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BUSINESS:
TELECOM
Should
WiLL Prevail?
A
proposal by TRAI two basic phone firms creates a stir
By
Malini
Goyal
 |
| Under
Chairman M.S. Verma, TRAI has been criticised for ignoring consumer
interest issues. |
Telecommunications
is back to courting controversies. Only a year-and-a-half
ago private telecom companies had been allowed to move from a regime of
paying licence fees to one under which they shared revenues with the Government.
That had ended the 10-year reign of controversy and confusion in the telecom
sector. Or so it was thought-till the Telecom Regulatory Authority of
India (TRAI) decided to rewrite a will, the short form of a technology
called wireless in local loop, that in simple terms enables the provision
of basic telephony without the use of cables.
On January
8, the regulator recommended that basic-telephone companies in India should
be allowed to offer "limited mobile" services using will. The
upshot? The country can now have mobile services as cheap as 40 paise
a minute (Rs 1.20 for a 3-minute call is the floor price) compared to
the average of Rs 3 a minute (for metros) service that cellular phone
companies currently offer.
Admitting
that the introduction of limited mobile telephony through
will will benefit basic-telephone companies at the expense of their cellular
counterparts, trai doled out two compensations. The revenue to be shared
by cellular companies will come down from 17 per cent to 12 per cent.
They can also retain 5 per cent of the revenues earned from long-distance
(std and ISD) calls made from a cellular phone. "With the cut in
revenue sharing, cellular and basic operators are at the same level,"
says S.C. Khanna, secretary-general of the Association of Basic Telecom
Operators (ABTO).
Apparently,
the whole package is gift wrapped as pro-poor. will-based mobile phones,
the claim goes, can multiply telephone ownership in India which currently
has just three phones per 1,000 people compared to the world average of
15.
But more
than the customers, some basic-telephone companies are jubilant today.
If the Telecom Commission, which is likely to take a decision on January
25, agrees to the TRAI recommendations, the value of basic-telephone services
will multiply manifold overnight. After all, these companies can then
offer mobile services without actually getting the cellular licence. Says
Prakash Bajpai, CEO and president, Hughes Tele.com, a basic-telephone
company in Maharashtra: "will allows us to offer an additional service
without further investment." The other apparent beneficiaries are
the public-sector Bharat Sanchar Nigam Limited (BSNL), Reliance Industries
(which plans to enter basic telephony in a big way) and a handful of small
private companies.
What then
is the worry? Ask cellular services providers. Every cellular services
operator in the country-including those who also have basic services businesses
like Ratan Tata and Sunil Mittal-has expressed shock at the TRAI's recommendations.
All set to move court if the policy is implemented, cellular companies
are raising fears of investment pull-outs (both foreign and Indian), legal
battles and plunging valuations of the $3.5 billion investment that has
already flowed into the Indian cellular business. Also at stake is the
bidding for the fourth round of cellular services licences in the country,
which were announced on January 5. Says Rajeev Chandrasekhar, chairman,
BPL Innovision: "The move to grant fixed service providers the ability
to deliver mobile services would amount to their back-door entry into
the cellular business."
The crux
of the complaint is not the will, but the mobility. As a technology to
provide fixed phone lines, will is not only allowed but is also desirable
in densely populated areas, hilly terrain or in areas where users are
very widely dispersed. However, under the current policy regime, the technology
should not be used to provide mobile services. Reason: the National Telecom
Policy of 1999 clearly mandates three separate licences for different
types of service: cellular mobile telephone services, fixed services and
cable services. So, whatever the technology, all mobile service providers
must get a mobile licence-mobility and will is no exception. In fact,
a proposal by cable operators to allow two-way communication through their
cable network was turned down on the ground that they must first seek
a basic licence.
The legality
of the issue supersedes the technology argument, which says that mobility
through will is pro-poor. Why should it then be stopped? Undoubtedly it
mustn't. In fact, for the technology to really work optimally it should
be granted unlimited mobility. Only, the companies desiring to do so must
bid and take a licence. Also if the poor are the ones to be benefited,
why introduce the services in cities? Why not restrict it to villages
where telephone density is the lowest?
Moreover,
often in the past, the Government has disallowed the march of a new technology
even in cases where its advancement would have ushered in drastically
cheaper communication. For instance, the voice over Internet (VOIP) is
a technology that can radically lower long-distance call charges. Yet,
the Government hasn't allowed VOIP for three years now. The obvious concern
was to protect the revenues of BSNL and VSNL which together make Rs 18,000
crore a year from long-distance calls (both domestic and international).
By proposing
will-based mobility, the TRAI may have inflicted a blow to both BSNL and
MTNL (the basic-telephone service provider in Delhi and Mumbai). Both
the public-sector telecom companies are entering cellular business and
require time to stabilise the investments made in their new business.
By unleashing will as a competition just when the two companies are entering
cellular business, the proposed policy will bring down the value of both
MTNL and BSNL.
TRAI argues
that the two-cellular services and will-based mobile telephony-are not
comparable. will-based phones will offer limited mobility without value-added
services like roaming, short messaging service (SMS) and WAP. But cellular
operators contend that about 75 per cent of their existing subscribers
will opt for limited mobility. Though TRAI terms the claim as exaggerated,
it fails to offer a more realistic figure.
It is also
difficult to ensure a level-playing field among operators, who are governed
by different sets of rules. Basic-telephone companies cross-subsidise
local call charges with the revenues earned from long-distance calls.
But cellular call charges are worked out on a cost-plus basis. Cellular
operators pay access charge to the basic telephone company when a call
is made from a mobile to a fixed phone. What the cell operator gets is
the revenue from airtime usage.
Contrast
this with a basic provider offering will-based mobile service. He will
not pay any access charges, thus allowing a company to keep Rs 1.20 extra
vis-à-vis a cellular operator. will-based mobile operators will
make a much bigger windfall from a long-distance call than cellular companies.
This brings in a bias in the revenue-sharing arrangement. Says Sunil Bharti
Mittal, chairman of Bharti Enterprises, which operates cellular services
in Delhi and basic services in Madhya Pradesh: "The Government must
ensure a level playing field while finalising the mobility for fixed-line
operators."
Then there
is the issue of convergence. The ABTO claims that if basic-telecom companies
are being allowed to offer mobile services, cellular services providers
have also been allowed to get into basic services. "Globally, convergence
of fixed and mobile is taking place," says Bajpai. He cites the example
of Europe, Australia and some Asian countries. While that may be true,
and the yet-to-be finalised convergence bill will address the issue, cellular
operators are questioning the manner, timing and method of TRAI's recommendations.
The Cellular
Operators Association of India alleges that the process was not transparent,
had procedural lapses and its views and concerns were not given due considerations.
"If the Government believes that fixed telephone service providers
should be allowed mobile services, it has the right to take such a decision.
But it must be done in a proper manner after following the due process,"
the association says.
TRAI has
also shown no haste in acting on many long-pending issues of consumer
interest. Cellular operators in metros, especially Delhi, have been working
in collusive duopolies, charging much higher rentals and call charges
than in other parts of the country. But TRAI took no remedial measure.
It finally took MTNL's entry in the cellular business to bring down the
tariff and rentals. Also, TRAI is silent on its 1999 order on the implementation
of the calling-party-pays regime under which incoming calls on cellular
phones are free. This one step will make mobile telephony cheaper and
affordable. Clearly, the telecom regulator has its priorities all mixed
up.
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