Daya karo, Dayanidhi


Jan 28, 2005
source : Business - Standard

T C A Srinivasa-Raghavan / New Delhi August 13, 2005
Higher-priced reliability is always preferred to lower-priced unreliability by the upper end of the market

Dayanidhi Maran, minister for communications and IT, is less than 40 years old. So he understands technology and the uses to which it can be put, which includes earning profits.

That could be one reason why he has been pursuing the expansion of public sector broadband with single-minded devotion, which is good. That, indeed, too is perhaps why BSNL cut the monthly rate to Rs 250.

Clearly he hopes to spread the use of the Internet. Rs 250 is as close to free as you can get. And it once again proves my point that public sector monopolies stand economic theory on its head. They expand output and lower prices. Economists, I think, should go back to their caves.

But that is not the burden of my song here. Instead, what I would like to know is this: having understood the importance of price competition, has the government understood the importance of non-price competition? Does it have even the remotest idea of what it takes to compete?

Let me explain. Since I live in Gurgaon, from where commuting to Delhi is a nightmare, I depend hugely on electronic communication. So when BSNL offered the DIAS service in 2003, I was amongst the first to buy it.

When it worked, it worked like a charm. When it failed, it was the end of the world because there was just one young engineer assigned to all of Gurgaon. He had to—and still has to—go by bus or rickshaw to attend to subscriber complaints.

Then last year BSNL started the broadband service. I switched because it was faster and cheaper. But soon the same old problem came back: it worked fairly well when it worked but when it failed there was no recourse because there was no one to complain to.

So, like all prudent Indians, I bought a backup service from Airtel. It was expensive but it ensured that I could work peacefully.

Now prices have fallen. I have never had a problem with it. The service has been prompt. There is a phone number you can call if the thing stops working. Someone turns up in a couple of hours and all is well.

In contrast, when BSNL’s broadband stops working, which is about twice a month, I usually end up calling someone very high-up. It is only then that things get sorted out. I don’t like to do that. But there is no alternative.

Whose fault is it that there is no complaint service? (Actually, there is, but typically no one ever responds when you call the number.) Until a few months ago, there wasn’t even an alarm to tell the exchange that there was a malfunction.

Also, whose fault is it that the equipment in use by BSNL broadband is second rate Chinese stuff? How was it approved? Who signed off on it? Why? Why does it malfunction so often? Is BSNL getting the return on its investment that it ought to?

So much for Gurgaon, let us move on to Delhi now. My wife teaches in JNU and so we maintain a small flat there, allotted to her by the University.

She wanted to have a broadband connection in her flat but found that only MTNL had wires running there. JNU has not allowed private operators, God bless its public spirited soul! No mobile phone towers, no private wires, what bliss.

Having lost faith in public sector broadband, I thought she would buy a WiLL phone from the Tatas or Reliance. I got in touch with the latter and the next day four engineers turned up to see if the signal was strong and steady enough.

It wasn’t, so the WiLL option was dead. Now there is only the MTNL option left.

But before applying for it, I thought I would attract Mr Maran’s attention to what a friend told me. She has an MTNL broadband connection, which has not been working for two weeks.

MTNL has not been very helpful. It probably wants to help, but simply doesn’t know how. In any case, even if someone told it how, its procedures probably would not permit it.

This is what Mr Maran should be now attending to. He can go on expanding access and dropping prices, but until he gets the customer service right, he will not reap the full benefits of lower prices. Reason: high-priced reliability is always preferred to low-priced unreliability.

What is surprising is that having run his own highly successful business, Mr Maran should have neglected the non-price aspects of competition. Is someone in BSNL and MTNL misleading him? I would bet on it. But he should find out for himself.

Based on the experience of other former public sector monopolies, I will take another bet. In a couple of years from now, BSNL’s and MTNL’s market share will be below 70 per cent, that is, they will have lost practically all of the upper, more profitable end. Is this the legacy Mr Maran wants to leave behind? If not, he had better bang a few heads.[/b]