'Intense' is the word to describe the current turbulence in India’s telecom sector. With the competition, tussles and regulatory dilemma, the entire sector stands shaken, that almost reminds us of the film 2012. The complex part is that it’s extremely precarious to reach a judgment without due diligence, be it on Net neutrality, spectrum usage charges (SUC), inter-connection usage charges (IUC), unreasonable lengthy trials, concerns of predatory pricing or disruptive new technologies. If only the announcement of Reliance Jio’s launch and its grouse over inter-connection with other providers can jar the market, what the impact of actual competition will be is really baffling. Whatever the situation, the competition in the sector is intensifying, leading to price competition, which benefits consumers. But the real need is to address issues relating to the quality of service (QoS), which is deteriorating on a daily basis, and also avoid regulatory uncertainties on the telecom regulator’s part.
It’s high time the Telecom Regulatory Authority of India takes a firm stand on Net neutrality. With a number of consultations on Net Neutrality, free data, differential pricing and over-the-top (OTT) applications, the regulator has been going back and forth on the same issue. This has led to regulatory uncertainty, which has done more damage than whatever the decision would have been. Moreover, it seems the regulator itself had suggested an alternative in the closed electronic communication network (CECN), to bypass the norms on Net neutrality. Trai, which with its differential pricing verdict, had posited itself as a forward-looking regulator, is turning backward, which needs to be avoided.
The SUC issue led to another ferocious debate. Looking at the complex calculations, Trai rightly suggested a flat-rate SUC across all spectrum bands. However, given the legal contract that exists between the government and the operators and also the obligation to suggest an alternative to department of telecommunications’ (DoT) weighted average formula, Trai suggested an even more complex way to calculate SUC. Revenue emanating from each band, as basis for SUC calculation, was not viable. Ideally, what was required was to renegotiate the existing contracts and settle for a gradually decreasing flat rate. However, the DoT took the final decision and ultimately, it implemented the existing SUC calculation model, with a few changes, as against Trai’s proposal.
The existence of IUC charges has long been questioned by telecom players. One can recall that in 2003, MTNL pulled the plug on the IUC issue, which islanded MTNL from other networks. In recent times, the issue of IUC resurfaced owing to the launch of Jio’s services, which has announced free calls from its network; and which will benefit immensely from scrapping of the IUC. However, if the IUC is scrapped, while all telecom operators will lose revenue, the hardest hit will be BSNL, which earns around `2,731 crore as revenue from long distance calls being routed through its network. While the move would have a negative impact on certain players, scrapping of the IUC would benefit consumers as the call rates would decrease. Thus, there is a need to undertake a cost-benefit analysis to arrive at the most optimal regulatory solution.
Normally, any new operator would test its services for flaws before an official launch. This is known as the trial phase. The length of the trial phase is not stipulated in the existing regulations, and thus there is no fair or unfair length. This has become an issue suddenly due to the never-ending free trial offered by Reliance Jio. The free trial has helped Jio garner over one million active users even before its official launch. The “free” trial impacts other operators, as is evident, but it will also impact the government’s revenues from tax and SUC, which are not applicable in the trial phase. This led to a confrontation between the Cellular Operators Association of India (COAI) and Jio, one of its members, Thus, to avoid such tussles in future, the regulator should ideally have clarity in its regulation after a diligent stakeholder consultation.
India has the lowest voice tariffs in the world, but despite that Reliance Jio has made it “free”. However, “free” is a subject of contention and it may be somewhat misleading. Competition in the sector is at its peak, and is envisaged to bring notable changes to the sector in consolidation and improvement in QoS, which is quite poor according to a report by CUTS and IIT Delhi. Without a doubt, this is an opportunity for Indians to go online and realise the potential of Digital India. The lethargic incumbents will have to expand their network or offer higher speed data, so there are several reasons for consumers to be jubilant.
However, the need to bridge regulatory uncertainties, to create a level playing field for all and also ensure quality services can’t be understated. Reforms are an important part of the development process. The call has to be taken, irrespective of who it favours and who is negatively impacted. The most important aspect is consumer surplus. Indian consumers have long struggled with issues like call drops, slow Internet speeds, misleading advertisements, all of which need to be checked. If the regulatory reforms can provide cheaper and better services to consumers, it’s undoubtedly the way to go.
The writers work for CUTS International...