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COVER STORY: GOVERNMENT
Pricing In The Name
Of The Poor
By Rohit Saran
Communications Minister
Ram Vilas Paswan's poor man is
one who can pay Rs 14,000-15,000 for a phone. That's the approximate entry
cost of subscribing to the limited mobility services that have been recently
rolled out in Hyderabad and Gurgaon. A facility to make national long-distance
calls (STD) would cost another Rs 3,000 (see table). However, in a
country that has a per capita income of less than Rs 1,800
per month, it isn't hard to guess how many of Paswan's
poor there really would be.
In comparison, the entry cost of a fixed-line
phone in rural areas is just Rs 1,000 (paid as registration charges).
The monthly rental ranges from Rs 80 to Rs 180 with free75 local calls
in a month.
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FOR LIMITED HANDS: Limited mobility isn't
for the poor yet |
Sure, the call charges from a limited mobility
phone would be the same as a fixed line phone-just 40 paise a minute,
compared with at least Rs 2 a minute that a local call from cellular phone
costs. But the two aren't comparable, because while the local calls made
from a limited mobility phones are subsidised (as are local call charges
from a fixed-line phone), the local calls made from a cellular phone are
not.
Universally and historically, fixed phone services
companies subsidise local calls from the fat revenues they earn from long
distance calls. In India, for instance, of the Rs 30,000 crore annual
revenues from basic telecom services, about Rs 20,000 crore is earned
from STD calls. The state-owned Bharat Sanchar Nigam Limited (BSNL) has
been subsidising local calls from the revenue it earns from long-distance
calls.
The private fixed phone companies too needed
a cushion to subsidise local calls. Their licensing agreement entitles
them to retain 60 per cent of the STD charges and 45 per cent of the international
call (ISD) charges made from a fixed phone. But cellular companies can't
retain a single rupee from the STD or ISD calls made from a mobile phone.
The only money they make on such calls is the normal airtime charge. Since
limited mobility is coming from the stable of fixed-service providers,
they will have the pool of STD and ISD charges to dip into in order to
keep the local call rates at 40 paise a minute.
 So
what should consumers worry about? Plenty. To keep local call charges
low, fixed-phone services companies will find it difficult to reduce STD
and ISD charges, which are among the highest in the world. And if they
are forced to cut long distance call charges, they will have to raise
local call charges beyond 40 paise a minute. Both ways, the customer will
be hit. Already, the schedule for annual reduction in STD call rates has
been relaxed, fearing a large reduction in the revenues of BSNL.
Limited mobility phones will have another price
advantage over cellular phones. Incoming calls will be free. But that's
something cellular companies too have proposed since 1999. After a protracted
legal and regulatory delay, the offer is likely to be cleared in a month's
time. Cellular users will then have the facility of free incoming calls
too.
Fixed-service providers legitimately claim that
the current high entry cost of limited mobility phones will come down
as their market expands, just as the cost of cellular services has been
falling with increase in its customer base. But that too won't be an unmixed
blessing. By hampering the future rate of growth in cellular phone subscribers,
the presence of limited mobility service will slow down the further reduction
in cost of cellular services. The prime potential subscribers for limited
mobility phone are rural rich and urban middle class, both either present
or prospective customers of cellular phone companies.
In the absence of any market estimates or a
relevant international experience, it is difficult to say if both or one
of the two mobile services will survive in the long run. The only country
in the world to have experimented with limited mobility is China. But
China's telecom industry is a government monopoly. India's attempt at
replicating the monopoly model in its increasingly competitive market
is at best risky and at worst foolhardy.
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