In the process of levelling the playing field between cellphone companies, fixed line operators and Wireless in Local Loop services, the Telecom Regulatory Authority of India (Trai) dealt a hard blow to Indian telephone users with a steep hike in call charges. Trai has slammed telephone subscribers with four hard punches. It has hiked rentals, reduced call duration to two minutes (itself a 33 per cent hike), halved free calls to 30, and reduced the number of calls billed at Re 1 from 500 to 300. The tariffs for rural consumers are slightly, but insignificantly, different as is its concession for senior citizens. Since the regulator has tinkered with so many parameters of tariff fixation, it is not easy to quantify the exact hike after the new tariffs come into effect but some consumer groups believe that it could be anywhere upto 50 per cent or more. The new rates, as anticipated by us, protect the government owned erstwhile monopolies MTNL (Mahanagar Telephone Nigam Ltd) and BSNL (Bharat Sanchar Nigam Ltd) which suffer from high cost, overstaffing, sloth and inefficiency. Their fixed line cost is as high as Rs 12,000 to Rs 15,000 per phone. At the same time, Trai tariffs have provided the new basic operators, Reliance and the Tatas, an opportunity to encash on this inefficiency, since their wireless last mile reduces their cost per subscriber to almost a third at Rs 5,000 or less. In fact, according to a Press Trust of India report, Reliance executives have gone on record to welcome Trais tariff increase for landline users saying, with this announcement users will take our services.
Again, as we anticipated, Trai has blamed the hefty hike on what it claims was cross-subsidisation of local calls. However, the regulator has failed to back this up with any cost data, nor has it attempted to establish how much of the high cost of MTNL and BSNL services are due to their own inefficiencies. Trais new costs are bound to be challenged by consumer advocacy groups, with whom it has started a formal consultation process which was jettisoned when deciding the present tariff hike. Typically, however, consumer protests usually meet with little success because the judiciary is neither equipped nor inclined to seek the assistance of an amicus curiae and go into complexities of tariff determination. In a country where the average telephone bill is approximately Rs 700, the tariff hike will not only impact the growth of telecom business, but will also restrict the use of the internet, especially by children and families. High tariffs are the main reason why Indias telephone density lags so far behind that of China. Instead of fixing and fiddling with tariffs so as to protect phone companies incapable of surviving in a free market, the regulator needs to focus on growing the business by fostering increased competition and on the survival only of the fittest service providers.