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The telecom industry is clearly at tenterhooks with the newly appointed IT minister looking at bringing down the mobile tariffs for local call rates to 10 paise a minute and STD call rates to 25 paise a minute. A.Raja feels that the decision taken by him in his previous tenure to bring in more mobile players can easily lead to lower tariffs. However, the telecom companies unanimously believe that such rates are not possible to achieve under the existing regulation.

BSNL came up with a new tariff plan of “India Golden Fifty” from March 1 in which it is providing local and STD calls at just 50 paise a minute across all networks. However, even BSNL believes that it is not possible to further bring down the tariffs as suggested by the Minister. “The reduction in tariffs to the extent of Rs 0.10 and Rs 0.25 per minute for local and STD calls is not viable for operators and presently there is forbearance in tariffs in the mobile segment and hence it may not be possible for Government to mandate such lower tariffs,” says AK Jain, GM, BSNL.

The present rates for a subscriber are 40 paise to Re 1 per minute to make local calls and Re 1 to Rs 2 a minute for national calls. The telecom players are not finding it viable to reduce the existing charges as both the mobile termination charge and fixed termination charge are 20 paise and also a carriage charge of 65 paise has to be paid. As a result the companies would encounter huge losses if they have to implement the new expected tariffs.

Nevertheless, Raja sounded positive as he said, “I do believe once the new operators start their operations the tariff will drastically come down and the telecommunication facility will be available to persons living in the lowest edge of the social strata.” He added that his motto is to provide tele-services at competitive and affordable rates. Since the operators already pay the government for service charges, spectrum fee, license fees, equipment and handset charges, it surely seems difficult to achieve the envisioned goal of 10 paise and 25 paise tariff.

Tariff Tremors

The Cellular Operation Association of India has termed this suggestion as an anti-business move. Given the fact that tariffs are determined by market forces and not fixed by regulators, the second time minister might have to re-think about his strategies. The statement sounds valid as the operators are offering rate of Rs 0.10 per minute in their own network as no termination charges are payable by them.

The tariff rates have triggered a fresh debate between the Communication ministry and the telecom players. On one hand Raja argues that reduced rates will place India as the leading telecom market, on the other end the telecom fraternity perceives this measure as a backlash on their market policies. With the telecom penetration in the country at present being just 37%, the reduced tariff rates will only result in declining Revenue Per Minute. Moreover, the telecom operators would further be demotivated to invest in rural areas since they are not profitable revenue generators.

Defying the Odds

Satyen Gupta, Chief Regulatory Officer, British Telecom Global Services says, “If the dream of low tariff rates has to be turned into reality then all stake holders will have to play a role-from service providers to regulators to government to make it possible”.

Operators should be motivated to use IP-based technology to reduce the rates. Also an interest in opting for new implementations like VoIP, 3G, WiMAX will further help in reduction as well as making the network more efficient.

Trai will have to review the Interconnection Usage Charge which was last reviewed in 2003. A change in the current policy can only lead to the cut in the present rates and motivate the service providers to rationalize their charges.

The impact on revenue after diminshing the prices is also another concern that the service providers are anxious about. Satyen Gupta suggests, “Innovative ways to increase the customer base should be adopted to negate the economic effects of low rates like bundle the offer of reduced rates with low cost handsets which can be provided at installments, this will even help service providers to penetrate in the rural areas where still hanset prices are an issue.”

The revenue is expected to spike up once the subscriber base is increased. This will accelerate the economy of scale. Disagrees AK Jain of BSNL, “The reduction in call rates at this stage may not trigger any significant increase in customer base from what it already is. The reduction in entry barrier is more important from the point of view of expansion of customer base”.

The Minister also feels that there is enough capacity in the country for the business to reach as many as 750 mn phone connections, the requirement of the hour is to adopt pro-consumer initiatives.

Keeping in mind the last five years of UPA government where some break-through announcements like Mobile Number Portability, liberalizing long distance telephony segment were made, the expectations are soaring high. Time is ripe for the newly elected government to draw a consensus among the telecom players to usher into a new era of development.

Archana Singh