Telephones
In the 1980s, it would take you years to get a telephone in India.
Today, it takes anything from a day to a week.
Q: What has changed?
Ans: Competition.
That’s why competition is a good thing, even if the competition keeps messing up. So Tata Indicom may give me sucky service and Reliance may hassle me in different ways, but I have options. And it’s because all these options exist that even MTNL’s service is vastly better than in the pre-liberalisation days. Competition rocks.
And even though liberalisation is no panacea, without it, I wouldn’t be online right now and typing this. Would you be reading this?
A much more balanced post, we can see. And since so many services are sucky and some player even hauled and penalized by TRAI, a little government regulation is good.
Well, said Amit. I agree with you, liberalization is no panacea yet order of the day.
Comment by mridula — December 19, 2005 @ 1:23 pm
Mridula, “much more balanced” compared to what? This is precisely the line I’ve always taken.
And no, more government regulation would make things worse. The market itself is the best regulator, and the government needs to get out of the way, and let consumers regulate with their wallets.
Comment by Amit Varma — December 19, 2005 @ 1:56 pm
So why did TRAI had to regulate Reliance?
Comment by mridula — December 19, 2005 @ 2:13 pm
TRAI should just get out of the way and let more players come in. Increased competition always leads to increased accountability.
And I thought you didn’t like oligopolies? It is because of TRAI and government regulations that the telecom sector is an oligopoly. It is functioning better than when it was a government monopoly because of increased competition, but it would perform even better if TRAI and the government got out of the way.
I suspect you look at intention when you consider government regulation, in any field. Try looking at outcome instead.
Comment by Amit Varma — December 19, 2005 @ 2:19 pm
I am really getting confused here. Any sane headed person will support “Free” Market, LPG (Liberalization, PRIVATIZATION, GLOBALIZATION),COMPETITION and what not? LETS Believe there is free market, competition, LPG etc., etc. etc and more etc. But all I want to know, if someone is committing fraud,misappropriating funds, cheating or indulging in some other similar acts, there should be no regulation on these things? Few decades ago, there was no internet and no laws regarding Internet crimes. But today many countries were/are/will be framing laws regarding this. Matlab, kisi ne mera paisa duboya, and that B****** will be roaming free? Market will come and regulate him? What about my money? Means I should earn more and invest at some other place? No one will frame laws for such cheats?
Ah! ha! ha! ha! I TOO WILL LIKE TO DO BUSINESS IN THAT MARKET THEN. :-)
Or discussion is about entry level? That there should be no license, quota or …..at entry level? No regulation at entry level? Or no regulation at operational level?
Comment by Alka — December 19, 2005 @ 2:30 pm
Alka, “committing fraud,misappropriating funds, cheating or indulging in some other similar acts” are all covered by the existing criminal code. You don’t need extra government regulation for that. The rule of law is essential to any market working well, and you need good enforcement, but government regulation beyond that tends to be counter-productive.
Can you specify what kind of behaviour you’d like a telecom authority to regulate that isn’t already covered by the law?
Comment by Amit Varma — December 19, 2005 @ 2:34 pm
Oh! You mean regulation is really needed somewhere? :-)
Comment by Alka — December 19, 2005 @ 2:40 pm
The point is ‘increased competition.’ It will automatically increase if TRAI goes out? Reliances and Airtels of the world will welcome competition with open arms like Microsfot did?
Anyway, why did TRAI penalize Reliance, you might be knowing the full story?
Comment by mridula — December 19, 2005 @ 2:40 pm
Regulations “are” :-)
Comment by Alka — December 19, 2005 @ 2:41 pm
I wonder what Shivam or Mridula or Chetan would have said if they had really caught a corporate in the act of bribing a politician instead of catching a politician accepting bribes.
Comment by Rajagopal — December 19, 2005 @ 2:42 pm
Mridula, when I’m speaking of regulation, I am obviously speaking about regulation beyond what the criminal code and tort laws already cover. If a company steals your money, you won’t need to go to an industry regulator but to the cops. The rule of law, as I keep stating but you keep ignoring, is the underpinning of free markets.
You seem to think that I support some kind of a lawless world, and I can’t imagine where you get that impression from!
Now, please do answer my question: Can you specify what kind of behaviour you’d like a telecom authority to regulate that isn’t already covered by the law?
If you support government regulation, surely it is incumbent upon you to specify precisely what kind of regulation you’re talking about.
Comment by Amit Varma — December 19, 2005 @ 3:01 pm
mridula, on why TRAI “regulated” Reliance:
The TRAI has in force an Access Deficit Charge regime, which I am sure you would be aware of. In this regime, any operator on whose network a call originates has to pay an ADC to the operator on whose network the call terminates. This charge is naturally passed on to the consumer as additional call tariff. The ADC is different for local calls and long distance calls, and the difference between them is huge. Reliance had been masking its routers in such a way that long distance calls would be rerouted as local calls, thus avoiding the higher ADC payments to other operators (mainly BSNL).
You would now argue - Reliance broke the law, cheated and gained an unfair advantage over competitors. You present this as an example of the need for regulation, and I don’t blame you for drawing this conclusion.
Now ask yourself this. What law was it that Reliance broke? It was a law created by TRAI. The reason? ADC’s intended purpose was to cross-subsidize rural telephony services from BSNL, which private operators were not interested in. Since this cross-subsidy was generated earlier through high long distance tariffs, which were now severely undercut by competition after liberalization, BSNL had to go begging to TRAI (its cousin in the DoT) to generate ADC as an alternate source of funding. TRAI of course never bothered to investigate allegations that BSNL was pumping ADC revenues into its cellular networks. TRAI also did not “discipline” BSNL into unbundling its legacy networks which had been installed through decades of monopoly giving it an unfair advantage over private competition.
In effect, a market where the regulator and a competitor are cousins led to an unfair and flawed regulation - which was violated by Reliance, which is now cited as reason for more regulation!!
Comment by sumeet — December 19, 2005 @ 3:10 pm
Quick note while I’m working: regulations and criminal code, theoretically (even practically, I think) are different kids. The line is thin, but there IS a line. Regulations are more like “codes of conduct” and I think they should be formed by bodies formed by consumers and companies together and not by the government. This is the so-called “free market” where the consumers decide whether a company should carry on doing business or not. The laws of free market go as far as delivery of products and services, maintenance and after-sale service. If a company doesn’t deliver, simply switch over to the one that does – simple.
When it comes to unlawful activities such as selling spurious medicines and adulterated food, tinkering with the accounting of the company, embezzling funds or setting on fire the competitors’ manufacturing units, they fall under the ambit of the criminal code of the country and as long as crime is handled by the government, the government will have to get involved. Here you can’t say, “Ok, let the free market decide whether the erring company should carry on functioning or not.” It’s like saying, “Let that person commit the murder and then let the society decide whether he/she should be treated like an outcast or not.”
The government shouldn’t meddle with the market as long as the market isn’t infringing upon our fundamental right to choose and is not destroying our ecosystems.
Regarding TRAI, I think it is doing more harm than good. It’s an exploitative agency and it keeps telephony far costlier compared to other countries.
Comment by Amrit — December 19, 2005 @ 3:11 pm
Amrit, well-stated, agree totally, especially this part: “Regulations are more like “codes of conduct” and I think they should be formed by bodies formed by consumers and companies together and not by the government.”
Obviously any company that commits a crime should be penalised for it: no one would argue otherwise.
Sumit, thanks, you’ve summed it up superbly.
Comment by Amit Varma — December 19, 2005 @ 3:30 pm
“What law was it that Reliance broke? It was a law created by TRAI. The reason? ADC’s intended purpose was to cross-subsidize rural telephony services from BSNL, which private operators were not interested in.”
Whatever it was, you prefer companies breaking the law rather than fighting the battle through rightful means? If anyone can fight a battle Reliance can or they should quit like Tatas did from the Bangalore Airport project.
Comment by mridula — December 19, 2005 @ 4:06 pm
Mridula, I get a somewhat twisted sense of deja vu here. About a year ago (or something like that) when the reliance issue was current, I had a similar discussion with someone on Gaurav’s blog (he had comments back then), where I said exactly what you say now - everything else remaining equal, including unfair rules, Reliance cheated and deserved to be penalized. And I stand by that. I was misunderstood as being pro-regulation back then, of all the ironies… The point I am making is: I am not endorsing Reliance’s practices, merely pointing out the flaw in the regulation which led to it, and hence asserting that a call for further regulation only exacerbates this systemic problem by creating unnecessary rules that can be bent by unscrupulous Reliances.
Comment by sumeet — December 19, 2005 @ 4:53 pm
Mridula, the point Amit has been trying to make is very basic - the laws of the land, if implemented properly, will take care of most transgressions (I say most, because in some cases new legislation may have to be framed). Even without TRAI, BSNL could have gone to the courts, couldn’t they? Regulation, as in the case of TRAI, creates a number of problems while solving few. Look at the history of economic regulation in India and it becomes clear. The MRTP, for example. The evidence is overwhelming.
Let me also add something here, there are people who are going off at a tanget on the ‘evil empires’ like Walmart etc. Remember that India needs to solve a lot of issues that are essentially a hangover of the License Raj and central planning. Comparing our situation with that of the US everytime someone talks about the need for reforms is just way off base.
Comment by Nanda Kishore — December 19, 2005 @ 5:06 pm
And I am also just trying to say that till such rules exist, there is no excuse for breaking them.
Comment by Mridula — December 19, 2005 @ 7:25 pm
Non sequitor. Rule of law is not being contested. Justification for the kind of “law” (ie, Regulation) that Reliance broke, is.
Comment by RR — December 19, 2005 @ 9:11 pm
Do we really have a choice?
The same 6 players in the market; entrenched oligopolies; ineffective regulator and almost next to nil compliance. Then DoT loves to play the BIG daddy of them all.
Yes, there has been a sea change of attitude but in isolated pockets. I don’t feel the same way for BSNL at my place; it’s still stuck in time warp as if isolated from rest of the world. Notional connectivity is no better than having one. Or whatever version of broadband that is advertised as!
The whole thrust ought to be on making these buffoons accountable.
Comment by Dr Abhishek Puri — December 20, 2005 @ 7:20 am
This is turning out to be a great debate, as well.
Comment by Vulturo — December 21, 2005 @ 2:35 pm
Do we really have a choice? The same 6 players in the market;
Dr. Puri, I guess you were being deliberately cynical, but there was a time when there REALLY WAS NO CHOICE. Now we have SIX to choose from! And I don’t think being “online” while on a train through remote Western Orissa is just notional connectivity. Yes, we have ways to go, but this is truly one sector where there has been nothing short of a revolution.
The whole thrust ought to be on making these buffoons accountable.
That, as we know, is the most difficult part, particularly if the offending part is a PSU.
Comment by Nanda Kishore — December 21, 2005 @ 5:20 pm
offending part = offending party
Comment by Nanda Kishore — December 21, 2005 @ 5:21 pm
[…] people — discretion inevitably leads to corruption. So what’s changed there? Competition. The private sector was allowed into telecom, and now I’m spoilt for choice in […]
Pingback by The Indian Economy Blog » Blog Archive » Corruption: A License To Kill — June 24, 2006 @ 11:40 am
Competition is what brings the customer in a better situation and Government shouldnt control it in any way.
I read a few comments and a guy here is confusing him self between government control and the need of legal machinery.
If a corporate is cheating its got nothing to do with competition atall its purely a matter of criminal justice which is a need regardless of if there is any competition or not.
Comment by Parminder Chahal — September 28, 2006 @ 5:12 am