Sucheta Dalal :TRAIng Times In Telecom (30 June)
Sucheta Dalal

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TRAIng Times In Telecom (30 June)  

After the furore caused by its tariff increases in May this year, the Telecom Regulatory Authority of India recently held a series of open house meetings at the four metros to deliberate the Interconnect Usage Charges (IUC) and the Access Deficit Charges (ADC) that have already been imposed by it on consumers.

One of the most startling revelations at these open house sessions was in connection with the ADC. In simple words, the ADC is charged to consumers to make up the deficit between revenues charged by Bharat Sanchar Nigam Ltd (BSNL) for its services and the actual cost incurred by it, which it claims is higher. The TRAI had claimed that the ADC cost to BSNL was a whopping Rs 13,000 crore and had used this to justify higher tariffs to consumers. However, at the Bangalore Open-house, TRAI suddenly declared that the ADC was just Rs 7,000 crore, or nearly half the earlier claim.

What does this mean? Quite simple. That TRAI has been trying to regulate tariffs in a highly confused telecom scenario without any access to real costs. And, that the increase in telecom tariffs may have no real justification at all. That is exactly what Consumer Advocacy Groups (or CAG) have been arguing for the last two years.

But TRAI has never listened. It is so busy trying to create a level playing field between disparate service providers - government owned PSUs, financially weak cellular service providers and powerful new entrants like Reliance and the Tatas - that it has no time for consumers.

In fact, the problem with fixing tariffs without accurate cost data became relevant only when Reliance came on the scene with its promise of vastly reduced call charges. All of a sudden both PSUs and cellular operators had ganged up on one side, with Reliance on the other, and the Tatas standing behind it as a silent spectator to events.

But another major stakeholder got inadvertently ranged on Reliance’s side and that is the consumer. Consumers are furious that government has tweaked its policies to foist higher tariffs on them in the garb of IUC and ADC charges that are not cost based.

At each of the four open houses, CAGs demanded that TRAI should first obtain data from all service providers, both their individual capital costs and segment-wise operational costs (or “unbundled costs of the network elements”) which should be audited to verify accuracy before arriving at significant conclusions. TRAI officials then admitted that they had been “experiencing serious difficulties” since the “data was not readily available with the operators, or there are some reservations on their part in providing these to us”. The fact is that TRAI has no powers to penalise operators who do not share data with it. And in the five years of its existence, it has neither made an attempt to collect genuine data nor armed itself with appropriate penal powers.

Apart from costs, CAGs have challenged the rationale for imposing additional IUC charges on consumers last May. Achintya Mukherjee of the Bombay Telephone Users Association says, “the IUC regime is only an arrangement between service providers for accounts settlements between them and they do not have a direct bearing on tariffs for the consumer”. When there was only a single operator in the fixed line system (BSNL or MTNL), it was the call originator, the carriage provider and also the call terminator. And the entire cost of operation was built into the tariffs charged by them. However, if the cost of this has to be paid externally to another operator, it means that the incumbent operator (BSNL/MTNL) has that much less work done by his system, leading to lower costs. Logically, such external payments could therefore be absorbed by the incumbent (BSNL/MTNL) operator itself. As for new entrants, their capital investment per line is much lower and their accounting settlements would not only balance each other’s payments.

If that is the case, then an IUC regime should not lead to additional costs to the consumer argues Mr Mukherjee. Ideally, he says, if market shares of various service providers were evenly balanced, the two sets of charges for termination and origination would cancel each other out, with no additional cost to the service provider or consumer. It is only when cellular operators came on the scene and began to pay MTNL/BSNL a hefty Rs 1.2 per call of three minutes that the system got skewed in favour of the fixed line operators, but it was allowed because cellphones were seen as a premium service. Instead of rectifying this with a fair sharing of costs between operators, TRAI forced a compromise where the consumer now pays Rs 1.5 for the same number of transactions (calls) in the system; only now, it was spread between two sets of consumers (the fixed line and cellulars) when earlier only the cellular subscriber paid Rs 1.2 for a smaller percentage of transactions (calls).

Similarly, TRAI has imposed a Calling Party Pays (CPP) regime, without convincing CAGs that other countries that also follow the CPP regime have a similar approach to the cost and valuation methods that TRAI has assumed. The same is true of how it has worked out and revised the ADC due to BSNL.

Instead of using the telecom spectrum and the resources of all service providers to promote teledensity, the government has passed on the total responsibility for remote area connections to BSNL, thereby creating a sentiment of social service by BSNL which also cloaks its inefficiencies and high costs. Instead of doing this, the TRAI should have handled the entire access deficit issue through the Universal Services Fund.

The danger is that the sum total of TRAI’s policies are not even headed in the direction of a fair tariff regime for consumers. What they are doing instead is to call into question the very need for a telecom regulator, when most disputes are best resolved by the judiciary.

-- Sucheta Dalal