Sucheta Dalal :Tariff order: Trai still looking for the right ring (31 March 2003)
Sucheta Dalal

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You are here: Home » Column Topics » Indian Express - Cheques & Balances » Tariff order: Trai still looking for the right ring (31 March 2003)
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Tariff order: Trai still looking for the right ring (31 March 2003)  

With less than five days to the implementation of the new and expensive tariff regime, the Trai (Telecom Regulatory Authority of India) has decided to put on hold its controversial new call rates for a month. These rates would have hiked phone bills by a minimum of 60 to 70 per cent and dealt a severe blow to the lowest- end local call makers using fixed line phones. The Trai has ruled out any rethinking on the telecom tariffs and insists that the ‘reschedulement’ is only meant to provide time for consumers to be properly informed about various tariff plans. But it may not be easy for the Trai to go ahead with its anti-consumer tariff proposals.

For starters, the two public sector telecom giants and their employee unions are chary about implementing the tariffs and interconnect usage charges mandated by Trai on January 24. That’s because a majority of consumers (about 65 per cent) are local call users who keep their long distance dialling facility locked up and their bills within the monthly rental limit. A steep tariff hike will alienate these consumers and create just the impetus for them to switch to other services that are more efficient. That’s just one reason why BSNL and MTNL have opposed the Trai tariff plan. In fact, five operators have proposed alternative tariff packages and one has come up with 16 different options.

Secondly, in a free market, the consumer is unconcerned about the historical installation costs and fancy overheads of entrenched telecom companies. After all, these firms amassed their massive reserves by overcharging consumers for several decades and harassing them through artificial shortages. Consumers are now demanding the best technology option at the lowest possible price. The problem is that the Trai and the government have done nothing so far to give consumers a fair choice. Although the telecom sector is invariably held up as the biggest beneficiary of liberalisation, politicians and policy markers in cahoots with powerful industry lobbies have messed around with licensing policies and spectrum distribution to create a huge mess.

The industry is now split into three equally powerful segments. At one corner are the public sector giants whose market share is being attacked by private operators; at the other is the cellular phone cartel which has successfully ensured the survival of their most lame-duck members by fixing mobile phone tariffs on a nation-wide basis. The third corner is occupied by the powerful Reliance Infocomm, which sits on a combination of licenses and hopes to turn its WLL operations into a national roaming service. The Tatas, who are in the same market as Reliance, are playing a smart wait-and-watch game allowing Reliance to dominate the battle. All they have to do is to follow up with a ‘ditto and more’ scheme.

An example of Reliance’s clout is that it has quietly wangled a major concession from the Trai in the form of forbearance on WLL tariffs.

Forbearance allows it to fix its own tariff instead of going to the Trai. Interestingly, a BSNL request to Trai to either lower the fixed to WLL-mobile interconnect charges or allow forbearance on fixed line tariff has drawn a blank from the regulator. The quarrel between cellular and WLL groups and their many claims, counter claims and falsehoods have finally landed up before the TDSAT (Telecom Dispute Settlement and Appellate Tribunal) for resolution and will probably be decided by mid-April. The Trai’s decision to hold its tariff hike package in abeyance until May 1 may protect it from any embarrassment that could follow from the TDSAT ruling. Fortunately for consumers, the BJP-led government is in election mode. This means that just as it won’t hike urea prices or reduce interest rates on EPFs, it will also not alienate its middle class voters with higher phone bills. A steep hike in tariffs, whatever its form, is bound to deal a blow to all telephone consumers since almost everybody owns a fixed line phone. Consumers also have a valid grievance when they charge that all the confusion in the telecom business has been created by Trai and the Department of Telecommunications (DoT) who fixed new tariffs without consulting consumer groups or forcing companies to share basic cost data.

This is probably why a divisional bench of the Madras High Court admitted a public interest litigation against the proposed tariffs in March. The petitioner argued that under the Trai Act it was mandatory for the regulator to hear and consider what the consumer wished to say in the matter before passing any order of revision or enhancement of tariffs. He also alleged that the tariff hike gave new telecom operators an ‘unreasonable control over pricing and services’ and that the tariffs did not even ensure that all GSM mobile service subscriber would be charged uniformly and fairly. Hopefully, the government will not wait for the courts to work out a fair policy for all consumers and service providers. Since it is policy makers who have caused the muddle over licence fees, spectrum charges and tariff regimes, government should take the lead in resolving the mess.

Arun Shourie’s appointment as Telecom Minister is already a step in the right direction. Shourie recently said: ‘‘If local call rates do not go up marginally, then the telecom sector will become sick like the power sector’’. Consumers would have no dispute with this logic if Shourie also asks the Trai to work out tariffs based on actual costs and not those claimed by the service providers. His argument would also hold if the system operated so that the fittest companies survive while the rest are merged or taken over. Instead, at least three cellular operations are owned by loss making groups with huge borrowings and little chance of turning profitable. Yet, they are among the most powerful lobbyists in Delhi and are clearly not working for a fair tariff regime for consumers.

Instead of complicated tariffs that are aimed at ensuring the survival of profligate service providers, the Trai needs to focus on the consumer. It could end much of the confusion by creating an omnibus telecom license across various types of services and ensure a fair distribution of spectrum. The players should be free to decide the type or combination of services they need to offer in order to maximise their revenues. They should also be forced to face competition and fulfil their Universal Service Obligations even if it forces them to merge operations or close down unviable businesses. If the local call tariffs go up marginally after such a shakeout, consumers will probably not grudge the increase.
-- Sucheta Dalal