ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Segmented Thinking on Telecom

WEEKLYECONOMIC AND POLITICAL Segmented Thinking on Telecom The prime minister has done well to take the initiative and announce that the domestic long distance (DLD) sector of telecom would be opened up for entry by multiple players, without any restriction on numbers. This, it is to be hoped, will put paid to the hectic lobbying that was being carried on by the department of telecom to restrict competition and for the right to select the licensees through bidding for entry fees. However, the prime ministerial intervention still leaves a variety of questions unresolved in opening up the DLD sector.

The prime minister has done well to take the initiative and announce that the domestic long distance (DLD) sector of telecom would be opened up for entry by multiple players, without any restriction on numbers. This, it is to be hoped, will put paid to the hectic lobbying that was being carried on by the department of telecom to restrict competition and for the right to select the licensees through bidding for entry fees. However, the prime ministerial intervention still leaves a variety of questions unresolved in opening up the DLD sector.

The prime minister had said, while announcing liberal entry into DLD, that operators would have to pay an entry fee and share revenue with the government. It is perfectly legitimate for the government to ask for revenue sharing by the DLD operators. A dedicated share of revenue should go for expenditure on universal service obligations and a tiny share should go to meet administrative and regulatory costs. Any additional revenue share would essentially be a tax on the telecom infrastructure. There is every reason to keep taxes on infrastructure low, to help the international competitiveness of Indian industry. With the removal of all quantitative restrictions, save on grounds of security and safety, from April 1, 2001, Indian industry will need to compete with the best in the world even in the domestic market, and not just in international markets. Even if Indian industry would be helped by tariff protection, the level of protection cannot, for sound economic reasons and in the interest of the domestic economy, be pegged very high. Efficient, low-cost infrastructure is one of the most vital inputs that the government can supply Indian industry to help it withstand competition and extend its market size.

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