It’s a phoney situation | india | Hindustan Times
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It’s a phoney situation

india Updated: Sep 18, 2009 01:25 IST

Calls drop because of clogged telephone networks. No other reason. Blame the government for the traffic jam in the sky — there is not enough radio frequency going for the dozen-odd telecom companies offering cellphone services in India. And blame the companies for the last mile gridlock — they have not put up enough cell towers and gear to carry the voice and data of their burgeoning list of subscribers. India’s telecommunications have exploded since they were opened up to private players in the 1990s, but inadequate resources and regulation threaten to stunt the growth of an industry that is barely in its teens. Telecommunications form the backbone of the service economy in much the same way highways work for industry. A country in the midst of a services revolution cannot afford an anaemic telecom network.

The way we went about parcelling out radio frequency for mobile telephony contains within it the seeds of the industry’s present problems. Instead of auctioning spectrum to the highest bidder, India opted for licences. The players initially on the scene, like Bharti and Essar, had little to begin with — they started with a fifth of the spectrum their counterparts in the West had. And as the number of operators rose, the airwaves shrank. The frenzy among telecom companies, which added 14.4 million new users in July, is fed by a policy of allocating more radio frequency as an operator’s customer list swells. The ensuing price war — call rates in India are among the lowest in the world — is taking its toll.

Networks, too, have not kept pace with the galloping subscriber base. The towers and gear needed to carry traffic from the 445 million cellphones in the country are, by some estimates, blanking out one in five calls. Not enough of the $21 billion Indian telecom companies spent in 2008 is going towards building grid capacity. A big chunk of future investments will go into buying radio frequencies for high-speed voice and data networks that are coming up for auction later this year. A Rs 5,000-crore bid for spectrum needed for nationwide “third-generation” services could set a mid-sized telecom company back by as much as 20 per cent of its market capitalisation. The costs of acquiring new subscribers and radio waves are wracking the service quality on offer. It’s time the Indian telecom industry realised there are only so many dropped calls before the customer switches off.