Structure of Telecom Market in India and Role of BSNL
By Surjith Karthikeyan & Munesh Sood
Recently, the Government of India has offered support of Rs 1.64 lakh crore to BSNL in the administrative spectrum allocation, merger of BBNL and BSNL, financial support for investments and financing of the viability gap. Previously, light measures such as employment restructuring had also been implemented at BSNL, as its labor costs accounted for almost 80% of service revenues, compared to around 5% of other telecom operators’ revenues. Thus, BSNL has recently started to record a positive operating profit. However, the current support measures can be viewed from the perspective of the overall structure of the telecommunications market in India.
Global telecommunications markets in all jurisdictions strive to be economically efficient. However, telecommunications sector externalities can occur even when all economic agents are price takers. Generally, externalities lead to market inefficiency. In the event that a market outcome is economically inefficient, a change in the consumption and/or production of telecommunications services may result in higher profits for businesses, higher benefits for consumers, or both. Generally, economic market structures can be perfect competition, monopolistic competition, oligopoly, and monopoly which is indeed determined by a number of firms and their competition. As perfect competition is indeed not practicable, we can aim for the telecom industry to be a monopolistic competitive structure, evidenced by a number of firms with differentiated products, limited firm pricing ability and the presence of barriers to entry in relation to the oligopolistic situation. characterized by a small number of companies with high entry barriers and prices.
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The formulation of telecommunications sector policy focuses on the achievement of objectives that depend on factors such as the technical effects of an action; economic efficiency (benefits and costs); equal distribution; social acceptability; operational practicality and administrative feasibility, etc. The key aspect that deserves consideration are measurable indicators for the same which may include rural and remote penetration of telecommunications services among others. India, one of the world’s leading fintech destinations, has used its telecom potential to bolster its financial inclusion goals and in this context, public telecom operators are playing a key role in driving connectivity penetration to distance, especially in inaccessible rural areas. In this context, a level playing field can be created for all telecom companies with a greater focus on public sector companies such as BSNL, which has experience in securing telecom networks in remote areas .
In a competitive developed economy like Singapore, the state-owned telecom company “Singtel” still holds the bulk of the telecom market and is a dominant price leader there with few private players. The company’s financial performance is also strong as service pricing is slightly high compared to other telecom markets. During the deployment of 5G services in Singapore, the public telecom operator has played the leading role as it has excellent facilities to meet the infrastructure needs of private players. However, in India, telecom services are very cheap due to the competitive market environment.
India is on the run for 5G, a chance for policy makers to educate and empower citizens and businesses operating in India. It could play a leading role in helping the government, as well as policy makers, to revolutionize their existing villages, towns and cities into smart and innovative villages, enabling citizens and communities to become enlightened and participate in socio-benefits. -economic and comfort provided by the wells. an advanced, more data-intensive digital economy, where the role of a state-run telecom operator may be imperative. The negative implication of 5G is the “digital divide” and the only public telecom operator has the potential to provide affordable coverage, through bandwidth synchronization, to reduce the risk of digital divide. Price regulation in the telecommunications sector can therefore focus on high quality services at affordable prices for users.
While competition in the telecommunications sector can ensure non-abuse by holders of significant market power; confidentiality and data protection guarantee the security of services and protect the privacy of users. In the case of 4G and 5G, BSNL has been made to ensure that it fully utilizes local equipment which is an added benefit as part of Atmanirbhar Bharat ensuring the security of its service for its uses . This strategy is indeed a roadmap that other telecom operators can replicate, which creates job opportunities in the telecom manufacturing sector.
India is on the verge of rolling out 5G and its uses could be categorized into three broad categories to know ; (i) Enhanced Mobile Broadband (eMBB) which encompasses enhanced outdoor and indoor broadband (ii) Massive Machine Type Communications (mMTC) which includes Internet of Things, Smart Cities, Smart Agriculture, energy, smart cities and home, remote monitoring and (iii) Ultra-reliable, low-latency communications (URLLC) which includes smart grids, telehealth, industrial automation, remote patient monitoring , industrial automation, etc. The price range to be set for these applications by telecom companies indeed determines its adoption across sectors and in this context, BSNL, as a state-run telecom company, can play a key role in facilitating its adoption in all sectors at fair prices. It can also be noted that the high prices of mobile connections made by private players previously have been considerably reduced with the arrival of BSNL. Thus, the presence of BSNL could play a key role in the healthy growth of tele-density in India.
Surjith Karthikeyan and Munesh Sood are civil servants in the Indian Ministry of Finance
(Views are personal)