Telecom policy change resulting in rate increases, customer attrition….

For those who thought telecom prices would not increase and tele-density not decrease consequent to the change in 2G policy, some statistics should prove to be an eye opener. In just two months – July and August – of this year, there has been a reduction of some 30 million subscribers. Some telecom operators like Reliance have also increased rates by as much as 25%. This post is only to highlight that every policy change has an impact on consumer lives. So far, almost all attention has been focused on the loss caused to the state exchequer by the old “cheap spectrum” policy, and alleged acts of corruption. Very little attention has been paid to the positive impact of the that policy on lower-end subscribers.

When the 2G “scam” (I never called it that) emerged and when it was labored in the public domain ad nauseum, everyone was focused on just the “loss” incurred by the Government of India. The CAG first raked this issue up preferring to call the loss “presumptive” – in other words this was revenue foregone by the government for preferring a policy of “no-auctions”. Everyone – most of all the BJP – jumped on the report and somehow made the creative leap from “presumptive loss” to “corruption of the Congress”. Ordinary folks today think that the Congress pocketed Rs. 1.75 lac crores. The BJP was successful in its political goal. But in the process, the truth got buried. The real truth is only now starting to emerge. And poor subscribers are having to pay the price.

No one pocketed that Rs 1.75 lac crores. That was indeed a presumptive loss. The government of India chose to incur that loss, just as much as it chooses to incur lacs of crores of loss on fuel subsidy or food subsidy every year. But such subtleties were beyond the CAG, and certainly the BJP. In a politically surcharged environment, no one was willing to look at the consumer side of the policy.

I have always argued that the cheap spectrum policy was a good policy. The government was right in foregoing auction revenues. It is this cheap spectrum that led to Indian telecom tariffs becoming the cheapest in the world. It is these cheap tariffs that led to the revolution in telecom in the country. Today, teledensity is upwards of 70%.....just in case anyone forgot, the teledensity was not even one tenth of this just ten years back. 2G is a “revolution” because it empowered the poor. Suddenly, all types of service providers (electrician, plumber….) who could not even afford to rent a cubbyhole were in business. Suddenly, all they needed was a phone number. Power shifted from those who had big shops to those who had big plans. This was the “inclusive growth” that everyone likes to talk about. For this inclusive growth, the GOI willingly sacrificed its revenues. How could this be called a scam? Why did this policy need to change? But who was there to understand this side of the story? Certainly not the intellectually starved BJP.

Well, the impact of the policy reversal is already starting to be felt – in anticipation of the auctions and thousands of crores being required to be paid to the government. More price increases are in the offing. More consumer attrition is in the offing. The reasoning is simple. If spectrum costs so much, then telcos will prefer to “cull” borderline subscribers – those who are economically unviable. After all, why should telcos take the burden of “inclusive growth”. Telcos are bothered only about protecting their investments. They care little about teledensity. By culling out such subscribers, telcos will use less spectrum and will have to invest less. The government can then put all the saved spectrum in a locker. Is this what the SC order of 1995 – which pronounced that airwaves were public property and should be used for consumer good – mean? Shameful to say the least.

More shameful that the change in policy is the idiocy of Indian politics. And the political nature of the CAG. By criticizing a policy that was good for the people, the CAG has forced the government to adopt a policy that harms the poor. Even the SC is complicit in this. Not understanding the impact of its “cancel all 2G licenses” order, the SC has contributed to the adoption of this anti-people policy. Further, by ordering that all natural resources should be auctioned, the SC has blundered massively. For if this were done, all resources would be sold only to richest capitalists; small businessmen who cannot compete monetarily, but who may be better equipped otherwise, will be given the short shrift. We complain about crony capitalism? Well….the SC and the CAG and the BJP should now be held directly responsible for crony capitalism.

The other shameful thing is the way in which media has failed to look at all the facts before putting out “breaking news”. No one in media wanted to look at the consumer’s interests. No one wanted to understand Kapil Sibal’s statement that there was a zero loss. Of if there was a loss, it was an intentional one. Everyone was mesmerized by the size of the “scam”. Everyone was happy putting up panel discussions on corruption. Till date, the only case of alleged corruption is the Rs 200 crores of loan given by DB Realty to Sun TV (a DMK associate). And for this, the country has had to change its policy. This is where media failed; becoming a victim of the political manipulations of the BJP.

The real truth is that auctions is a matter of choice. Auctioning everything would make India a totally capitalistic country. We object to FDI in retail on the one hand; yet on the other hand, we push for India to become totally capitalistic. If that were to happen, we should be ready to pay higher prices for everything. Unless of course, we want the government to pay for the poor by providing subsidies, again drilling a hole it is finances. In which case, what did we achieve through the auctions at all???