The December 18 announcement by cellular mobile service providers (CMSP),
except MTNL, Aircell, Hexacom, Reliance, and RPG, of reducing mobile-to-mobile
STD call charges by 50% from January 26 has triggered a new debate. It remains
to be seen whether the new tariff will be approved by the Telecom Regulatory
Authority of India (TRAI), even as consumers have been given no say in the
choice of NLD operator.
Will the cellular operator bypass the Telecommunication Interconnect
Regulation, 2001 and the Telecommunication Tariff Order? Will BSNL incur huge
losses because of new relationship between CMSPs and Bharti Telesonic? Will the
new rate trigger a price war in STD in days to come?
Commenting on the development, industry insiders said Bharti Telesonic could
implement the reduced tariff because of legal complications. Others felt that
with Bharti’s IPO due in the last week of January, the December 18
announcement was a PR exercise to build up investor confidence for the IPO,
especially as it gives an assured revenue stream to Bharti Telesonic.
(in UP West)
First, subscribers should have the freedom to choose the NLD operator, and
not cellular operators forcing them to opt for a particular one. As of today,
there are two NLD operators– BSNL, the incumbent, and Bharti Telesonic, the
only private operator in the country. NLDO guidelines state that it will be
"mandatory for fixed service providers, cellular mobile service providers
and cable service providers to provide interconnection to NLD service providers,
whereby the subscribers could have a free choice to make
inter-circle/international long distance calls through NLD service
In the present scenario, however, cellular service providers are not
providing any options to the customer as they cannot dial the NLDO of their
choice. Instead, cellular operators are forcing the customer to opt for Bharti
Telesonic. So, Bharti Telesonic cannot start services without carrier access
codes being (CAC) in place, as one cannot force the customer to go by a
particular route. And it seems it would be difficult for them to implement the
new rates on January 26.
Asked to comment on CAC, TV Ramachandran, director-general of the Cellular
Operators’ Association of India, said: "Because there’s a delay in
grant of the carrier access code, which is not an aspect controlled by us, why
should I force subscribers to go to BSNL?"
Tariff for Cellular-to-Cellular Call*
(Rs. Per minute)
(Rs. Per minute)
has to also pay prevalent airtime while making a STD call
to the announcement, there will be a cut in cellular to cellular STD rates
by 50 %. So for a peak time rate of Rs 24 per minute presently, the
cellular to cellular STD rate will be Rs 12 per minute (excluding the
average airtime cellular tariff of Rs 2 per minute). But if one includes
the cellular airtime tariff, the total cut in cellular to cellular STD
tariff comes down to 42 % and not 50 % as promised by the cellular
operators. As per the announcement there will be two time bands of peak (9
AM to 9 PM, Sundays, and three national holidays) and off peak (9 PM to 9
AM except Sundays, and three national holidays), and the country will
divided in three distance zones– home (50-200 Km); regional (north,
south, west, east), and national (inter region).
For simplicity, the country has been
Speaking about simplified structure, N
According to Manoj Kohli, CEO, Escotel
According to the TRAI’s recommendation on carrier selection code, if any
subscriber plans to make an STD call in a multiple regime NLDO, he or she has to
dial the STD prefix, i.e. 0, followed by an NLD service code (NLDSC), a carrier
access code (CAC), and thereafter the national significant number (NSN) of the
dialed subscriber. So, for making a call from Delhi to Mumbai one has to dial 0
+ 10 (NLDSC) + 55 (CAC) + 22 (Area Code) + 3451234 (Local Number).
The authority recommends adoption of 10 as the NLDSC. This code will have to
be dialed for all NLD calls involving carriage over NLD network facilities. In
regard to the CAC, which will identify the NLD operator chosen by the
subscriber, the authority recommends a two-digit code beginning at 40 and ending
at 59, thus giving 20 codes to be allotted to all NLD carriers, including BSNL.
Recently, DoT allotted the CAC of 20 to BSNL and 50 to Bharti Telesonic. Though
cellular service providers have assured TRAI in writing that they can implement
CAC immediately, experts say even in the worst case scenario, it will take two
to three months time for cellular service providers to upgrade their software so
as to accept CAC and define call routing patterns. Even BSNL exchanges are not
CAC-ready and cellular customers cannot exercise this option through BSNL
exchanges. According to industry insiders, only 142 LDCAs out of 322 are CAC-ready.
So, in the case of BSNL, it might take longer before a customer is given the
option to choose the NLDO.
Once the CAC is in place, the cellular service provider has to inform
customers about the dialing procedure and other details before implementing it.
The customer has to be informed about the different tariff regime. Second, it
seems cellular operators have pre-empted the tariff rebalancing exercise which
is not expected before April 1, 2002, as the billing system of service providers
has to be upgraded. Analysts feel that one might see the same tariff due to
cost-based tariffs. TRAI is planning to come with cost-based tariffs even for
basic services, as is the case with cellular. Presently, the monthly rental of a
PSTN phone is subsidized at the cost of a STD call. Due to social obligations,
the monthly rental for basic services is around Rs 250 per month, whereas it
actually costs around Rs 500-650. According to industry analysts, STD calls are
at a premium of 250% at present. If STD calls are made cost-based, the average
cost for an STD call would be around Rs 4 per minute at peak time, in comparison
to the existing average cost of Rs 10 per minute. Even cellular tariffs
announced recently are on the higher side.
The industry has been talking about a level playing field, but in this case,
there doesn’t seem to be one by any measure. Being a new entrant in the NLD
segment, Bharti Telesonic has the advantage of not fulfilling any social
obligation, but BSNL has to fulfill them being an incumbent and due to its vast
reach–it controls 99% of the basic market. Sources in BSNL have gone on record
as having said that "if BSNL is removed of its social obligations and basic
services tariffs are cost-based, even BSNL can think of providing STD calls at
almost the same price or even at lower prices".
But then, who is going to fulfil the social obligation and meet the
objectives of NTP ’99, which promises the availability of "affordable and
effective communications for all citizens"? Third, the reduction in
cellular-to-cellular STD tariff is violating the revenue-sharing agreement
between cellular service providers and NLD operators. Due to the agreement
between Bharti Telesonic and cellular operators, the revenue-sharing arrangement
shifts from 95:5 to 40:40:20.
Elaborating on revenue sharing, N Arjun, chief executive officer of Bharti
Telesonic, said, "The revenue-sharing agreement will work out between three
players–originator, NLDO carrier and terminator–in the ratio of 40:40:20.
This is possible because of cost-based non-discriminatory interconnect regime
and technological advances which have helped in lowering costs." As per an
MoU, however, the revenue-sharing arrangement is bipartite and not tripartite,
and it works to be 33.33% for the originator, 66.66% for the carrier (Bharti
Telesonic) and 0% for the terminator.
A TRAI notification on interconnect called the "Telecommunication
Interconnection (Charges and Revenue Sharing) Regulation, 2001" states in
Schedule II, Item 6: "For local/domestic long-distance calls carried
(partly) by basic service providers, an amount is to be paid to the basic
service provider at a rate applicable to local/domestic long-distance call. The
amount is to be calculated on the basis of the corresponding conditions
specified in Item 3/Item 4."
The cellular service provider, therefore, will get only 5% of the total
long-distance revenue, with the remaining 95% going to the NLD service provider.
According to industry analysts, cellular operators are charging cost-plus tariff
from the subscriber and therefore, they are not allowed to retain a portion of
the STD charges. Whatever other benefits they get from the interconnect
agreement have to be passed on to the consumer and not the cellular service
On the interconnect agreement, TV Ramachandran said, "A figure of 5% is
the minimum allowed and it says interconnect is mutually agreed upon and cannot
be unilaterally thrust on me. So far, the agreement has been thrust on me. And
since I had no bargaining power as even when I was entitled to a share of the
long distance, I was not getting anything. By regulation, we are getting 5%. But
I am entitled to a fair share of the interconnect. So nobody can stop us because
there’s nothing wrong in this."
Fourth, the Telecommunication Interconnection Regulation 2001 is applicable
from January 31 and not January 26. So, there’s a possibility that cellular
service providers would like to avail of cuts in cellular-to-cellular STD calls
by 50% for five days, as they are not covered by any regulation before January
31, 2002. But industry insiders say tat despite the interconnect agreement valid
from January 31, they are still bound by the same interconnect agreement.
Fifth, the TRAI’s Telecommunication Interconnection (Charges and Revenue
Sharing) Regulation, 2001 says: "The service provider may implement the
proposed interconnection charges and revenue-sharing arrangements after the
mandatory notice period of 45 working days." In the case of Bharti
Telesonic, the interconnect agreement has not been signed till date and only one
month is left. Therefore, it would be difficult for them to implement the STD
cuts in cellular-to-cellular calls by January 26. But Arjun says, "If TRAI
gives me a go-ahead, we will implement it. Otherwise we will not do it." As
the interconnect agreement and tariff plan have not been finalized and submitted
to TRAI by Bharti Telesonic, TRAI is not willing to comment.
If the TRAI still gives a go-ahead, despite these points, there is every
possibility that BSNL will match or better Bharti Telesonic’s price and would
like to consolidate on its customer base. What we are heading for then, is a
price war in the days to come, with TRAI playing a crucial role and the drop in
tariff a win-win situation for BSNL, Bharti Telesonic and consumers. Happy days,