Sucheta Dalal :Will calling parties pay or will they not?
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » Column Topics » The Rediff columns » Will calling parties pay or will they not?
                       Previous           Next

Will calling parties pay or will they not?  

September 10, 2001

All over the world there is a mega boom in the usage of cellphones. Technological advances coupled with falling prices have ensured that the 'handy' is affordable even to the homeless in countries like Germany.

India too is part of this huge growth especially after cellular operators were forced to effect a drastic drop in prices due to competition; so much so that some even claim that they are offering the service below cost.

Indeed, cellphone companies are struggling to increase infrastructure to cope with the expanded client base and maintain service standards.

But that has not stopped them from wanting an even bigger slice of the phone-user market by lobbying for a change in billing to a calling party pays (CPP) regime.

India, like many other countries launched cellphones as a 'premium segment product' under a mobile party pays (MPP) regime where the mobile user paid for the airtime on incoming calls as well as outgoing ones.

In the mid-1990s many countries around the world switched from a MPP to a CPP regime and cellphone operators have argued ever since that this lowers user costs and increases market penetration and usage.

To me, this claim is a little difficult to digest. The rapid development in cellular technology accompanied by a steep reduction in equipment costs and phone tariffs had a lot to do with increased usage. Also, cell operators themselves admit that falling prices and introduction of pre-paid cards also played their role in increasing the number of subscribers.

In 1999, the then Telecom Regulatory Authority in India had accepted the cell operators argument and ordered the implementation of CPP despite resistance by consumer groups. However, the Delhi high court struck down the move on the grounds that TRAI had exceeded its jurisdiction.

The court had also asked: "Why should the common man bear the burden of the rich man's phone?"

Two years later the story is different. TRAI has been reconstituted and is legally empowered to decide the issue and the cellphone has become less of a rich man's service. The subscriber base for cellphones has doubled to over 4.5 million in the last year and cellphone companies too have gained by moving from a licence fee regime to a revenue sharing one.

Thanks to lower tariffs, my carpenter and car mechanic both sport nifty cellphones and have become more easily traceable. Does this make the market ripe for a switchover to CPP?

Last week, the Telecom Regulatory Authority of India held two open house discussions in Bombay to record the views of users, manufacturers and consumer organisations on the issue.

Their responses were no surprise. Except for the cell operators, every other interest group -- consumers as well as fixed-line operators -- were vehemently opposed to a CPP regime.

Those opposed to it said that CPP as a claim for increasing subscribers did not hold water when the market was already growing at 100 per cent.

They argued that even an advanced market like the USA remains under an MPP system despite the freedom to switch over; so do Hong Kong, Singapore and Sri Lanka.

It has to be admitted that the number of countries that have switched to CPP is impressively larger -- but it is the Chinese market which seems the most directly comparable to the Indian.

China has 110 million cellphone users as against India's 4.5 million and the growth is based on a CPP regime. That China continues to have a large public sector with compelling restrictions on usage, also influenced their decision not to go for CPP.

Some countries have also rejected a switchover to CPP because of the high cost of installing the billing and tracking technology.

An even costlier option that may be considered necessary in the Indian situation is to give subscribers the option of choosing a CPP or an MPP system.

At the TRAI open house, the fixed-line companies made it clear that all additional costs in installing the technology would be passed on to the consumer. Since these costs would be distributed across users, even those who do not plan to call mobile numbers may end up paying for the technology.

Another important issue is educating consumers about the complicated billing procedures. Some of these issues are to highly price-sensitive markets such as India.

Fixed-line costs in India are already high despite the steep decline in technology costs because of the bloated public sector companies that dominate the market.

Rampant corruption and poor customer services has people terrified about the misuse of their phones and this worry takes precedence over access to better technology and convenience.

A majority of individual users of fixed-line phones have disabled their long-distance services to avoid misuse, and all others use dynamic locking facilities to prevent abuse. So great is the fear that many consumers only used public call centres to make long-distance calls in order to keep a control on talk time and cost.

Clearly if a CPP system is introduced, local calls to mobile numbers will be as expensive as long-distance ones depending on call duration, and there is bound to be a demand for dynamic locking facility to block calls from fixed lines to cellphones.

The problem is not restricted to homes; a majority of offices in India have tight checks on the use of long-distance facilities in order to prevent abuse. Traders even install physical locks on their instruments to prevent misuse of local calls.

For several years I worked at one of India's largest and richest newspaper groups. Telephone connectivity is the lifeline of a newspaper organisation. Yet, except for senior journalists and editors, all others needed written permission to make a long-distance call to check a news report.

As for cellphones -- they are only provided to the senior staff and their bills too are carefully controlled.

The situation is the same across business and industry. Cellphones may no longer be elitist gizmos around the world, but in India they remain an expensive need-based business utility to most users.

And the market is so price-sensitive and paranoid that CPP may hurt rather than help mobile phone companies.

That brings us to the delicate matter of consumer education and transparency in billing procedures. The billing for mobile phone calls would have to be simplified and a consumer education campaign launched to explain it to people.

Complaint handling is another issue. Basic fixed-line operators are clear that they will not accept responsibility for consumer complaints.

As for private operators, they do not even have a compulsory mandated complaint-handling mechanism with docket number allotted against complaints because of their small customer base and high service standards.

If CPP is still introduced in India, it will be against the wishes of consumers and at an enormous cost to the subscriber. Is it really worth the effort and the expense? Surely TRAI needs to find out before making a decision.

It is also important that users of fixed-line phones as well as cellular services make their voices heard and convey their views to the regulatory authority.

Make your voice heard: Those interested in making their views known to TRAI can write to:
Advisor (Mobile Networks) or Advisor (Economic) at [email protected] --- or call them at 91-22-3738708.

TRAI also plans to get regular consumer feedback through a Customer Satisfaction Survey. It has appointed IMRB to conduct the survey on its behalf.

Consumer organisations have asked TRAI to allow telephone subscribers to write directly to those conducting the survey so that their views are recorded.

Disclaimer: Sucheta Dalal is associated with a Bombay-based NGO called the Bombay Telephone Users' Association.

-- Sucheta Dalal