The Hindu : Has the regulator called it right?

Online edition of India's National Newspaper
Sunday, Jan 26, 2003

Opinion

Opinion - News Analysis

Has the regulator called it right?

Will the TRAI's new tariffs and interconnection charges mark an end to the prolonged litigation by phone companies against each other?

THE PAST month has been marked by severe swings in mood on the part of phone users. The announcement of low tariffs by limited mobility companies (known as WLL (M) in telecomese) was greeted with widespread euphoria. At last, here was a technology offering mobility at fixed phone tariffs although the rental was much higher than that charged by fixed phone companies.

This mood was tempered by the beginning of the phone wars which saw cellular companies blocking all calls from limited mobility companies. The impact was felt more in the media because with their excellent contacts, limited mobility companies made it appear that the blocking of calls of a three lakh community WLL (M) was a bigger issue than it really was.

Soon the national capital felt the repercussions. Since the WLL (M) calls being blocked by cell companies were passing through BSNL and MTNL lines, it was the turn of these two heavyweights to feel offended. The interconnection network with cell companies was disrupted.

This was intended to demonstrate what it feels like for a behemoth to show its strength to a weaker person. The logic was that this is what the cellular companies did to new entrants, the WLL (M) operators, so now they can sample their medicine.

Rattled by the effect on the networks of three of the leading lights of the Cellular Operators Association of India, cell companies went for a compromise. They promised not to block calls as well as offer concessions if the TRAI announced a "just and fair" interconnect regime. Since the field had become crowded and the situation complicated with the entry of more companies, the TRAI simultaneously announced changes in tariff structures and new interconnect charges.

Will the TRAI's new tariffs and interconnection charges mark an end to the prolonged litigation by phone companies against each other?

The new tariffs which make possession of fixed phones costlier had become inevitable because of several recent developments. The cross-subsidy available to fixed phone companies from the high long distance charges had vanished in two phases. The first was when VSNL was privatised and competition introduced in international long distance calls through the introduction of more companies and permission to the cheaper voice over internet protocol (VoIP) technology. Outgoing international call charges were higher than incoming ones. As a result, other countries were paying VSNL because more calls from their networks landed in India. At one stage, American companies were paying Rs. 5,000 crores annually to VSNL as accounting rate charges. This cushion vanished last year.

This year another source for cross-subsidy, long distance calls, also began evaporating. First because private companies had inaugurated their long distance networks and later when cellular companies slashed their STD charges. Fixed line companies were left operating below cost services and the future appears even more dismal because they will have to match the latest reduction in STD charges made by cellular companies. The call charges and rentals were also not covering the cost of access, i.e., reaching out to the vast network unfolded by fixed phone companies (essentially BSNL) across the country.

At the same time, it was to be ensured that the vulnerable sections should be insulated from economic considerations. Therefore, the TRAI has suggested maintaining the rentals of rural phone users and senior citizens. Since fixed commercial phones are a rich source of income through local and long distance calls, their rental has also not been touched. The middle class which has been the biggest cheer-leader of economic reforms has taken the hardest knock. Some of it has also been borne by the rural users in the form of fewer free calls and higher local charges but the middle class will pay the most for the privilege of keeping a phone.

The cellular owning population gets a breather from the rental that was planned to be charged from subscribers for availing free incoming cell to cell calls. However, the TRAI has guaranteed some income to cellular companies by stipulating that for every fixed to mobile call, the former will have to pay a certain amount to the latter. This will also be the case for calls from fixed to WLl(M) users. The TRAI appears to have upheld the logic of cellular and WLL (M) users who said their subscribers on an average were contributing less than fixed phone users and, therefore, the cost per minute for determining cost based charges works out to be higher.

The least that can be said for this logic is that it flies in the face of several past studies which have stated that private companies were not configuring their networks efficiently.

Is the TRAI in possession of some new evidence which states that private companies have changed their ways. Or was it unable to resist the pressure from both cell and WLL (M) companies?

The tariffs and interconnect recommendations are not the final word since they have to be approved by Parliament. But the message for BSNL and MTNL is very clear.

They must pay more attention to their cellular and WLL (M) ventures on one hand and improve their fixed line networks to make them single access sources for cable, Internet and voice communications.

This is a difficult task since the organisational structure is a shambles and Pramod Mahajan's tenure has seen further deterioration. Senior officers of the Indian Telecom Service (ITS) are forever manoeuvring for cushy postings and jobs after retirement while the middle level are frustrated and on the lookout for employment in private phone companies. ITS men occupied posts where their engineering expertise is not even remotely required. In those posts, they are squandering funds allocated for the purpose with both hands.

Except for the provision of guaranteeing revenue to cell and WLL (M) companies for each incoming call, the TRAI has more or less moved in the right direction. The voluble middle class does have a cause to feel offended but its ranks have already been thinned by desertion to the cellular ranks. The murmur therefore will not be as loud as it was last time when Parliament was forced to keep the TRAI's tariffs in abeyance.

S.D.

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