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May 5, 1999


TRAI may suggest revenue sharing in paging business

Email this story to a friend. The Telecom Regulatory Authority of India, in its recommendations on paging licence fees, is likely to suggest only a nominal revenue-sharing mechanism.

The authority is likely to reserve judgement on division of revenue on incoming calls between the basic operator and the paging service provider.

The recommendations on licence fee from fourth year to the tenth year for paging operators in 27 cities are expected to be given to the government in around two weeks.

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In its consultative paper on paging tariffs, the authority had mooted the idea of a 'calling party pays' system where the caller to a paying number would be charged above the average call rate.

The authority suggests that paging service be charged, for instance, at Rs 1.50 per call. While the basic telephone provider would retain Rs 1.30, the remaining Rs 0.20 would be remitted to the paging service operator.

The operators are pushing the concept of revenue sharing because it will boost revenues substantially.

According to a company, revenue from incoming calls would almost completely wipe out the licence fee arrears of the past year.

The 'calling party pays' regime is, therefore, expected to boost the flagging revenues of paging operators, most of them in the red.

In 1998-99, 9 of the 10 operators were posting losses, even before payment of licence fees. In the first three years between 1996 and 1998, licence fees averaged 47 per cent of revenues (TRAI figures).

In subsequent discussions, fixed line operators, mainly the Department of Telecommunications, and the Mahanagar Telephone Nigam Limited, have been saying that there are technical limitations to implementing a CPP regime for paging operators.

While the paging operators say these can be worked around, technical experts say DoT and MTNL are not entirely off the mark in their reservations.

There are some shortfalls in the billing software for recording the exact number of calls to a paging number.

While the TRAI has said that separate discussions will be held on the issue, there is a view in the TRAI that the new higher paging rentals as well as the nominal licence fee regime being considered would improve the bottom line of the industry, even without the CPP regime.

The TRAI is also concerned that customers be not unduly burdened with higher rentals as well as higher call charges.

Operators also admit that in countries with the CPP regime, the rentals are minimal. The Indian Paging Service Providers' Association has said it is against making an incoming call a premium call, while stating that this should only be a choice of last resort.

Operators have also suggested that the revenue could be shared even without an increase in tariff. But technical issues and commercial objections of dominant fixed line operators would still remain to be resolved.

TRAI calculations indicate that by improving their operating ratios, the majority of the operators would turn a profit even after paying 7.5 per cent of their revenues as licence fee.

With leased line charges coming down massively, operators should cut costs by switching over to leased line connectivity to the basic network instead of taking expensive junction lines, say regulatory officials.

The TRAI study also reveals that the three or four (out of 10) operators making losses in the revenue-sharing regime, do so, whether they pay 5 or 15 per cent of their revenues as licence fee.

The TRAI is currently discussing several revenue-share levels from 0 to 10 per cent. There is a view that revenue share should be nominal, a view that is now shared by several officials in the government, as reflected in the Group on Telecommunications deliberations.

The government policy, of late, as reflected in the Internet guidelines, is also leaning to a more liberal licensing regime.

The industry has also been pointing out that there should be no discrimination between the Internet and the paging services, especially given that the use of the latter is far more widespread.

- Compiled from the Indian media

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