The communications minister's One India plan of offering STD calls at the rate of Re 1 per minute became a reality on March 1 with its introduction by the government operators. Bharti and Hutch duly followed it with their scheme the next day.
While the minister pre-empted the regulator in announcing the One India plan, the Telecom Regulatory Authority of India's recent amendments to interconnect user charges (IUC) regulation will determine the survivability of the One India plan.
An STD or a national long-distance call consists of three elements: call origination carried by the caller's access service provider; intra or inter-circle carriage by the National Long Distance Operator (NLDO); and call termination by the receiver's access service provider.
Apart from the infamous and hotly debated access deficit charge (ADC), the carriage and termination charges are the other two factors that determine the price of a long distance call. Trai in its recent amendments to the IUC has fixed the per minute termination charge at 30 paise and ceiling price for carriage charges at 65 paise, which when combined with the ADC, brings the maximum fixed price of an STD call to just below Re 1 per minute.
What a consonance with Maran's One India plan!
However, the mobile operators have been fuming over the low termination charges because these are 12-14 times lower than that prevailing in other countries. What is the effect of such termination charges?
Call termination assumes importance in a competitive market with a number of access providers. Call termination externality relates to the termination of calls that originate on different networks. The effect arises because the person originating the call is not the customer of the operator who terminates the call. The terminating operator will be able to raise the price of termination or deny the termination with no direct effect on its own subscribers.
The call termination externality represents a major barrier to effective competition and even in a competitive market may allow excessive pricing and poor quality of service as has been happening in our country.
One way to circumvent this failure is through regulatory intervention. Trai has fixed the termination charges to be the same for all operators and for all types of calls. This fixed termination charge, if set high, will increase the user charges and hence will be detrimental to subscribers.
High termination charges will also lead to originating service providers' reluctance to interconnect with other operators. If set low, it will lead to operators resorting to practices of denial of call terminations originating from other networks. Improper IUC will also lead to price discrimination between calls terminated in the originator's network and other networks. The following two incidents illustrate the interconnect anomaly.
The Point of Interconnect (PoI) congestion report released by Trai indicates that in as many as 398 PoIs, the congestion is alarming and well above the benchmark level of 0.5 per cent. At 249 locations, the PoI congestion was as high as 5 per cent.
This high level of PoI congestion is due to inadequate junctions between the two networks that interconnect, which lead to frequent blocking of calls and degraded quality of service. A closer look at the report indicates that the PoI congestion is mostly between private and BSNL/MTNL networks.
Recently, Trai issued direction to mobile service providers in the states of Maharashtra, Tamil Nadu, West Bengal and Uttar Pradesh not to charge differential tariffs for calls terminating in BSNL network and other service providers networks.
Private mobile operators in the aforementioned four states had specified a higher tariff for calls terminating in the mobile networks of BSNL/MTNL from one service area to the other, falling within the geographical boundary of the same state. Trai also received complaints from subscribers regarding the differential higher tariffs being levied by private mobile operators for calls terminating in the BSNL/MTNL network. The operators contend that they have established direct connectivity between each other's network in these four states.
However, in case of BSNL/MTNL, because of the lack of direct connectivity, calls are carried from their network to the BSNL/MTNL network through NLDO, in which case, additional carriage charge is paid to the NLDO and the tariff for calls terminating in BSNL/MTNL network are being charged at a higher rate compared to calls terminating in the network of private mobile operators.
These above distortions are due to the lack of proper interconnect agreements between the different operators, more specifically, between private and government operators. Unless the interconnect agreements are properly regulated and monitored, the One India plan, which forces Re 1 per minute for STD calls, may not be sustainable and may not bring the intended benefits to the subscribers.
If only Maran could heed to the regulator's advice on tariffs and interconnect. . .
The writer is Professor, Management Development Institute, Gurgaon.
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