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Friday, March 28, 2008

Penalising telecom less

In Indian economic policy, it takes a while before obviously sound things get done. But many obvious things do get done. Compare Why penalise telecom? in Business Standard (February 2006) with this announcement from yesterday. As an aside, this was one of the early blog entries that I had written.


  1. Sir,
    Is telecom sector really penalised?
    All the industry stakeholders appears to be happy.Shareholders are happy- more than average P/E for entire market.Customers are happy- one of the worlds lowest telecom tarriff.Govt is happy - getting substantial L.fee. USOF is providing subsidy to USP's for providing public telephone,RHDEL's.Politicians are happy in making their cut.Share the pain,share the gain is the mantra.Who do you think was happy to provide connectivity in rural india? all the operators were targetting high ARPU subscribers till recently.Now ofcourse the things are changing, the urban market is saturated, ARPU's are falling and now the analysts value a company on the basis of number of subscribers instead of revenue..they for sure know that Industry will consolidate and the revenue will follow with the big subscriber base.With this the operators are now focussing rural subscribers.
    Sir i feel that it was the bad idea to liberalise this sector the way it has been done.There is so much of duplication of telecom infrastructure resulting in sub-optimal utilisation of capital.Further,even liberalisation was done halfheartedly.Policy does not share the active sharing of infrastructure. Reasons are best know to the babus at sanchar bhawan. The USOF policy is full of inner contradictions.Anumber of schemes are organised in a way that it clearly favours the blue eyed boy of the ministry.There is also no explaination to provide subsidy support to the FWT(Fixed wireless telephony), restricting the technological advantage of mobility.Something is fishy for sure? I wish I have encouraged you enough to take a look at the design of USOF subsidy support.And lastly the telecom operators are Big boys, sometimes they dictate policy.

  2. Dear TinTin,

    I agree Telecom is a natural monoply and should be regulated accordingly.

  3. Tintin,

    Could you please tell us more.

    My main claim is: If the distortionary taxes on this sector were removed, prices seen by customers would be lower. A lot of people would benefit from this.

    What are the inner contradictions of USOF?

    Who is the blue eyed boy and what are the schemes organised to favour him? (Or is this favouring done?)

    Where did you see the telecom firms driving policy in an unhappy way?


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