The move of DoT to forge a nodal firm for the supply, installation and
maintenance of telecom network equipments for all the twenty odd telcos in the
country is wrong and will be a disaster! When the famous AT&T of the US was
broken up in 1984 into seven Regional BELL Operation Companies (RBOCs), these
companies brought into being a multiple-owned company, Telcordia in order to
give them R&D services and solutions to solve operational problems. The network
would encounter problems and upgradations would be necessary for introduction of
new facilities and services. For the monopoly sake, AT&T's captive, the Bell
Labs (R&D arm) was fulfilling the need. Telcordia was to meet that need for the
RBOCs. Very soon, the competing companies found that the common resource was not
in their individual interest and they would better undertake their own R&D or
source it to different organizations of their choice. Over a period of time, the
seven RBOCs consolidated themselves into three dominant ones.
Indian Scenario
History everywhere shows that in any mass market, about 80% of the market is
held by three or four companies and the rest 20% by as many as twenty or more.
This is bound to happen in India as well. There is no way in which a circle or
state can sustain twelve to fifteen fiercely competing telcos and every one of
them being financially viable. Already, there are moves for consolidation and
acquisition of foreign partners by sale of their equity at fantastic prices. For
example, Videocon Telecom, Unitech, etc.
The DoT's plan for a nodal firm for telcos is on the lines of the Government
of India's Nehruvian socialist period (of licence quota, permit raj), State
Trading Corporation (STC) for trading with communist countries citing advantages
in dealing with communist countries with different norms of business by
state-owned monopolies. Similarly, the CMC is also a repetition of that mindset.
As the economy opened up, the CMC lost its raison d'etre. It had finally fallen
into the lap of the Tatas. The STC went the way of the USSR.
The Chinese Fear
The problem for Indian telcos is the supply of equipments by Chinese
state-owned companies. We have held that PSUs are 'instruments of state' and so
have to comply with our constitutional mandates and its laws. So, we can
understand that Huwaei and ZTE, the state-owned Chinese telcos will be their
master's instruments. That is the reason why we have fear of security of our
telecom network. What if the equipments are populated with Trojans, which can be
activated by outside commands. China has become notorious for hacking,
exfiltrating and disabling any targeted network in the world. The Chinese
government is not showing any evidence of trust and friendship with India. On
the other hand, we have an undeclared confrontation along our borders as well as
within the country.
The P-telcos may find the DoT offer to be good as that will facilitate
acquisitions and mergers. Competing companies can bargain with the competing
suppliers, but if the supplier is only one and the buyers are many, it is a
state of monopsony. The nodal firm can extort high prices, from P-telcos. But
given its big leverage as the sole buyer from competing foreign companies and
sole supplier to Indian companies, it would also expect a very high sale price
of equipments to the competing telcos. The nodal company will play the sole
middle man's role like the STC. It will have an adverse affect upon the prices
that the telcos will charge to users.
We are finding a bad solution for the single risk (overcome) of security in
the equipments that are coming from outside. We don't have any reason for
suspecting security risks from non-Chinese suppliers. The right solution is to
have an international security certifying agency, whose certificate of safety
should be mandatory for supply of equipments by Chinese and other foreign
companies to Indian telcos. That solution is much more preferable than the idea
of a nodal firm. The nodal firm concept can also facilitate the Indian telcos to
form a CARTEL with regard to the prices they charge from users. The telcos
obtain equipment at the same cost and operate and maintain them at the same
cost. Obviously, there is no differentiation among service products except in
advertisements. Infringement of the mandated norms for quality of service is not
leading to any punishment to the defaulters. The Trai has no power and there is
no move to confer such power on it.
I would suggest the DoT and the P-telcos desist from executing the idea of a
nodal firm to obtain supplies and maintain and operate the competing telco's
networks.
Dr TH Chowdary
vadmail@cybermedia.co.in
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