Trai’s proposal to penalise operators is a reflection that it is unable to make telecom markets work effectively
The Telecom Regulatory Authority of India (Trai) recently issued rules that will require telecom operators to compensate their consumers for call drops. The regulator has directed that, subject to a maximum amount of Rs 3 per day, a mobile operator must pay Rs 1 for every failed call. Unfortunately, this is a sledgehammer approach, based on dubious regulatory reasoning.
However, this is not to suggest that Trai should ignore or downplay this continuing annoyance, which is nationwide and recurrent. Trai, in fact, has a statutory duty to protect telecom customers and is right to treat the issue with urgency.
However, the Trai approach defies relatively simple regulatory reasoning in that it fails to ask a few simple questions: Why does India’s telecom market—the world’s most competitive by number of players—deliver on price but seemingly not on quality? Why are some players, especially smaller ones, unable to exploit the situation to gain market share? How can the regulator make market players compete effectively on quality of services?
Levying penalties is hardly the answer. The scale and frequency of call drops—possibly running into crores daily—is simply much too large. It is not trivial to ensure that all or even a majority of customers experiencing call drops can be compensated verifiably. Ensuring that the crores of vulnerable and uninformed marginal customers can seek—and receive—compensation is a monumental challenge. So is protecting operators from frivolous claims.
Levying fines is, therefore, both unorthodox and largely unenforceable. As Trai’s own research indicates, no international regulator—even in smaller markets—has attempted a similar measure to control call drops.
Trai’s consultation paper argues that Columbia is an exception. For a start, it is a bad idea to rely on an isolated example. Even so, the example is misleading. Admittedly, Columbia’s regulation requires that operators compensate customers for dropped calls. However, this applies only if the operator claims to offer coverage in the area—mobile operators do not guarantee 100% coverage anywhere in the world. The Columbia provision would rule out all areas where the operator has yet to reach. The Trai rules have no such provision. Also, an operator in Columbia must refund the price paid by the customer. The Trai proposal, on the other hand, requires the operator to pay a fixed compensation of Rs 1—roughly twice the average call rate—subject to a maximum of Rs 3 per day.
In addition, there is a mismatch between the obligations listed in the operator’s licence and the new rules for compensation. An operator is in compliance with his licence as long as call drops do not exceed 2%, but yet can be asked to pay a customer for all failed calls. This makes rules for call drops in India more burdensome than elsewhere. This includes the only country that seems to require operators compensate customers.
What should the regulator do to reduce call drops or to improve quality of service in general? There is agreement on some, if not all, steps: It should be easier and cheaper to install telecom towers since they are vital for connecting mobile customers. Since arbitrary closures delays and corruption are routine, government agencies, especially in the states, have their work cut out. However, increasing towers will be counterproductive beyond a point. It will eventually cause interference, unless operators can access more spectrum in a predictable time-frame and at a non-extortionate price. Concerted efforts by government agencies—for example, the Department of Telecommunications (DoT), ministry of defence—are key to releasing more spectrum. This is necessary, but perhaps not sufficient.
As an economic regulator, Trai needs to focus on improving the working of telecom markets. The most effective solution to the call drop issue is perhaps to assist customers in rewarding better performing operators and punishing laggards. “Naming and shaming” is arguably more effective, as our experience on the web shows. Trai could share the quality of service data all service providers submit to it. It could add additional information and graphics to make the relevant data more accessible to the average user and publish it more widely. Consumers could then vote with their feet, thereby moving to companies with better quality of service. After all, it costs Rs 19 to move business to an alternative operator. Of course, sharing the information might also help determine whether there is much difference in the quality of service among mobile operators.
The possible loss of market share and revenues would provide the commercial incentive for companies to invest in reducing call drops. The lack of this information, in a form that can be used by telecom customers—and the many consumer groups registered with Trai—is a serious lacuna. It may explain why most customers pursue deals on price, but not quality. This can be corrected if Trai’s capacity building programmes for consumer groups also train the latter in helping consumers to choose operators, based on the latter’s quality of service. This is a much smaller challenge than levying penalties in a fair and consistent manner across the country.
Trai’s unique proposal to penalise operators is an acceptance of failure and a reflection of the fact that the regulatory body is unable to make telecom markets work effectively in consumer interest. It implies that India’s telecom market, with between 7 and 11 players in each circle, is still not competitive enough to deliver quality of service. If this indeed is the case, then Trai is duty bound to conduct a far more serious study to identify anti-competitive practices or market abuse in telecom markets. Its response, then, would need to be far more comprehensive than simple penalties for call drops.
The author is a consultant and specialises in regulatory aspects of telecom and internet markets