1. Reliance Jio effect ensured other telcos get busy wooing subsidies, but focus is wrong

Reliance Jio effect ensured other telcos get busy wooing subsidies, but focus is wrong

The much hyped October 2016 auction has ended in a flash with the government making only a fraction of the anticipated Rs 5 lakh crore.

By: | New Delhi | Published: October 13, 2016 6:10 AM
The next telecom wave in India is undoubtedly data. India already has 350 million internet users and this is expected to double to over 730 million internet users by 2020, as per a recent National Association of Software & Services Companies (Nasscom) report. More important, 75% of new user growth is expected to come from rural areas. The next telecom wave in India is undoubtedly data. India already has 350 million internet users and this is expected to double to over 730 million internet users by 2020, as per a recent National Association of Software & Services Companies (Nasscom) report. More important, 75% of new user growth is expected to come from rural areas.

The much hyped October 2016 auction has ended in a flash with the government making only a fraction of the anticipated Rs 5 lakh crore. Sixty five per cent of the spectrum was unsold, and the efficient 700Mhz spectrum did not find takers. Was it steep base price or prudent bidding (unlike the usual recklessness seen in the previous bidding)?

While we digest the outcome of this flash auction, the Reliance Jio effect has ensured all the telecom operators (telcos), including the state-owned BSNL, are busy wooing subscribers. Let’s hope this would shake-up the telecom sector and enable delighted subscribers, but there are challenges galore. The government, telcos and the regulator must work together in improving the overall quality of experience.

The next telecom wave in India is undoubtedly data. India already has 350 million internet users and this is expected to double to over 730 million internet users by 2020, as per a recent National Association of Software & Services Companies (Nasscom) report. More important, 75% of new user growth is expected to come from rural areas.

Back to basics—Call drops

While India’s rapid rise in voice and data penetration is appreciated, it is unfortunate that the telecom sector is not focusing on fixing the vexing call drop issue. Despite all the effort from the government, media and public, there is hardly any change in the ground situation. While the telcos claim to have added thousands of towers to reduce call drops, the fact remains that the call drop menace just continues.

The Supreme Court had struck down the telecom regulator Trai’s proposal asking telcos to compensate for call drops. The relationship between Trai and telcos, also seems to have hit a low. Notwithstanding this, the government must ask the telcos to improve the call drop issue urgently. Trai should seek direct feedback from the subscribers and not just depend on the test reports on call drops.

Regulatory levies

It is to be noted that the regulatory levies in India are three or four times higher compared to China and other countries. Recently, the government decided to retain the weighted average formula for computing spectrum usage charges (SUC) as against a simple flat rate. The complicated weighted average formula takes into account the frequency band, when the spectrum was acquired, among other parameters. While the government imposed a flat 3% SUC for the recently concluded auctions, it should go for the flat rate for all the spectrum soon.

The tussle between Trai and the telcos about IUC (interconnect usage charge) meanwhile continues. IUC is the charge levied by telcos for calls terminating in their network. For example, for a call made by someone from Network A (called calling party) to someone on network B, an IUC of 14 paisa per minute is charged by A to B. Since we follow a calling party pays model, this charge is passed onto the subscriber initiating the call. The IUC was reduced by 30% from 20 paisa to 14 paisa in March 2015. The recent consultation paper from Trai suggests that the IUC be abolished. Obviously, the big telcos are upset as they are set to lose a few thousand crores with this move.

The smaller telcos, especially the latest entrant Reliance Jio will be the beneficiaries, if Trai suggestions are implemented. Considering that we have eight operators (down from 10-12 due to spectrum sharing/trading pacts amongst the operators) in each circle and India still being a large voice driven market, a staggered reduction in IUC could be considered.

Zero IUC or Bill and Keep (BAK) model allows for calls to be terminated at no-charge. Basically, the operator recovers their costs from their own customers instead of charging other operators. The BAK model is followed by the landline service providers in India.

This means, no termination charges are levied for calls made from landline to another landline or mobile network. To encourage landline phone use, BSNL allows free calls to any network in India on Sundays.

Tariff war 2.0

Globally, telcos allow internet telephony or Voice over IP (VoIP), but Indian telcos don’t support it. Why? Telcos earn 5-6 times more using a traditional call as compared to VoIP calls. No wonder telcos get jittery about zero-IUC. Trai’s proposal of a zero-IUC is intended to encourage telcos to provide VoIP services.

Reliance Jio’s Voice over LTE services, completely an IP driven network is sure to disrupt the market. Jio’s aggressive growth will be a challenge till the Interconnect issue is sorted.

The anxiety amongst incumbent telcos to counter Jio has resulted in tariff war 2.0 for data, with many of them reducing tariff by over 50% to retain subscribers. This reminds us of the tariff war 1.0 or call tariff paisafication started during 2003, when voice call rates were drastically reduced (again thanks to Reliance). But then the quality deteriorated over a period of time.

Undoubtedly, the tariff war 2.0 is good news for the subscribers. Instead of only trying to provide cheapest data tariff with average quality, the telcos must compete on excellence in quality of service for data, India specific content and superior user experience. All these without compromising on net-neutrality.

Again direct subscriber feedback on quality and ensuring the telcos offer acceptable data-rate over a specified period of time are much needed.

For India’s dream of a digital society to be a reality, the government, regulator Trai and the telcos need to work cohesively for ensuring superior subscriber experience.

The author is ICT professional. Views are personal

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