the Telecommunications minister. The new government announced its telecom policy in October 2004 (roughly an year back).

Maran's policy was very disappointing. I wrote about this in a column I was writing in Samachar.com (Tamil). (copy in Unicode also available in my blog) Maran has since consistently talked against local loop unbundling in every platform possible. TRAI had recommended that in order to increase the broadband penetration, local loop owned by BSNL, MTNL be unbundled and any private operator be allowed to offer DSL connectivity through this infrastructure. BSNL's unions opposed this recommendations. Maran and DoT opposed this recommendation. TRAI was quite happy in conceding that the local loop contructed in the last 5 years need not be shared with others. However Maran's ministry was not in favour of this either.

The DoT policy announced in October 2004 had set targets for broadband connectivity: 3 million broadband connections by December 2005, of which 50% (1.5 million) to be provided by BSNL/MTNL and the rest by the private operators. The result as of September 2005? 0.61 million total connections provided (that is 20% achievement on targets!), with BSNL/MTNL providing 0.26 million (2.6 lakhs) and the private operators 0.35 million. Projecting these numbers and considering vigorous sales in the last quarter of 2005, the numbers will probably reach 1 million at best. That is, probably close to 33% of the original target set.

TRAI, visibly worried by this fact has written a letter (PDF) to DoT. (The extracts available in the form of a press release from TRAI, dated 3rd November 2005.)

TRAI has recommended once again to seriously look at unbundling the local loop. I do not believe Maran will listen to these recommendations. The reason is that there is no pressure group to lobby for this. Business Standard had a debate on this topic (19th October 2005): Deepak Maheshwari, Secretary of ISP Association of India (ISPAI) - also GM, Corporate Affairs of Sify Vs RL Dube of BSNL.

Dube's article has enough in it to be fisked. Dube claims that BSNL will cross 0.5 million by December 2005 and 1 million by March 2006. In any case, this target is well below the projected target of 1.5 million by December 2005 by DoT. Dube goes on to state that broadband works only on "a computer with Pentium 4 and above and also a sound operating system." By sound operating system, I think he means Microsoft! This is utter nonsense. Broadband will work on a 10 year old computer with Intel 486 chip running a Linux OS. The real problem is, there are more people asking for broadband and BSNL is unable to supply them with connections fast enough. That is because BSNL has not invested enough in the DSLAM infrastructure. BSNL doesn't have the marketing and after service infrastructure. There are district headquarters where DSLAM is available but marketing is very weak. (ex: Vellore in Tamil Nadu. People can get broadband but they don't know why they should!)

BSNL believes that unbundling will result in private operators making a lot of money. But in reality, BSNL will get a rental for renting out the infrastructure to private operators. By way of open competition BSNL can extract the most from the private operators. This will not prevent BSNL from offering their own service to public at their own pace. BSNL can concentrate on using this money and investing in upgrading the copper elsewhere. The biggest beneficiaries will be the people and BSNL, while the private operators will also make some money, but not the most.

Why is Dayanidhi Maran reluctant?

3 comments:

  1. In Erode, a friend of mine tried to get a broadband connection from bsnl. bsnl replied that their capacity is limited 48 broadband connections and 400 are in waiting list for getting new connections. This is the state of affairs in bsnl. but bsnl blames (http://us.rediff.com/money/2005/oct/13broad.htm) slow growth of broad band due to lack of content. irony!

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  2. Sathish Kumar NithianandamSun Nov 13, 08:56:00 AM GMT+5:30

    Good you mentioned Vellore. I applied for a bsnl dsl connection in Vellore Gandhi Nagar area on bsnl.co.in an year back and they never responded. Now they say that I am on waiting list 52 and they only have 50 connections to provide (good that they had track of my request). Anyway they are ready to give me since they don't think all 52 will ask for connection now. But still they haven't given the connection. I guess its too much money bsnl has to invest to provide dsl connection to so many places in india and they still aren't an agile company.

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  3. Maran is reluctant because, I think, he is being tutored. Look at what proper unbundling brought to the UK and French markets. The problem is, Maran thinks he is Minister for BSNL and MTNL. Not for the common citizen of this country. And, in thinking so, he is not alone.

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