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