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Telephone on demand is an alluring objective of telecom liberalisation, but its consequence may not be palatable for a large class of telephone subscribers in the metros. This is becoming clear from reports on the Telecom Regulatory Authority of India's (Trai's) exercises on rationalisation of telecom user-costs and tariffs. The problem facing Trai is that the existing arrangement to collect upfront Rs 18,000 per OYT connection and Rs 30,000 per tatkal (instant) connection will crumble once telephone on demand becomes a reality. The OYT-tatkal collections help reduce the effective cost of a telephone line. Besides, unlike MTNL and DoT, private operators find it difficult to collect charges upfront. Covering the estimated cost of Rs 40,000 per line will require a hike in user-charges. True, the cost estimate is exaggerated. Costs of switches have declined, as have the electronics portion of telecom equipment. Besides, the use of fibre optics in high-density areas also brings down the cost per line. Trai must Telephone on demand is an alluring objective of telecom liberalisation, but its consequence may not be palatable for a large class of telephone subscribers in the metros. This is becoming clear from reports on the Telecom Regulatory Authority of India's (Trai's) exercises on rationalisation of telecom user-costs and tariffs. The problem facing Trai is that the existing arrangement to collect upfront Rs 18,000 per OYT connection and Rs 30,000 per tatkal (instant) connection will crumble once telephone on demand becomes a reality. The OYT-tatkal collections help reduce the effective cost of a telephone line. Besides, unlike MTNL and DoT, private operators find it difficult to collect charges upfront. Covering the estimated cost of Rs 40,000 per line will require a hike in user-charges. True, the cost estimate is exaggerated. Costs of switches have declined, as have the electronics portion of telecom equipment. Besides, the use of fibre optics in high-density areas also brings down the cost per line. Trai mustget right the cost savings related to new technology and to rising density. Indeed, it must insist on technology that reduces costs.
But the realistic (lower than Rs 40,000 per line) cost will still have to be covered. First on the hit list is the telephone rental charges. The bi-monthly rent is presumably to be doubled. This will enable the telecom provider to recover his costs in half the present period. Judging by reports, also on the anvil is a stiff rise in local call charges. It is not difficult to fix rental on the basis of fixed costs; but how short should be the period of pay-back? Local call charges must surely be related to variable costs. How will variable costs be apportioned between local and STD/ISD calls? Apparently, local calls are subsidised by STD/ISD calls. If so, what is the extent of subsidy that local calls in (high density) metros get? In many parts of the developed world, local calls are free and telecom companies make their money on long-distance calls. In this country, local callcharges are to be stiffened and tariffs on STD/ISD calls reduced. Mind you, with a rise in the volume (density) of STD calls, there is a case for reducing long-distance tariffs; this will also help spread the rural telecom network.
The key issue is whether Trai's tariff schedule will be binding on all basic-service providers, or whether the prescribed tariffs will be ceilings. Administered tariffs will provide a cushion to new service providers in the metros, and yield the existing (public sector) players a bonanza. Ceiling rates will create space for competition.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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