TRAI-ying a New Regime

Once again, TRAI has begun the tariff re-balancing exercise. As a first step
towards this, it has brought out a consultation paper. However, will TRAI be
able to achieve its objective of bringing basic rental and local call charges
closer to cost? The last time it conducted a tariff review was in 1998—99 when
rentals and local call charges were revised upwards while NLD and ILD rates were
slashed with the objective of bringing them closer to cost. But it did not
achieve much. Will the present exercise prove worthwhile? Not until it takes
some practical and politically correct steps. One of which could be forcing all
operators to offer cost-based rates to commercial users. But why should
commercial users be charged differently?

The
consultation paper seeks to explore ‘the tariff framework for basic services,
including dial-up access to the Internet, in the context of the competitive
trends seen in the telecom market’.

Without getting into the complexities of what the tariff revision entails and
how it should be worked out, let us first recall why the below-cost tariff was
devised in the first place. It is well known that the principle objective was to
increase the tele-density by making telephones affordable for more and more
people. The below-cost tariff for local calls and the monthly rentals were then
cross-subsidized by high long-distance tariffs. But have things changed since
then? Tele-density still remains abysmally low, affordability remains a big
issue, and competition in the fixed service still remains non-existent.

In this backdrop, what should be done with the existing basic services’
tariffs, given the fact that any re-balancing here would only mean an upward
revision of local call charges and monthly rentals? One argument could be that
since long-distance tariffs cannot be used any longer to cross-subsidize local
call and rentals because they are going down, the subsidy on them should be
discontinued or at least be brought more closer to the cost. TRAI itself admits
that since the existing tariff structure is based on considerations of
affordability, it would be difficult to alter it all of a sudden. Also any
upward revision of the tariff could definitely meet with a strong political
opposition. More important than all this, an upward revision, could adversely
‘affect a rapid growth of subscriber base and the achievement of the tele-density
targets’.

Further, if cellular tariffs continue to decline and WLL limited mobility
services start offering rates like 1.20 per 3 minute call, fixed services
customers might start surrendering their phones, thereby making the operations
further un-viable.

It is in this context that it is important that TRAI should begin the
re-balancing exercise by forcing the operators to increase tariffs for
commercial users. Basic service operators should be forced to do so, because
they never implemented TRAI’s earlier suggestion for recalibration of
commercial users’ rentals. And TRAI is not off the mark when it says that
operators lose an opportunity to raise the much-needed resources that could
decrease their huge deficit.

It is ironical that on the one hand, the government finds itself short of
resources for the expansion of telecom infrastructure in the country, on the
other hand, it has been subsidizing commercial use of phones for ages! TRAI
admits that in the absence of effective competition in the sector, regulators
would continue to play a dominant role in fixing tariffs, it should force
operators to charge different tariffs from commercial enterprises, even
government departments, and other such ventures.

While there could be other ways of bridging the gap between cost-based tariff
and affordable tariff, one thing that TRAI should facilitate and encourage is
sharing of network infrastructure among various basic service operators to bring
down costs. Among other things, this would mean that incumbents–BSNL and MTNL–should
unbundle their last mile network and provide access to private operators. Till
date, there has not been any serious effort at unbundling in India. This has not
only led to unnecessary cost inputs but has also in fact, slowed down the spread
of telecom services.

Ravi Shekhar Pandey/Voice&Data