Is India ready for a phone revolution?

With one stroke of the pen, as it were, Communications Minister Dayanidhi Maran has changed the landscape of the long-distance telecom market in the country, and has come that much closer to his One India plan under which long-distance call rates will not be very different from local rates.

While last week's decision to dramatically lower entry fees and revenue shares is a plus, the real advance is the decision to do away with onerous rollout obligations that long-distance players had to accept.

Now, instead of having just a handful of players in the long-distance market, there will be a rush of new players, including perhaps MTNL and Hutch (probably through its partner Essar, since Hutch is a pure play mobile operator worldwide) and other MNCs that have been waiting to get into this lucrative market.

Since access providers like Bharti, Hutch, Reliance and the Tatas have now been allowed to provide Internet telephony as well, the pressure on long-distance rates will be severe.

Of course, the biggest competitive pressure will come from the fact that, by the end of the month, the telecom regulator will probably give effect to the carrier access code, which will allow users of one telecom service, say Airtel, to dial an access code and use Reliance's long-distance services, say, to carry a call from Mumbai to Delhi.

So, over a period of time, tariffs should fall by a lot more than the 9 percentage points Mr Maran has mentioned. The minister calculated this by simply deducting the new revenue share licence fee of 6 per cent from the existing 15 per cent.

Mr Maran's miracle, of course, is not without its share of problems. For, while most telcos have welcomed the announcement, any challenge before the TDSAT could cause problems since the regulator Trai's mandatory recommendations were not sought before coming up with a new policy. It is curious that, just a month ago, the same long-distance telcos had asked for a compensation of Rs 2,805 crore (Rs 28.05 billion) if the market was opened up!

Also, for newcomers like Vonage and Skype (who have set the long-distance market afire internationally) to come to India with Internet telephony, they will not just have to apply for a long-distance licence (which will cost a mere Rs 2.5 crore now), they will also need what's called an "access licence", which is either a fixed line or a mobile service provider's licence.

While a new mobile licence is not possible since there is no spectrum, even a fixed-line licence (through the unified access service licence) is expensive - an all-India one still costs around Rs 1,500 crore (Rs 15 billion). So Mr Maran needs to rationalise other licence fees as well.

The decision to curb the future of standalone Internet service providers is inexplicable. And unless Mr Maran moves on reducing the access deficit charge on long-distance traffic (the minister is reluctant since this will hurt the public sector BSNL), One India will remain just that much further away.