The Telecom Regulatory Authority of India (TRAI) has in the past, claimed that it was encouraging competition and therefore some of the steps it was taking such as raising tariffs for the subscribers was only to favour competition. Justice Sodhi, the TRAI Chief has claimed that in the long run competition will benefit the subscriber. We have taken up earlier the skewed priorities of TRAI, busy as it is in helping the private cellular operators and it’s anti subscriber attitude. However, the recent actions of TRAI in preventing MTNL to offer cheap cellular services and in introducing a Calling Party Pays (CPP) regime shows that helping private cellular operators and not competition is increasingly becoming TRAI’s preoccupation. The subscriber will have to wait a very long time indeed to see any benefits through such competition.
TRAI’s stance on MTNL’s Cellular Service is important for two reasons. First, MTNL’s pricing brings out clearly that private cellular operators are offering highly overpriced services. MTNL is prepared to offer cellular services at Rs.1.20 a pulse – far below the costs that the cellular operators consider “viable”. The call rate of Rs.1.20 may be contrasted with Rs.4.00 per pulse that TRAI has fixed for the private operators.
Why did TRAI fix Rs.4.00 per pulse (1st November onwards) as the charges for the cellular services? This tariff is based on the cost figures supplied by the private cellular operators. The private operators have shown huge costs for marketing, billing and bill collections, incidentals and so on. This, apart from inflating the capital costs of the equipment, the old practice of Indian capital to skim the projects off the top for the “promoters”. This is how the cellular operators have also claimed “sickness” and therefore in need of public largesse, a public largesse given by the BJP Government with alacrity just before the elections. And it is the same basis of “costs” and “viability” that TRAI is accepting for cellular operators and thus penalising the public.
The second importance of TRAI’s attitude of not allowing (or in delaying MTNL through repeated queries) MTNL lies is its interpretation of competition. In TRAI’s scheme of things, competition only means protecting private parties against DoT and MTNL and not allowing a fair competition to benefit the subscriber. Thus, as the cost of communication of equipment is dropping rapidly, it is possible to introduce cellular mobile services at much lower costs. This is exactly the benefit that MTNL proposed to pass on to the subscriber – using the latest technology of CDMA, which allows more to be extracted from the frequency bandwidth – and thus lower costs. However, competition against private operators and a reduction of their tariffs is not welcome to TRAI. Protecting competition only means protecting cellular operators.
This is not the only anti subscriber move that TRAI has made in this period. The Calling Party Pays – the CPP principle — has been used in the US. That is, if a land phone user now calls a cellular user, he or she has to foot the bill for the call. We have time and again pointed out that the key issue in India in the telecom sector is providing cheap basic services – the land phones — at low costs. As the cellular services are more expensive (due to TRAI’s artificial pricing), therefore the CPP principle will only inflate the bills of the ordinary subscriber using his or her land phone.
However, this is not the major issue in the CPP regime. The major issue, which is going to impact the basic service subscribers, is the share of call that the basic service provider will have to pay to the cellular service operator. This means really DoT / MTNL as the private basic service operators are yet to start their service. In TRAI’s order, the basic service provider will have to pay the cellular service provider 0.80 per metred unit which is above the call rates for the lower slabs – 0.60 per call for rural areas, 0.80 per calls for the lower slab of urban users. If we take the average tariff per call for DoT, it is about RS. 1.00 per metred unit. Thus, DoT will be left with only RS. 0.20 per metred unit while handing over RS. 0.80 to the cellular operators! If we take the average time for a call – about 3 minutes – the basic service operator DoT will retain RS. 0.80 for a three minute call – even less than the average collection for calls within its own network. Thus what TRAI is proposing is that DoT and MTNL should subsidise the cellular operators.
TRAI has an explanatory memorandum to its order on CPP. One of this is mobile calls are premium calls and therefore should cost more. This makes strange reading for a body advocating cost based tariffs. As we have seen from MTNL’s pricing that the cost of mobile services have dropped and are comparable to that of basic services. Therefore cellular calls should also be cost based and not priced as premium calls. The other in the memorandum is regarding the revenue share to be handed over to cellular services and DoT’s contention that this will lead to Rs.0.80 of its income of Rs.1.00 being handed over to cellular operators. TRAI states that they have considered a standard tariff of Rs.1.20 for basic services and if DoT was offering lower rates, this is DoT’s problem. Shown off verbiage, TRAI is saying that DoT should increase its tariff to the price caps set by TRAI in its earlier price order. Thus, the whole argument TRAI then advanced – that its tariffs were price caps and not actual tariffs – is a piece of fiction. TRAI wants the tariffs in basic services to increase to an average of Rs.1.20 now and elimination of slab based tariffs that keep basic services low for the lower end subscriber. Thus the CPP regime is another attempt by TRAI to raise the tariffs at the lower end for the land phone users.
This brings us to the last part of our argument. The costs of communication are dropping rapidly this should enable a rapid roll out of the network and lowering of costs to the consumer. Any competitive regime should help this process, if textbook economics is to be believed. Instead, we have a “competitive regime” under TRAI’s aegis whose main talk is to push up the costs for the subscriber. Instead of competition benefiting the consumer, it is helping only private operators. Justice Sodhi, who argues that competition will help the consumer “in the long run” needs to be told that as a famous economist once said, in the long run, all of us are dead. What matters now is whether competition, TRAI style, is helping the people or harming their interests. This is the only test that we have to judge TRAI’s policies.