Monday, September 22, 2008

Fix the Fixed Lines

(This was written about two years ago, but the suggestions are still valid and need to be implemented.)

I have not had a fixed line at home for several years now; my wife and I have four mobile phones between us and never felt the need for a fixed line at home. I thought, like many predict, that fixed lines would soon die. But just today, I applied for a fixed line at home. Not a fixed wireless, mind you, but the copper line that is uncharitably referred to as the plain old telephone service (POTS). 

Why did I need to take such a "retrograde" step? There were several reasons:

1. The quality of the wireless network is erratic. I am unable to depend on my mobile phone for long phone conversations, particularly official conference calls. With flexi-work and international calls at late hours, the need for a reliable phone line at home has become a must. 

2. Mobile call rates are still higher than that of fixed lines. Whether that reflects relative costs or not, it is surely true that calling from a wireline, particularly at high usage levels, is cheaper. My employer might be footing the bill, but still, why should I pay more when I call from a fixed / pre-determined location (home or office).

3. My mobile phone provides service to me as an individual, it can be shared only when I am at home. So if there is someone at home who needs to make a call when I am not home, say my parents or my child or a domestic help, the fixed line is a shared communication service. This is true even at the work-place where everyone does not necessarily have a mobile phone.

4. Finally, I must admit that I just like the convenience of using the fixed phone - the big black box which nowadays can pack in a lot of intelligence. While I need my mobile to be slim and light to fit into my shirt pocket, the form factor is not convenient for long conversations, particularly when you are in a fixed location. In spite of hands-free devices and bluetooth, voice clarity is still suspect on most mobile phones, even the high-end ones.

Just so you do not misunderstand, I am not saying that mobiles are in general inferior to fixed lines; just that in certain contexts, the POTS delivers greater value than a wireless service.

If there is, as demonstrated above, a reasonable case for the continuation of the fixed line at home, why is it that only about 15% of Indian homes have a fixed phone? It cannot be because of affordability: twice as many homes have cable TV at home, paying almost the same charge, every month. Further, data shows that the average # of mobile phones per home (in homes that have a mobile phone) is less than 1.5; given that household size in India is 4 to 5, there is clearly a gap in telecom coverage.  Lack of competition in the fixed services space and the fixation of policy makers on wireless growth has completely choked the growth of wireline.

Let me correct that to lack of effective competition. There are a few access providers rolling out wireline networks - cherry-picking the enterprise locations and high-end homes. But more interestingly, some ISPs have also rolled out various forms of wireline (cable, fiber, copper) networks. However, none of them get any encouragement to continue their roll-out. There are no clear policies for RoW permissions - every municipality, authority and building society charges its pound of flesh for allowing network creation. Having created the network, with a very high capex per sub (usually Rs 15,000 to 25,000 per subscriber), the ISP can only offer Internet and limited Internet Telephony services. They do not have the opportunity to offer basic services like voice, which even today contribute a large portion of telcos' revenues globally. Obviously an ISP cannot hope to compete with the incumbent , while addressing just a fraction of the customer revenue but with the full (or more) capex.

What needs to be done
* Allow ISPs to migrate to new category of access license: Unified Access License - without spectrum, for a nominal entry fee. On terms similar to UASL, allow ISPs to offer access services, including full Internet Telephony.

* Encourage competition in fixed line services by mandating local loop unbundling - perhaps starting with all non-metros.

* Legislate free RoW for all access licensees (recovering just the actual re-instatement charges) and mandate sharing of existing ducts - on cost recovery basis - by all licensed operators.


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