The announcement made by cellular mobile service providers (CMSP), excluding MTNL, Airtel, Hexacom, Reliance and RPG, on 18 December 2001, regarding the reduction of mobile-to-mobile STD calls by 50 percent from 26 January 2002, has triggered a new debate. Will the new tariff be approved by the Telecom Regulatory Authority of India (TRAI) even if it doesn’t give the consumer the choice of choosing an NLD operator? Will the cellular operator bypass The Telecommunication Interconnect Regulation 2001 and The Telecommunication Tariff Order? Will the incumbent operator, BSNL, incur huge losses because of the new relationship that exists between CMSPs and Bharti Telesonic? Will the new rate trigger a price war in STD, in the days to come?

The announcement has created mixed feelings. Industry insiders feel that Bharti Telesonic cannot implement reduced tariff due to legal complications. Others feel that with Bharti’s IPO due in the last week of January 2002, the announcement was a PR exercise to build up investors’ confidence, as such announcements implicitly assure people of good revenue streams.

NLDO Guidelines
According to guidelines, subscribers should have an option to choose an NLD operator rather than the cellular operators forcing the subscribers to opt for a particular NLD operator. As of today, there are two NLD operators—BSNL, the incumbent operator, and Bharti Telesonic, the private operator. NLDO guidelines state: "It will be mandatory for fixed service providers, cellular mobile service providers and cable service providers, to provide interconnection to NLD service providers, whereby subscribers could have a free choice to make inter-circle/international long distance calls through the NLD service provider." But at present, the cellular service providers are not providing any option to customers as they cannot dial the NLDO of their choice and moreover, they are being forced to go to Bharti Telesonic. Bharti Telesonic cannot start its service without carrier access code (CAC) in place, as one cannot force the customer to go by a particular route. And it seems it will be difficult for the company to implement the new rates from 26 January, 2002.

Commenting on CAC, TV Ramchandran, director general, COAI, said, "Because there is a delay in carrier access code, which is an aspect that is not controlled by us why, should we force subscribers to go to BSNL."

According to TRAI’s recommendations on carrier selection code, if any subscriber plans to make an STD call in a multiple regime NLDO then the subscriber has to dial the STD prefix, followed by an NLD service code (NLDSC), a CAC, and then, the national significant number (NSN) of the called subscriber. For example, for making a call from Delhi to Mumbai, one has to dial 0 + 10 (NLDSC) + 55 (CAC) + 22 (Area Code) + 3451234 (local number).

TRAI recommends the adoption of number 10 as the NLDSC. This code will be required to be dialed for all NLD calls involving carriage over NLD network operators’ facilities. For CAC, which will identify the NLD operator chosen by the subscriber, the authority recommends a two-digit code beginning from 40 and ending at 59, thus giving 20 codes to be allotted to all NLD carriers, including BSNL. Recently, DoT has allotted CAC of 20 to BSNL and 50 to Bharti Telesonic. Although cellular service providers have given in writing to TRAI that they can implement CAC immediately, experts say even in the best case, it will take two to three months for cellular service providers to upgrade their software to accept CAC and define call routing patterns. Even BSNL exchanges are not CAC-ready and cellular customers cannot exercise this option via BSNL exchanges. According to industry insiders, around 142 LDCAs out of 322 are CAC-ready. So for BSNL, it may take long before a customer is given the option to choose an NLDO.

Once CAC is in place, the cellular service provider has to inform customers about the dialing procedure and other details before implementing it. The customer has to be informed about different tariff regimes as well.

It seems that cellular operators have pre-empted the tariff rebalancing exercise, which is expected before 1 April 2002, as billing systems of service providers have to be upgraded. BSNL has already responded to the move by coming out with a cost-based tariff for STD calls. TRAI is planning to come out with cost-based tariff even for basic services as is the case with cellular. Presently, the monthly rental of a PSTN phone is subsidized at the cost of an STD call. Due to social obligations, the monthly rental for basic services is around Rs 250 per month whereas it actually costs around Rs 500 to Rs 650 per month.

According to industry analysts, STD calls are currently at a premium of 250 percent. If STD calls are cost-based, the average cost for a STD call will be around Rs 4 per minute during peak time in comparison to the existing average cost of Rs 10 per minute. According to cellular tariffs announced recently, the average cost of STD tariff comes to around Rs 5 per minute, which is on the higher side.

The industry has been talking about level-playing field for long, but in this case, there does not seem to be a level-playing field by any measure. Bharti Telesonic being a new entrant in the NLD space, has an advantage of not fulfilling any social obligation, but BSNL being the incumbent and due to its vast reach (it covers 99 percent of the basic market), has to fulfill them. BSNL sources have gone on record saying: "If BSNL is freed of its social obligations and the basic services tariff are cost-based then it can also think of providing STD calls at almost the same price, or even at a lower rate." But then who is going to fulfill the social obligation and meet the objectives of NTP’99—availability of affordable and effective communications for the citizens.

Breach of Agreement
The reduction in cellular-to-cellular STD tariff is violating the revenue-sharing agreement between the cellular service providers and the NLD operators. Due to the agreement between Bharti Telesonic and cellular operators, the revenue-sharing arrangement shifts from 95:5 to 40:40:20.

Elaborating on revenue sharing, N Arjun said, "The revenue-sharing agreement will work out between the three players—-originator, NLDO carrier, and terminator, in the ratio of 40:40:20. This has been possible because of the cost-based, non-discriminatory interconnect regime and technological advances that have helped in reducing cost."

But as per the MoU document, the revenue-sharing arrangement is bipartite and not tripartite, and it works to be 33.33 percent for the originator, 66.66 percent for the carrier (Bharti Telesonic) and zero percent for the terminator.

According to TRAI, the notification on interconnect called ‘The Telecommunication Interconnection (Charges and Revenue Sharing) Regulation 2001’, which covers arrangements among service providers for interconnection charges and revenue sharing for telecommunication services, including wireless in local loop with limited mobility, states in schedule II (revenue sharing for cellular mobile), item 6: "For local/domestic long distance calls carried (partly) by a basic service provider, an amount is to be paid to the basic service provider at a rate applicable to local/domestic long distance call. The amount is to be calculated on the basis of the corresponding conditions specified in item 3 and item 4 above, i.e. Rs 1.14 per metered call, pulse rate applicable to basic service local/long distance calls, and for long distance calls the chargeable distance equal to the distance of the call carried by the basic service provider for an equivalent STD call from point of interconnection to destination". So the cellular service provider gets only five percent of the total long distance revenue and the rest 95 percent goes to the NLD service provider. According to industry analysts, cellular operators are charging cost plus tariff from the subscriber so they are not allowed to retain a portion of the STD charges. And whatever benefit they get from the interconnect agreement, has to be passed to the consumer and not to the cellular service provider.

Commenting on the interconnect agreement, TV Ramachandran said, "Five percent is the minimum allowed, which is mutually agreed upon and it cannot be unilaterally thrust on cellular service providers. So far, the unilateral agreement was thrust on them and since they had no bargaining power, so despite being entitled to a share of long distance tariff, they were not getting anything."

The Telecommunication Interconnection Regulation 2001 will be applicable from 31 January, 2002 and not from 26 January, 2002. So, there is a possibility that cellular service providers will like to avail of a cut in cellular-to-cellular STD calls by 50 percent for five days, as they are not covered by any regulation before 31 January 2002. But industry insiders say that in spite of the interconnect agreement being valid from 31 January, 2002, they are still bounded by the same interconnect agreement.

TRAI’s Telecommunication Interconnection (charges and revenue Sharing) Regulation 2001 states, "The service provider may implement the proposed interconnection charges and revenue-sharing arrangements after the mandatory notice period of 45 working days". In case of Bharti Telesonic, the interconnect agreement has not been signed till date and with hardly a month left, it will be difficult for it to implement STD cuts in cellular-to-cellular by 26 January 2002. N Arjun also said that new tariffs will be implemented only if TRAI gave a ‘go ahead’.

As the interconnect agreement and tariff plan have not been finalized and submitted to TRAI by Bharti Telesonic, TRAI said it was not in a position to comment on the aspect.

And one cannot rule out the possiblity that if TRAI gave the ‘go ahead’, BSNL too will take steps to match or better Bharti Telesonic’s prices in order to consolidate their customer base and stop churn. If that happens, one may well witenss a price war, one in which TRAI’s role will become crucial. A win-win situation for consumers nevertheless.

STD Tariff for Cellular-to-Cellular Calls

Pravin Prashant