WLL(M) has been touted as the poor man’s mobile but the cost structure will perhaps never justify the description. If one compares the costs of WLL(M) and GSM, one will notice a huge difference between the two. In case of GSM, the rental varies from Rs 200 to Rs 500, depending upon the scheme that one opts for. On the other hand, in case of WLL(M) there is a floor price of Rs 450 per month and a ceiling of Rs 550 per month, which means that service providers cannot go below Rs 450 per month and cannot charge more than Rs 550 per month. Moreover, monthly rentals for both (rural and urban) subscribers are the same.

The tariff exercise on WLL(M) was undertaken in the year 2000 and the WLL(M) tariff was announced on 1 May 2001. But the time has now come for TRAI to review the tariff structure. Equipment prices in telecom have been falling every year. Infrastructure costs on the wireless front have also been decreasing. Even on the demand front, there has been a considerable increase. With TRAI dismissing the COAI case on the WLL(M) front, there will be a further increase in demand and deployment of WLL(M). It is understood that all basic service providers are planning for a large-scale deployment of WLL(M) infrastructure, with Reliance Infocom leading the race. Other players include BSNL, Tata Teleservices, HFCL, Shyam Telelink, and HughesTele.com. This sudden increase in demand of WLL(M) handsets will help bring the cost of WLL(M) infrastructure equipment at par with cellular infrastructure prices. According to industry sources, the price of WLL(M) infrastructure will hover between Rs 5,000 and Rs 6,000 per line.

Arriving at Estimations
Assuming annual recurring expenditure (ARE) of 22 percent, estimated costs can be brought down from around Rs 550 to Rs 160 by taking certain measures (see Table 1). These measures include reduction of capital expenditure, keeping traffic at 56 mE (milli Erlang) and not at 80 mE, and not including handset subsidy in the WLL(M) tariff structure. The reduction in capital expenditure results in a reduction of Rs 200. Tabulating traffic at 56 mE and not at 80 mE results in a further drop of Rs 50. And by not incorporating the handset subsidy in the tariff prices further fall by Rs 140.

TRAI, while computing the earlier WLL(M) tariff, had taken a peak hour traffic of 80 mE per subscriber based on actual wireline usage. But when one talks about the mobile user, wireline usage decreases, since WLL(M) is not used by bulk user segments like PCO and EPABX. So the usage will be much lower and while computing the rental one should look at a realistic traffic figure of 56 mE.

It seems that in the earlier computation, TRAI had included the handset price in the capital expenditure per subscriber. But since the cost is borne by the subscriber, one should not consider it while computing the capital expenditure per subscriber for WLL(M). If service providers are offering subsidy on the handset than the subsidy element has to be incorporated in the capital expenditure.

According to TRAI, the service provider has to deploy one BSC per SDCA, which does not make any sense as the lowest configuration of BSC available presently is 1,900 Erlangs, which can support about 34,000 subscribers for 56 mE traffic. But there can be SDCAs with 5,000 and 20,000 subscribers and if one deploys the lowest configuration the BSC capacity is not optimally utilized, thereby increasing the capital expenditure per subscriber.

The capital expenditure has reduced because of the drastic reduction in import duty from an effective import duty of 38.74 percent to 5 percent. Price of the base transmission station (BTS) infrastructure has also come down by around 30 percent whereas BTS electronics costs have reduced by around 50 percent. The base switching center (BSC) price is now one-fourth of the earlier price. Even the insurance, freight and forwarding charges have reduced by around 2 percent. Dark fiber costs for the providing backbone infrastructure have also reduced by 40 to 60 percent.

It seems that TRAI is planning to do a major tariff rebalancing in months to come and before finalizing on the WLL(M) tariff, the regulator should look at the finer points more carefully and not come out with a tariff similar to what the regulator announced in The Telecommunication Tariff (Twentieth Amendment) Order, 2002 announced on 14 March 2002 for international long distance.

It seems that ILD operators are planning to market ILD services at rates 50 percent cheaper than those announced by TRAI a month ago. The question that arises is: how can prices vary by up to 50 percent within such a short span of time? Moreover, when service providers are looking at providing services at a cheaper rate then why is the TRAI Tariff Order placing ILD tariffs at a premium? Sure, it’s the technology that is encouraging service providers to offer services at cheaper rates. But then shouldn’t TRAI also come out with a consumer-friendly tariff structure? If a cost-based model is followed, WLL(M) rentals may be placed between Rs 140 and Rs 170, and the handsets may come closer to being what they have been projected to be—the poor man’s mobile.

Pravin Prashant