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TRAI needs to pull up its socks
January 21, 2003
The telecom party came to a rude halt for consumers last week.
Until recently, the telecom industry was held up as an example of how privatisation and liberalisation help in improving services and reducing tariffs for the consumer.
Competition and technological developments ensured that companies had to assiduously woo potential subscribers, until the consumer had begun to expect that every new entrant in the business would herald a fresh fall in call charges.
The party came to a halt last week and exposed consumers to the ugly side of competition, when the same telecom companies began to block calls from landlines to cell phones.
Before we go into the rights and wrongs of their decision, here is the issue in a nutshell.
Cell companies pay an access charge of Rs 1.20 every three minutes to fixed-line operators such as Mahanagar Telephone Nigam Ltd, Bharat Sanchar Nigam Ltd, the Tatas (after they took over Hughes), and will soon pay Reliance Infocomm calls from cellphones to fixed-lines (landlines).
Companies immediately pass on the cost to the consumer.
However, on calls originating from cellphones and terminating at landlines, the cellphone companies are not allowed to collect any such access charge.
Although cellular operators protested, they went along with the one-sided system because their tariffs, in any case, were not cost-based.
Also, so long as cellphone companies banded together under the Cellphone Operators Association of India and tariffs were uniform and cartelised across the country, the payment didn't really hurt.
The entry of Reliance Infocomm, with its threat of predatory pricing upset this cozy scenario.
Reliance offered to cut basic call prices to a third, but the Telecom Regulatory Authority of India disallowed this.
Technology would allow Reliance's wireless in local loop system to extend its mobility and virtually offer a cell phone at landline tariffs posing a further threat.
Reliance not only has the technology to extend the limits on mobility, but has also promised a 15-second pulse rate, which will benefit people making short calls.
Cellphone companies apparently panicked and resorted to the time-honoured Indian way of getting the government's attention -- they resorted to a strike of sorts and stopped connected calls originating from land lines to cellphones.
If the move caused chaos and hardship to paying customers, that was just too bad. Their goal was apparently to get the attention of government and embarrass the TRAI, and it worked wonderfully.
TRAI, which has never quite got a grip on its primary regulatory function of ensuring a level playing field and resolving disputes between a variety of telecom operators trying to survive in a rapidly changing business environment, was sidelined by Telecom Minister Pramod Mahajan again.
As minister, Mahajan dons various caps. Sometimes, he plays master of ceremonies at telecom events, at others he presides over cartelised tariff announcements. And this time, he took on the role of super-regulator and told the cellphone companies that if they stopped breaking the law immediately, he would look into their demands.
Media reports indicate that cellphone operators have interpreted this as a signal that they too would be allowed to collect access charges from fixed-line operators.
The assumption is probably because Reliance and Bharti Telecom have quietly signed an agreement where both pay each other a small access charge of 38 paise, making Reliance the first company to show a willingness to level the playing field between basic and mobile charges.
This raises two issues.
First, if TRAI does not allow local call charges to be dropped, will the access charge then be loaded on to the consumer?
Second, if the regulator does not quickly create a level playing field between various operators, isn't it in danger of fostering chaos by segmenting the market?
Here is what I mean. TRAI's efforts to keep local charges at Rs 1.20 for three minutes (it refused to clear Reliance's proposed tariff of 40 paise for three minutes, charging it with predatory pricing) are obviously aimed at protecting the mammoth and overstaffed erstwhile public sector monopolies -- MTNL and BSNL.
The regulator is unconcerned that this is against consumer interest.
If TRAI permits cellphone companies to collect access charges from fixed-line operators, it is probably safe to presume that this too will be passed on to consumers and loaded on to local call rates.
Since cellphone companies have ensured that mobile-to-mobile call tariffs are lower -- because there is no access charge payable -- we can probably expect the following scenario.
Calls from one fixed-line to another will cost the same; however, as soon as a fixed-line user calls a mobile phone, the charges could -- in the worst case -- double, i.e. Rs 1.20 as call charge for three minutes and Rs 1.20 as access charge.
Even if TRAI splits the access charge between the two operators, the public sector operators are likely to pass the new charge on to the consumers.
This means that fixed-line-to-fixed line tariffs, mobile-to-mobile ones and mobile to fixed-line tariffs will remain the same, but fixed-line to mobile tariffs will be much higher. How much higher would depend on TRAI.
This is just a recipe for confusion, especially at the low end of the market, which is highly price sensitive.
It is the regulator's job to ensure that there is a level playing field between various telecom operators, no cartels are formed, and issues relating to differential fees and tariffs are urgently sorted out.
So far, TRAI has failed in most of these departments causing bitterness among all constituents.
Consumer groups are upset that despite persistent requests, TRAI has paid little attention to their demands.
It has made no effort to ask cellphone companies to reveal tariff calculations and lets them get away with steep and cartelised tariffs that make a mockery of privatisation and competition.
It has also failed to address the legitimate demands of cellphone companies to create a level playing field (in terms of original license fees paid, et cetera) between different segments of the market.
Finally, it seems torn between it role as regulator and that of a protector of the flabby public sector monoliths.
This cannot go on. A fair and functioning telecom market needs a tough and unbiased regulator, who is bound to protect consumers' interests, and the frequent dramatic interventions of a wisecracking telecom minister are no substitute for firm regulation.