Sucheta Dalal :TRAI telecom operators will kill the market (12 May 2003)
Sucheta Dalal

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You are here: Home » Column Topics » Indian Express - Cheques & Balances » TRAI, telecom operators will kill the market (12 May 2003)
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TRAI, telecom operators will kill the market (12 May 2003)  

The daily protests, dharnas and morchas following the Telecom Regulatory Authority of India’s (TRAI) new tariff regime introduced on May 1 would probably mark an end to the telecom revolution unless there is a sensible rollback. Celebratory reports about how vegetable vendors, bhel puri sellers, carpenters, electricians and chauffeurs are increasing their business by being ‘connected’ through mobile phones have given way to consumer panic as more and more subscribers plan to give up ‘surplus’ phone connections.

The telecom industry, which refuses to listen to consumers, seems bent on hara-kiri. Many months before former TRAI Chairman M.S. Varma announced a tariff hike that was to be effective from April 1, the head of a telecom company had told me that ‘‘local call rates will have to go up, it is the only flexibility we have.’’

That was a mistake. Like with electricity tariffs, telephone charges have very little flexibility left at the lowest end of the market because the capacity to pay is low. Yet, cellular operators have ignored this fact while lobbying for a Calling Party Pays (CPP) regime.

At the TRAI’s open house sessions across the country, consumer groups had made it clear that although CPP was the norm in some developed countries (not China), it would not work in India, where nearly 70 per cent of the subscribers lock their long-distance dialling facility and keep phone bills within rental limits. Thus, CPP remained on hold for a long time. The new TRAI chief obviously ignored previous interactions and introduced CPP through higher interconnect charges right away, with all the predicted chaos. Worse still is the manner in which the TRAI introduced the tariff hike. After postponing the previously announced hike for a month, it sprung an entirely new regime on consumers without so much as a public discussion. The TRAI, which held regular interactions with consumer NGOs in the past, does not even bother to respond to letters or queries from them under the present dispensation. At a time when all independent regulators put up major regulatory and tariff changes for discussion on their website, the TRAI has no excuse for introducing a new tariff regime without discussing it with users, or anticipating the chaos that would result at Public Call Offices (PCOs). Cellphone companies deliberately obfuscate the deleterious impact of high local call charges, by publicising their reduction in long distance tariffs, but the regulator ought to have focussed on real numbers.

Notwithstanding the hype, a majority of Indian phone subscribers keep a strict control over their monthly bills. In fact, the bulk of long distance calls by individuals are still made from PCOs at off peak hours. That is why we celebrate Sam Pitroda’s vision in dotting the country with PCOs and connecting people like never before.

The only beneficiaries of reduced long distance charges are commercial users and rich individuals. Consumers are so confused and furious that members of Parliament (MPs), who never have to pay phone bills stood up to protest the hike irrespective of their party affiliation. Ironically, even the phone companies are all unhappy and have reportedly taken their complaints to the Prime Minister. What the TRAI’s hasty new tariff regime has done is to segment the market and maybe even kill the growth of telecom.

Here is how it would happen: Under the new tariff model, the 200 per cent increase in fixed-line to mobile rates could hike phone bills several times over unless subscribers are really careful about usage time. Hence, a telecom NGO that I am connected with (the Bombay Telephone Users Association) is advising its members to demand dynamic mobile locks on their phones just like STD locks. The BTUA had told the TRAI at an open house session in Mumbai that a CPP regime should not be introduced without providing the facility to lock out expensive calls to mobile phones. It had also warned that inadequate research by cellphone lobbying for the CPP would only kill the growth of telephone usage in the country.

While this may still happen, it suits all the service providers today. As the Telecom Minister said, it would stave the public sector companies (MTNL and BSNL) from going bankrupt. The cartelised local call rates also suit cellphone companies, since none of them make profits, although their repeated reduction in long distance rates suggests otherwise. In fact, the TRAI’s new tariffs may keep some of them from bankruptcy. Even Videsh Sanchar Nigam Ltd (VSNL) is in the same boat. The Tatas purchased VSNL at over Rs 2,500 crore, but a top telecom expert admits that the entire organisation can be set up from scratch at under Rs 400 crore. It needs serious cost cutting but has little manoeuvrability because of restrictions in the shareholders’ agreement with government. Since the new tariffs were introduced without an open discussion, mobile phones have cut themselves off from PCOs. And non-coin public phone providers are charging extortionate charges (ranging from Rs 7 to Rs 14) for calls made to cellphones. Having created this mess, the TRAI has now asked the public sector phone companies to find a solution.

Further, the new tariffs will cut and restrict connectivity rather than encourage a seamless convergence of different technologies and increased mobility. Fixed line consumers, conscious that calls to mobile numbers have turned expensive, are bound to restrict usage and affect teledensity. Instead of emulating China and encourage wider usage, we have frightened Indian phone subscribers into surrendering phones. The argument that fixed line tariffs were hiked to keep public sector service providers from bankruptcy is absurd. It is probably the reason why Reliance Telecom’s lower tariffs for Wireless and Local Loop are being repeatedly denied. In all the years since telecom was liberalised, the government has refused to make telecom PSUs autonomous, or force them to shed staff, cut costs and improve efficiency. Instead, Telecom Ministers seemed bent on killing these companies at the behest of private operators. The common man cannot be asked to pay the price for this folly; especially when the government is refuses to give up control over these PSUs even today.

But look at how industry argues. The Confederation of Indian Industry’s (CII) website says that, ‘‘rentals should gradually increase to cost-based levels’’. This is exactly what telecom NGOs have been demanding—cost-based tariffs. But neither public sector companies nor private operators are being asked to submit, true and verifiable cost data before deciding on tariffs. Instead, consumers are being asked to pay for the bloated costs of keeping PSUs alive with specious arguments about the cost of village telephony, which ought to be part of the Universal Service Obligation of all service providers anyway.

-- Sucheta Dalal