Financial Daily from THE HINDU group of publications
Thursday, Mar 14, 2002
Info-Tech - Telecommunications
Trunk traffic and tariff
THE last two months have witnessed many changes in long-distance telephony. On the recommendations of the Telecom Regulation Authority of India, international long distance (ILD) traffic was opened to private operators. Considering that the terms were liberal, many companies showed interest. Letters of Intent have been issued to five parties.
However, there were fears that easy entry into ILD by private operators might affect the disinvestment of VSNL, which led the Government to take an unusual step. It had realised substantial funds by selling of VSNL real estate, getting a large dividend, and the taxes on these. These raised fears that VSNL would fetch less. But that did not happen, and the Tatas clinched the deal.
Bharti, a private operator for NLD traffic, also announced excessively low rates for STD calls with in the country. The cellular phone operators tried to take immediate advantage of this reduction. BSNL quickened the pace and lowered STD call charges even before the Bharti's tariff could be implemented. The competition has turned into a legal battle and the telecom tribunal has stayed TRAI's orders in this case. However, these developments have had little effect on the average citizen.
The Government had appointed private operators to offer national long distance trunk calls. The terms included being provided connectivity for which the operators were to pay. These operators, beginning with Bharti, offered cheaper rates. These rates were to be introduced from January 26. The Ministry promptly announced the prefixing of two digits to identify the operator whose trunk network was selected by the subscriber.
At this stage, BSNL came out with an explanation that its network was not capable of accepting these two additional digits. The changes to make the BSNL and MTNL networks responsive to the new numbering scheme would cost crores of rupees and take a few months. Why did the Government not resolve this issue before seeking the entry of the private operators? Should BSNL and MTNL retain their monopoly over STD calls, even after private operators have invested heavily for setting up the facilities, merely because the parent Ministry did not anticipate or resolve the numbering system issue required to provide connectivity to private NLD operators? BSNL also reduced STD charges a few days before Bharti's STD rates became operational. The new tariff, announced with much fanfare, was expected to reduce the STD call charges dramatically.
The major reduction has been in the full time, or peak, rates. These are basically used by the corporate world. Big companies have become money-conscious and many have switched to e-mail to save on trunk bills. The calls that still have to be made will now be cheaper. Private users make STD calls during concessional, or off-peak, rates.
These subscribers will gain only marginally in some slabs. For example, there is no change in off-peak rates for slabs of 50-200 km and 500-1,000 km. Off peak rates continue to be the old Rs 1.20 and Rs 4.50 a minute. Per minute charges have been reduced by 60 paise in the 200-500 km slab and by Rs 1.20 in the above-1,000 km slab. This works out to a reduction of 20-25 per cent. Further, the off peak rates fetch a concession of only 50 per cent under the new dispensation, while the earlier rates slipped to 25 per cent, that is, a savings of 75 per cent for seven hours. The charges were a third of the peak rates for three-and-a-half hours in a day. The new rates are still high compared to international levels. A windfall for the average user will come when the Government authorises voice over the Internet with effect from April 1. The voice over the Internet has been available for years but is only now being allowed so as to coincide with the opening of the trunk traffic to the private sector. A substantial quantum of calls will be diverted over the cheaper and of-lower-quality Internet. The total market will shrink and the turnover calculations of private operators may tumble. The Government has, thus, unwittingly placed another obstacle in the path of privatisation of trunk traffic.
TRAI recommendations permit only computer-to-computer communications in India. This will favour commercial subscribers, since in the average domestic situation both ends may not have a computer. However, a computer to telephone call via the Internet is authorised for international calls. It is hoped that this distinction will be eliminated. There is a need to be cautious about authorising international voice traffic over the Net. At present, there is a substantial difference between the total time of incoming and outgoing calls from India to most countries. The country occupying trunk circuits for the longer period has to pay for the difference in the time of use to the country using the trunk network lesser.
Income from this differential in traffic has been steadily rising and is about $500 million today. The authorities must take measures to ensure that the differential traffic is not sent over the Internet. Else the country would lose revenues.
Second, the privatisation of the ILD service could also lead to a tariff war, as with NLD charges. The lowered rates may increase outgoing calls. This will lower forex earnings.
A via media could be to create an environment that diverted this additional cheap rate, low quality traffic over the Internet while retaining high rates for normal calls. This will retain the differential and, simultaneously, help lower-end users.
An important outcome of the Tatas becoming strategic partners, in addition to having basic, cellular and NLD operations, could be that it would be present all along the telecom value-chain.
The Tatas can offer good competition to the public sector monopolies a positive for the country.
(The author is a Pune-based freelance writer.)
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