Y 2002–03 was the first full year in the history of national long-distance (NLD) telephony concluded in a non-monopoly environment. This was subsequent to NLD licenses granted to Bharti Telesonic on 29 November 2001, Reliance on 28 January 2002 and VSNL on 8 February 2002. VSNL too was granted the NLD license in lieu of giving up its international long-distance (ILD) monopoly in 2002 ahead of the scheduled date of 2004. That BSNL—the erstwhile NLD monopoly and incumbent player—is also all set to move into the ILD space, is a different story.

Market Scenario
BSNL continued to rule the roost in the NLD market, with only Bharti doing the commercial launch of its services in FY 2002–03.

The total NLD market in India at the end of the fiscal was pegged at around Rs 5,970 crore, with BSNL having the lion’s share of over 92 percent. This was possible owing to BSNL’s tremendous reach all over the country. As on December 31, 2002, BSNL’s vast switching network had a capacity of 484.55 lakh lines with 8,045 exchanges in urban areas and 28,583 exchanges in rural areas. The behemoth’s nationwide network covered all district headquarters, sub-divisional headquarters, tehsil headquarters and almost all block headquarters. Out of 6.07 lakh villages in the country, 5.04 lakh villages were provided telephone facility by BSNL by the end of December 2002.

At the end of 2001–02, there were 427 TAXs in the country with the total equipped capacity being 41.22 lakh lines. The number of stations connected to the National Subscriber Dialing Network through these TAXs was 29,365. During FY 2002–03, 10.11 lakh additional TAX lines were implemented. As on 31 March 2003, the total number of TAXs was 438, while 4.50 lakh lines were added to TAXs in the BSNL network.

BSNL also added 14,371 rkm of microwave systems during FY 2001–02, to have 204,551 rkm as on 31 March 2002. Against the target of 5,000 rkm in FY 2002–03 for microwave, 8,000 rkm was achieved in FY 2002-03. Also, 99,620 rkm of optical fiber systems was commissioned, which brought the total to 326,271 rkm as on 31 March 2002. Moreover, 75,812 rkm of OFC was commissioned during FY 2002-03 against a target of 75,000 rkm for FY 2002–03.

In areas that cannot be covered by cable links, BSNL provided the STD facility by using satellite-based multi-channel per carrier (MCPC) VSATs. Such places are mostly remote, hilly areas and islands, typified with small telephone exchanges and low volume of traffic. The capacity of one MCPC-VSAT is seven channels, which has been upgraded to 10 channels in the recent supplies. In FY 2001–02, the total number of the MCPC systems made operational was 13, thus taking the cumulative total of MCPC-VSATs in the country to 425 as on 31 March 2002. The total deployment of MCPC-VSATs in the fiscal under consideration stood at 40.

However, due to closure of some MCPC-VSATs, the cumulative figure as on 31 December 2002 was 414.

The Pricing
BSNL was forced to go for a major cut, following the reduction in tariffs from private players. BSNL announced its first rate cut last year when it brought down peak time calling charges to a maximum of Rs 9 per minute. This was significantly lower than Rs 24 charged earlier. These rate cuts were announced when Bharti Telesonic announced competitive rates for its IndiaOne long-distance service. The second round of rate cuts resulted in a uniform reduced rate of Rs 4.80 throughout the day for distances greater than 500 km. For lesser distances, the earlier rates prevailed. The second round of rate cuts came after Reliance Infocomm announced long-distance tariffs at Rs 1.20 per three minutes (40 paise per minute). Because of the steep drop in tariffs, BSNL’s revenues from NLD services also showed southward movement to end up at Rs 5,500 crore in 2002-03, a decrease of around Rs 2,000 crore from FY 2001-02.

Though BSNL has been corporatized for almost three years, it still does not have a system in place for separating its revenues category-wise. This is a legacy from its monopoly days. Being the incumbent operator, with a near monopoly on the basic and STD market, BSNL did not separate its revenue streams. It instead chose to provisionally assess the revenues from NLD services at 30 percent of its total revenues, and use the same for calculation of license fees. DoT has now mandated that separate revenue streams ought to be provided for license fee calculation.

The Players
Bharti made its foothold in the NLD market, garnering revenues of Rs 430 crore from its NLD services business. At the end of 2002–03, the company’s NLD services are operational almost throughout the country except in the Northeast and Jammu & Kashmir. It has so far laid down 23,500 km of cable with some amount of work left in Kolkata and parts of eastern India. As far as the infrastructure is concerned, it has put in 15 switches from Siemens all across the country except in the Northeast and Jammu and Kashmir. However, it is GAIL that has provided most of its infrastructure to Bharti on shared basis.

Ever since Bharti forayed into NLD, most of its revenues have been coming from cellular operators scattered all across the country. It tied up with almost all major service providers in the country for its NLD offering. However, eventually most of them have gone back to BSNL as the latter is offering the services at cheaper rates. BSNL is currently charging Rs 1.10 per minute for carrying STD calls, as compared to Bharti’s rate of Rs 1.49 per minute. Moreover, BSNL has also been offering discounts of up to 10 percent to cellular firms. That apart, BSNL had allowed the firms to fix their retail tariff, and thus maximize their margins. Bharti, on the other hand, had fixed STD tariffs at Rs 2.99.

Nevertheless, Bharti managed to get traffic of 100 million minutes per month last year.

Meanwhile, VSNL, though a rival of Bharti in the international space, is said to be in talks with its telecom rival Bharti to share the latter’s national long-distance (NLD) infrastructure. Since there is bound to be an overcapacity in the bandwidth space, with companies like Reliance, Bharti and BSNL already having their networks and many utility companies like PowerGrid, RailTel and GAIL proposing to do so soon, it makes business sense to lease capacity from them, rather than putting up one’s own network in place. RailTel plans to tie up with some organization for offering NLD services. According to a current mandate from the government, only PSUs can pick up the equity and therefore RailTel is currently in negotiations to offer the equity to DoT.

VSNL has consciously decided to adopt a build-and-buy model for its NLD operations, which would mean setting up the infrastructure in some areas and leasing or acquiring broadband infrastructure businesses of other companies. Currently, VSNL has 321 PoPs across the country. Since NLD tariffs have fallen by two-thirds in the last few months, Bharti is forced to sell NLD minutes below cost. The weighted cost per minute is Rs 1.70 but due to the interconnect agreement Bharti is selling at Rs 1.10.

Reliance too has nearly finalized its infrastructure with PoIs in 514 SDCAs. Of these, testing has been completed in only one SDCA, while commercial traffic is yet to be commenced. For its NLD services, Reliance has 17 switching PoPs and five gateways in Delhi, Mumbai, Kolkata, Chennai and Ernakulam.

The CAC Imbroglio
Now that Carrier Access Code (CAC) issue is under consideration at TRAI, NLD players are expecting that its inception will give MTNL and BSNL subscribers the choice of using any NLD service provider. In fact, with all private operators, this has been a sore issue for long. They say that the very spirit behind opening up the NLD sector to private players would be defeated if CAC is not implemented. CAC would help users choose and pick up any carrier they wish to. In this scenario, without the implementation of CAC, in most cases it would be impossible to break BSNL’s monopoly. Currently, only the digital exchanges are CAC-ready and unless the remaining analog exchanges are also brought into the fold, CAC implementation would remain a dream.

How would the CAC work? DoT, in its recently finalized National Numbering Plan 2003, has mandated that for an STD call, the subscriber would have to prefix ‘010’ for selection of the NLD carrier, followed by the CAC, the STD code and the subscriber number. The new numbering plan, formulated after a decade, has a projected forecast of 50 percent teledensity by the year 2030. This would translate into a numbering space for 75 crore telephone connections comprising 30 crore basic and 45 crore cellular connections. Initially, CIC is to be a two-digit code, which would be sufficient for allotment to 40 NLD operators. However, the length of CIC may be reviewed and changed to a three-digit code as and when required.

Rajneesh De