Last week, the union cabinet approved a Rs 1.64 lakh crore multi-component package to revive state-owned telecommunications provider Bharat Sanchar Nigam Ltd. The announcement was made in the same week that private telecom operators bid for fifth generation spectrum waves, being auctioned by the government.
Over a decade since BSNL was a significant presence in the Indian telecom market, what role does the government want it to play in a space that has since narrowed to three private players?
R Chandrashekhar, Union Telecom Secretary between 2010 and 2013, told BQ Prime that a number of strategic considerations are likely to have weighed in favour of reviving BSNL.
Why is the government moving in to revive BSNL now?
A large revival package for BSNL may seem a bit surprising on the face of it. Especially since this comes in the wake of government's stated policy of stepping out of business and the recent privatisation of a flagship central public sector undertaking like Air India. There are, however, various factors that may have weighed with the government while taking a decision like this against the run of play, so to speak.
One factor is security considerations. As the country is growing increasingly digital and security threats in the digital space mount, there may be a felt need for having an instrument of the government which could directly address some of its own high-priority and high-security communication requirements.
The second factor is that while the private sector has achieved remarkable progress in the last couple of decades, the fact remains that there are some areas which are either uneconomic or far-flung remote and rural areas that not been covered. Government needs to cater to such areas. Communication has now become a basic necessity and therefore, leaving such areas to their own fate is not an option. Hence the need for an arm which can execute not just finance, such areas. The past experience with coverage through private operators using the USO Fund as a viability gap measure was not very effective in achieving that objective.
The third factor could be the need for coverage of difficult regions such as extremist affected areas. Lack of coverage in such areas is not due to economic factors, but other factors like the law-and-order situation. Such areas may require special effort to provide coverage. This is regarded as important from both a security point of view as well as from a societal point of view.
A fourth factor could have been making use of spectrum that remains unsold and unused at the moment.
Yet another factor could be the prevailing market situation. Basically, we have only three players—and there are growing concerns of a possible duopoly lurking around the corner. So injecting a little more competition may have been seen to have some virtue.
All these factors to some degree may have been at the back of the mind of policymakers.
What would be the priorities In the revival plan?
With or without BSNL around, these concerns would remain in the background. Whether BSNL is the right instrument or there are other ways to achieve these objectives through the private sector is a policy choice. A public sector undertaking in the telecom space translates into an ability of the government to address some of these concerns much more directly. Government can ensure implementation. Private operators will naturally be bounded by considerations of viability, leading to a situation where some areas remain uncovered. This worry would be greater given the stretched balance sheets of private operators at this point. So, the government may have felt that this is a more effective way of dealing with this problem.
Obviously, there is an inherent contradiction here. Reviving BSNL would mean transforming it into a lean, mean fighting machine – a profitable going concern, with the agility to face competition head on. On the other hand, coverage of areas where private operators have kept away because of viability considerations would adversely affect the journey to profitability.
These two priorities are at cross-purposes with each other. These are the kind of policymaking dilemmas that always arise. The government's way of balancing these contradictions could be to compensate BSNL for any uneconomic decisions thrust on it. This is easier said than done. There are bound to be complications in doing so. Consequently, balancing these two opposing objectives will remain a challenge, but will have to be done, else both objectives would fail.
It is no secret that BSNL has been bleeding market share to the private sector for many years now. BSNL cannot be an effective instrument to cover remote and uneconomic areas if it doesn't have a large operation of its own to give it economies of scale and the reach that is needed. A pan-India coverage capability is important. To do that for a country of India's size and population, a certain threshold of subscribers is obviously imperative to stay in the game.
The captive market of BSNL has two components. One is public sector users with special needs. The other is customers in areas not covered - or not effectively covered - by other operators. In such areas and certain other areas, past customer loyalty remains. BSNL will need to be a competitive player even as it serves some of the more strategic goals of the government.
Can BSNL be revived without an image and manpower makeover?
There is no question at all that unless a certain set of operational measures is taken alongside the revival package, this exercise will not work. It's not a question of may not work, it will not work unless some key steps to revamp BSNL are taken as an integral component of the revival plan.
Before coming to the key steps, we need to go into a bit of history as to why BSNL is what it is, and where it stands today. BSNL has the legacy of being the monopoly service provider pre-1994, which was when the private sector was introduced into the sector for the first time. BSNL was not only the monopoly provider, it was providing telecom services at a time where there was no mobile telephony at all, and connections were all land lines. The kind of workforce that you would need to serve that use and the nature of operations is quite different – you needed to have many boots on the ground, working in far flung areas. Most of these people such as linesmen and other such workers did not have significant technical capabilities. So BSNL had a very large workforce, of over 4 lakh employees at one stage. When mobile telephony and the private sector came in simultaneously, the kind of organizational structure and technical capabilities needed were completely different.
Over time, the manpower has come down steadily due to natural attrition, people retiring, and various rounds of voluntary retirement schemes. Currently the manpower strength is around 1.5 lakh or less. But it is an aging work force with a very high median age. Over the next 4-5 years there is going to be a significant further attrition as well, even without any VRS schemes. Alongside, BSNL needs to bring in the right manpower tailored to the market operations of today's telecom service providers
Another challenge is the legacy of nature of bureaucratic decision-making because of the environment that existed. For many years between 2005 and 2015, BSNL was not able to make the investments required to maintain its services, not due to financial constraints, but due to an inability to take the required commercial decisions. Commercial decisions were invariably embroiled in controversies and had to be rolled back before they could be finalized and implemented. To purchase equipment, for example, the decision makers have to make an assessment of one offering over the other. Motivation of officials was sometimes questioned. There were murmurs that rival operators stirred controversies to avert a strong challenge from a state-sponsored player.
Then again, there was a certain point in time when BSNL was a very rich organization with bulging cash reserves. A lot of that – tens of thousands of crores reportedly - was extracted by the government in the form of dividends and other payouts.
All these factors constitute the legacy of BSNL and will need to be addressed. In its place will have to come a mechanism that brings nimbleness and agility that today's market demands. Unless these systemic and image aspects are addressed, BSNL will continue to struggle.
Where should things stand, a year later?
In the next year these core issues need to be addressed. A lot of technological upgradations also need to be made, while ushering in fresh blood and upskilling existing employees who continue to work with the organization. The company needs younger blood too in order to inject the kind of energy that is required in a very competitive market.
More importantly, the challenge BSNL faces, especially in the rural areas, has not been of just coverage, but of the quality of service even where coverage exists. Is network coverage absent for 20 hours a day? Is it patchy even for the few hours it's there? Users don't get connected to calls and there are only some pockets in villages which have actual coverage. There are complaints galore.
Quality-of-service issues need to be addressed if the digital revolution is to extend to India's rural areas. The digital economy is where opportunities lie in today's world and the access to these will be critically dependent on communication networks. Unless the problem of access is addressed keeping the rural areas specifically in mind, the spread of the digital revolution would be inequitable, and the benefits would not be equitably distributed. That is not desirable for a country as large and diverse as India.
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