The Department of Telecommunications (DoT) has written to all state governments and Union Territories, urging them to prioritise the services of state-run telecom operators Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) for internet, broadband, landline, and leased line requirements. The move, citing national data security considerations, has triggered concern among private telecom and internet service providers (ISPs), who reportedly say it could distort market competition.
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Government Advisory to States
In letters dated April 8 and addressed to state chief secretaries, DoT Secretary Neeraj Mittal referred to a 2019 Union Cabinet decision that mandated the use of BSNL and MTNL by Central government departments. He requested similar adoption by state government departments, agencies, and public sector undertakings (PSUs), noting that BSNL, which now operates MTNL’s services, will offer a dedicated nodal point to ensure high service quality.
“As BSNL/MNL are becoming competitive in the telecom sector, and in light of the Cabinet decision in the past, I request you to consider utilisation of the services of BSNL and MTNL by all departments/agencies/PSUs (public sector undertakings) of the state government for internet/ broadband, landline and leased line requirements,” DoT secretary Neeraj Mittal wrote in the letters, according to an Economic Times report.
Private Sector Raises Red Flags
Industry executives view the directive as unprecedented in its scope. While government departments have occasionally used state-run telcos on a project basis, a broad advisory of this nature could severely impact the private sector. According to industry estimates, private players could lose thousands of crores in potential annual revenue, with smaller ISPs—operating on thin margins—being the most vulnerable.
Private telcos currently account for over 92 percent of the telecom industry’s adjusted gross revenue, which stood at Rs 2.23 lakh crore between April and December 2024. A significant portion of their enterprise earnings comes from government contracts, typically awarded through competitive bidding based on the lowest price.
Industry stakeholders argue that the DoT’s directive undermines a level playing field. An industry executive quoted in the report said the idea behind carving out BSNL and MTNL from the DoT as a separate entity was to let the company function independently and to ensure that the government did not act as a regulator as well as the owner.
“The government has been supporting BSNL through various financial packages, and it should compete in the market on its strengths and not through preference,” the executive said, as mentioned in the report.
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ISPAI Advocates Regulatory Neutrality
Echoing these concerns, Rajesh Chharia, President of the Internet Service Providers Association of India (ISPAI), said the government, as licensor, must remain neutral. “The objective of the government should be the proliferation of broadband and internet rather than promoting any particular service provider. This way other operators will get discouraged and will not come forward for any promotional activity of the country, and people will start questioning patriotism if this partiality is done by the government or department,” he reportedly said.
The DoT, however, maintained that the directive aligns with the Cabinet’s revival roadmap for BSNL and MTNL. Since 2019, the Centre has invested Rs 3.22 lakh crore in revival packages for the two loss-making PSUs, including funding for 4G rollout and infrastructure upgrades. As a result, BSNL posted a net profit of Rs 262 crore in Q3 FY25—its first since 2007–08.
The department’s letter noted that BSNL has significantly increased capital expenditure over the past two years, strengthening its transmission and optical fibre network. This, it said, would place the company on a stronger growth path and enhance its capacity to serve government clients efficiently, according to the report.
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