There?s much hullabaloo about the recent reduction in termination charge by Rs 0.10 per minute on domestic calls. It?s hoped that this move by Trai will lead to lower tariffs when it comes into effect from April 1. In these times, when the average local mobile tariffs are down to Rs 1 and the same for STD cost around Rs 1.50 per minute, the tendency is to view any rebalancing of the cost structure of the operators as leading to a misplaced reduction in tariffs, which are anyway the lowest in the world. Tariffs are a product of market competition and recently when Reliance Communications launched its GSM services and started offering SIM connections for as low as Rs 25, it did not need any regulation to bring the rates down. Quite logically, when the other pre-dominant CDMA operator Tata Teleservices launches its GSM services, a new rate war will start.
Before one explains why the present reduction in domestic termination charges (termination charge is a fee paid by an operator on whose network a call starts to another on whose network the call ends), will not necessarily lead to any reduction in STD or local tariffs, it is pertinent to understand the context in which the current termination charges were reviewed.
This was one more way by which the communications and IT minister A Raja wanted to help the new entrants to whom he had doled out licences and spectrum last year at throwaway prices, to better their chances of getting a decent valuation and cash out. As is apparent, the GSM operators association, the Cellular Operators Association of India (COAI), was never in favour of downward revision of the charges and in fact has criticised it. GSM players like Bharti Airtel, Vodafone-Essar and Idea Cellular form around 75% of the mobile market and if they don?t lower tariffs, who else would? For these operators, reduction in termination charge does not mean much. As all of them have a decent subscriber base and almost a pan-India network, their payout and gain is mostly neutralised. However, for new operators, say Unitech Wireless, if they start rolling out services tomorrow, the same cannot be said. Initially, they would have a lower user base, meaning their subscribers would make more calls on other networks as compared to the calls they would receive. As a result, the company would end up paying more by way of termination charges.
Put simply, if the charges were not reviewed, incumbents like Bharti and Vodafone would have earned more from these new operators than they now will with revised charges. This is the reason why COAI is not happy with the move.
If Rcomm or TTSL are happy it?s because they are launching GSM services and will get relief. But these companies would anyway provide competitive tariffs initially to lure customers. As far as new licensees like Unitech Wireless, Swan Telecom, Loop Telecom or Datacom are concerned, none of them have started their services and chances are that things would not change much by the end of this year.
In this context, expectations of a major reduction in tariffs for local and STD calls are misplaced. However, as pointed out by this newspaper, the move would certainly bring about reduction in ISD rates where the termination charge has been increased by Rs 0.10 per minute. This is also due to the skewed ratio between international calls coming to India and going out from here. The ratio stands at 3:1 ? around 21 billion minutes of calls come to India from overseas while only 7 billion minutes go from India. Naturally, if operator earnings from calls coming from outside go up, they would offer some reduction for outgoing calls.
By charging differential termination charge between domestic and international calls, all that Trai has undertaken is a rebalancing exercise?give some while taking some. In effect, it has re-introduced the abolished access deficit charge wherein every private operator paid Rs 1 for international calls to BSNL to fund its social cause. Now international calls would do the same for private operators as well.
rishi.raj@expressindia.com
