Friday, December 19, 2003
A Reliance on nepotism?
The Reliance conglomerate in India has made a very successful foray into the booming Indian telecom sector, becoming one of the largest players in the market only 9 months after entering. While it would seem like a remarkable achievement to overtake well-established comptetitors in that short a time, there are questions being raised as to whether Reliance's success is due in part to its legendary ability to influence government policy in its favour.
The dispute stems from the way that Reliance has built a national mobile network on the cheap by using wireless local-loop (WLL) technology licensed for city-sized areas. Normally a user of such a service would not be able to “roam” from one city to another. But Reliance has given its subscribers multiple telephone numbers and a call-forwarding facility to enable them to use their telephones as they travel across the country.
This has been challenged by the cellular firms, whose licences cost them at least four times as much as Reliance paid for its WLL licences. In October, Arun Shourie, India's telecoms minister, said that the government's technical-evaluation committee had found that Reliance was “violating” its licences and that it would be told to restrict its activities. But at the same time Mr Shourie and the Telecom Regulatory Authority of India were preparing a new unified telecom licence, covering all services. Reliance has now bought one of the new licences for $340m (including a $100m “penalty” for its earlier violations).
Though the consumer is the clear beneficiary (lower costs, better plans etc) of this food fight between Reliance and the other telcos, one needs to ask whether it is time, for the long-term health of the economy, to save capitalism from the capitalists (tip of the hat to Raghu Rajan)?
The dispute stems from the way that Reliance has built a national mobile network on the cheap by using wireless local-loop (WLL) technology licensed for city-sized areas. Normally a user of such a service would not be able to “roam” from one city to another. But Reliance has given its subscribers multiple telephone numbers and a call-forwarding facility to enable them to use their telephones as they travel across the country.
This has been challenged by the cellular firms, whose licences cost them at least four times as much as Reliance paid for its WLL licences. In October, Arun Shourie, India's telecoms minister, said that the government's technical-evaluation committee had found that Reliance was “violating” its licences and that it would be told to restrict its activities. But at the same time Mr Shourie and the Telecom Regulatory Authority of India were preparing a new unified telecom licence, covering all services. Reliance has now bought one of the new licences for $340m (including a $100m “penalty” for its earlier violations).
Though the consumer is the clear beneficiary (lower costs, better plans etc) of this food fight between Reliance and the other telcos, one needs to ask whether it is time, for the long-term health of the economy, to save capitalism from the capitalists (tip of the hat to Raghu Rajan)?
