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Why is DoT restricting competition?

Yesterday’s Economic Times reported that Department of Telecom (DoT) has decided not to grant anymore new telecom licenses against the 343 pending applications that it has received. Reason given is absolutely unreasonable and bordering on stupidity. DoT has stated that they want to prevent unhealthy competition in an already crowded market. Lets look at whats wrong with this thinking.

First, who decides what is the level of competition we need in a particular industry. God, please don’t let the answer to this question be the government. The desired level of competition in a particular industry has to be decided by the market place or the market forces and not the government. And certainly not that same government department whoch sold off the licenses for peanuts which landed up making windfall gains for the few selected industrialists/businessmen.

Second, the companies which want the licenses are not stupid. If they want the licenses give it to them. If DoT wants to warn these conmpanies that they could lose money, let them do so. Companies want to get into this business and I don’t see any reason for not granting them the licenses. These are big boys and hopefully they can take care of themselves.

In any case, the licenses given by Minister Raja for a song were also given by unfair means. The dates for last date of application were changed unfairly which result in a number of companies not being able to compete for the licenses.

In fact, one can use the licenses creatively to expand the availability of telephones to the interiors. Give the license to the new applicants to start the business in smaller towns and villages. Once they establish their network in the rural areas as per predetermined norms, let them expand elsewhere also.

Why is the government trying to restrict competition? I am sure the strong telecom lobby has a role to play. Isn’t it surprising that the telecom players first convinced the government to increase competition by letting them also partipate in the industry. They sing praises of the concept of competition. After they receive the licenses, they start convincing the government not to increase competition as high level of competition is harmful.

Restricting competition is the last thing that the government should do. It is the competition which will ultimately bring benefits to the customer, the industry and the government. So, why restrict it.

Avinash Narula

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