An Unholy Alliance?

DQI Bureau
New Update

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.


North South East West
Delhi Tamil

Calcut Madhya


Pradesh (West)



(in MP)

Pradesh (East)
Karnataka Orissa Gujarat

(in UP West)
Kerala Bihar Mumbai
Punjab Chennai Jharkhand

(in Bihar)

(incl. Goa)
Rajasthan Northeast Haryana Himachal


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)


Per minute)
9 am—9

pm (peak)
12 6 2.40
9 pm—9

6 3 2.40

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

divided into four regions where telecom circles are clubbed together. The

northern region comprises of Delhi, UP (W), UP (E), Uttaranchal, Punjab,

Rajasthan, Haryana, and Himachal Pradesh. South comprises of telecom

circles of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, and Chennai.

East will have circles like Calcutta, West Bengal, Orissa, Bihar,

Jharkhand, and NorthEast. West will have circles like Madhya Pradesh,

Chhattisgarh, Gujarat, Mumbai, and Maharashtra (including Goa).

Speaking about simplified structure, N

Arjun, chief executive officer, Bharti Telesonic said, "The logic

behind two time bands and three distance zone was to make it simple as the

present structure was very confusing with five time bands and five

distance bands."

According to Manoj Kohli, CEO, Escotel

Mobile Communications Limited "The reduced prices will be applicable

in three phases. In the first phase to be effective from 26th January

2002, telecom circles of Delhi, Mumbai, Chennai, Calcutta, Karnataka,

Andhra Pradesh, Madhya Pradesh, UP (W), Haryana, Gujarat, Punjab, and

Maharashtra will have this facility. Ist phase contributes around 70 % of

the traffic. The second phase will be implemented in circles of UP (E),

Rajasthan, Tamil Nadu, and Kerala which will be effective from April 2002

which contributes around 20 % of the traffic. And the third phase in West

Bengal, North East, Assam, Bihar, and Orissa which will be effective from

26th January 2003 and which contributes 10 % of the traffic." Even,

cellular operators have plans to extend this 50 % cut in STD rates for

calls made from cellular to PSTN in the third phase added Manoj Kohli.

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,


Pravin Prashant/Voice&Data