Fixed Makeover to Bring Growth Back

Even simple steps like reducing downtimes and mean-time-to-repair could make PSTN attractive to not just business segments but also to households

Once a mainstay of telecom in India, PSTN services have been on a never ending decline for close to a decade now. From having a subscriber base of 42 million in December 2003, India has seen its wireline subscriber base shrink to about 28.9 million at the close of 2013, from 30.79 million in the corresponding period of 2012, as per the numbers released by Telecom Regulatory Authority of India. This amounts to a negative growth of 6.17 percent.

Efforts to grow the PSTN wireline base have yielded little result with customers of both the state-run operators—Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL)—continuing to surrender their subscriptions in favor of mobile services.

The leading PSTN service provider BSNL saw an annual decline of close to 10 percent in its subscriber base—from 21.04 million in December 2012 to 18.94 million in December 2013. MTNL managed to squeeze in a small annual growth of 2.3 percent on a relatively much smaller base of 3.46 million than BSNL.

Nevertheless, the BSNL and MTNL combine continues to have the largest share of 77.8 percent of the wireline sub-

scriber base in the country, with BSNL alone accounting for close to 66 percent at 18.94 million wireline subscribers. MTNL was next at 3.54 million subscribers, followed by Airtel at 3.35 million, Tata at 1.51 million and Reliance Communications at 1.24 million subscribers. Others included Quadrant, Sistema and Vodafone which put together had 0.32 million subscribers as of December 2013 according to TRAI.

Growth Inhibitors

While PSTN services have mostly suffered decline due to a cannibalization by mobile services, there have been other reasons for the decline as well.

It is also notable that while a private sector player like Airtel has been able to grow its wireline subscriber base bit by bit, the incumbents BSNL and MTNL have not been able to contain the churn of their wireline customers. The argument, that a migration of customers from wireline to mobile is expected and inevitable, therefore is considered inadequate by industry watchers. The fact that the state-run operators have lost market shares in their mobile businesses too is considered a key pointer of strategic gaps, which if duly addressed, could result into a positive impact for the wireline segment.

One of the reasons for customers surrendering their PSTN subscriptions has been the poor quality of service, especially in the event of a downtime. In smaller towns and rural areas, when the wires get broken or cut, there often is a crippling lack of manpower to identify and visit the affected site, due to various reach and logistics issues. There also is a lack of best practices in the way the wires are laid out in far flung areas, which actually points at a lack of trained resources.

By addressing these gaps, a part of customer churn, which is triggered by frequent downtimes and poor rate of repairs and subsequent delays, can quickly be plugged. This itself could help slow the rate at which the PSTN churn has been happening.

While a private sector player like Airtel has been able to grow its wireline subscriber base bit by bit, the incumbents BSNL and MTNL have not been able to contain the churn of their wireline customers

Having said that, it is also argued that even the private operators have not been able to grow their wireline footprints and subscriber bases in a significant way. A key inhibitor in this regard is considered to be the right of way (RoW) issue, wherein there is no uniform policy that facilitates laying of cables by telcos across various states or telecom service areas.

To compound the matter, much of the telecom industry has been reeling under huge debts, ever since the first 3G auction in 2010. This has severely limited the capacity of telcos to invest in the expansion of wireline networks in the country. Since mobile services are considered a relatively much lower hanging market segment and can be rapidly scaled up to meet new subscriber additions, telcos have been focused on their mobile service investments. By comparison, wireline networks take longer time to deploy and services also take longer to be provisioned, telcos have historically gone slow on ramping up their wireline networks.

What Next?

The impact of mobile voice on PSTN has been severe so far and it is not a blow from which the segment can recover easily. To arrest the decline in the PSTN services, the first most important step would be to effect a rise in the BSNL and MTNL subscriber numbers. As of now, even though the private operators are able to register small gains in their subscriber numbers, a negative growth in the relatively large subscriber base of incumbents more than offsets that positive growth.

The government may need to evaluate if measures like business process transformation or organizational restructuring would be required or if steps like strengthening the channel networks and enabling the partners would work better.

Then there remains a long-pending consideration for unbundling of the local loop, which had been advocated quite strongly at least around six to seven years ago but which has got ignored in the want of any concrete response from the key stakeholders. At one point of time the counter argument was that it would negatively impact the PSTN business of the incumbents. However, in the face of the decline that the segment has anyways suffered, the argument hardly has a basis and there could be significant merit in re-energizing a discussion on unbundling the local loop.

While mobile services have already played a decisive role in revolutionizing telecom in the country and would continue to be the primary communication vehicle for the masses, the strategic role of wireline in the deeper and wider context of telecom for the economy at large can never be emphasized enough.

If due measures are taken to address even the operational weaknesses (like frequent downtimes) and inefficiencies (such as long mean time to repair) then at least a part of the PSTN churn could be arrested. The next step, of course, would be to bring growth back to the segment.

While the business and commercial segment would offer the most suited ground for PSTN growth, the potential latent with households in the higher and mid socioeconomic segments may need to be tested and measures be defined accordingly.