Consumer, the real winner

With the cellular phone industry backing down and withdrawing its case against the government in the Supreme Court, in return for just a few hundred crore rupees worth of sops, it is clear that the real winner in this bruising saga is the consumer (apart from of course Communications Minister Arun Shourie), since the telecom firms will focus exclusively on the market place now.

And that means the previously warring companies will now work on giving customers better services like, for instance, high-speed Internet access on, or through, mobile telephones, and certainly better all-round connectivity.

While a lot of hope is being pinned on tariffs falling further since the government has lowered the fee structure for the cellular industry, this may not happen for a few reasons. One, tariffs are already so low that the entire industry is bleeding.

Two, the access deficit charges to be paid by mobile phone users to subsidise BSNL's operations will actually increase tariffs  --  interestingly, the cellular industry fought the telecom regulator on this, and brought down the ADC from Rs 13,500 crore (Rs 135 billion) to Rs 4,500 crore (Rs 45 billion) in just one stroke, but then inexplicably gave up the battle for its consumers.

Third, with the unified licence making it unviable for small operators to continue, the industry will see a lot of consolidation and that usually results in higher tariffs.

The question that naturally arises out of Wednesday's developments is: since the cellular operators have withdrawn their case, does this mean the government's policy change was justified?

Clearly not, because, as this newspaper has argued and even the TDSAT's majority judgement accepts this, the WiLL-mobile services as offered by Reliance Infocomm were not legally permissible.

Yet, it is this that the government legalised through its unified licence. The reason why the cellular operators withdrew their court case, is different, and manifold.

Clearly, the reason wasn't the sops doled out to them, because the few hundred crore rupees they got is peanuts compared to the Rs 18,000 crore (Rs 180 billion) they demanded as compensation from the government for violation of their licence conditions.

The real reason is that few industrialists have the stomach to take on the government over a prolonged period of time. And in this case, both the government and its regulators made it clear that they were in favour of the WiLL-mobile firms.

Besides, with some cellular operators themselves in violation of the spirit of the law by having higher-than-permitted foreign stakes through complex cross-holdings, the government found it easy to lean on them  --  the decision to allow a higher foreign stake will now allow them to get over the problems they faced in the past.

Others, like AT&T decided to quit India altogether, and some like BPL were groaning under a mountain of debt and so needed government goodwill to get government-owned banks to renegotiate their loans.

The entire episode, needless to say, has left a bitter aftertaste in the mouths of investors, both local and foreign, who will naturally be suspicious of a government that changes policies to determine who the winners will be.

But, for now, in this festive season, in a period when India looks like it's the belle of the ball, the government is not too concerned. That will happen only later.

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