Cheques and balances by Sucheta Dalal

Cheques & Balances by Sucheta Dalal

June 18, 2000

Where does TRAI figure in the telecom tariff hike

As for telephone users, the TRAI is not bound to hear a direct representation from them and a long legal battle in a civil court is the only recourse

A lot has been written already about Ram Vilas Paswan’s Rs 1,200 crore bounty of free phones for telecom employees, as well as the manner in which the Prime Minister’s acquiesce obtained on the basis of a fake assurance regarding corporatisation. But when a policy decision imposes a huge burden with implications on tariff, how is it that the Telecom Regulatory Authority of India (TRAI) has not figured in the debate at all?

The answer is that the huge gift to 3.2 lakh employees is a policy issue of the telecom companies and that TRAI has no role whatsoever in them rewarding their employees. This does not make sense. Over a year ago, when the old TRAI under Justice S S Sodhi dealt a crushing blow to telecom subscribers by hiking local call tariffs, it did so in the name of eliminating subsidies. Today these monopoly companies are creating new subsidies and the regulator remains a silent spectator. It was then argued that long distance call charges allegedly subsidised local calls and that increased international competition made it imperative to balance costs and cut long distance tariffs. It was also argued that the cost of installing a fixed line was a huge Rs 25,000 and was being subsidised by the phone companies in non-urban areas.

The TRAI had then accepted the cost data submitted by the telecom companies and had forced a four-way increase in tariffs on hapless consumers. Telephone rentals were increased, the pulse rate for calls was reduced, the cost per call hiked, and finally the number of free calls included in the rental were reduced. Organisations such as the Bombay Telephone Users Association, with which I am associated, had questioned the cost per line claimed by the Department of Telecommunications — our contention was that the cost had to be significantly lower and that there was an element of double counting involved in the calculation. The detailed working of this cost was never shared with NGOs and user groups so that they could be independently verified.

User associations had also argued that the bloated monopolies with their notoriously low efficiency levels and service standards can no longer be the basis of fixing costs for ordinary consumers. It has been pointed out to the TRAI that the Maharashtra Electricity Regulatory Commission (MERC) has already created a precedent by sharing detailed transmission data provided by the state electricity board and power producers with NGOs and research groups. This allowed them to make a cogent case against the tariff hike proposed by the Maharashtra State Electricity Board. In the case of telecom companies too, the TRAI has to make such data available to user associations, so that subsidies, costs and freebies can be independently calculated.

The claim that fixed lines were being heavily subsidised needs particular attention, because both DOT and MTNL are extremely profitable, despite such subsidy claims and the burden of a high wage bill, low productivity and efficiency. Their profits indicate a clear case for the TRAI to have attempted to balance tariff hikes with cost cutting measures and increased productivity norms — but a simple tariff hike is always the easier option. Also, private service providers had been quietly lobbying for higher tariffs, because it improved their break-even level and allowed them to wean away subscribers merely because of better service and higher efficiency. An inefficient monopoly is always good news for new entrants.

As for telephone users, the TRAI is not bound to hear a direct representation from them and a long legal battle in a civil court is the only recourse. Since, the DOT and MTNL continue to be near monopolies, Ram Vilas Paswan’s largesse has a direct bearing on ordinary telecom subscribers. Finance Minister Yashwant Sinha may be happy that his Ministry will not be paying for Paswan’s gift, but telephone users are certain to bear the burden some time soon. A sample study by the Bombay Telephone Users Association shows that the last tariff hike led to a burden of 34 per cent on users at the lower end and as much as 300 per cent on heavy phone users. This level of increase is extortionately high by any standards.

The telecom unions’ threat to launch an agitation against corporatisation is another issue. This is no longer a matter between government and public sector telecom employees in comfortable protected jobs. A business newspaper reports that A F Ferguson has valued the assets of the Department of Telecom Services at an enormous Rs 250,000 crore. These assets belong to the nation and cannot be allowed to be squandered away because of the blackmail by trade unions. If telephone companies are not forced to cut costs, improve productivity and service standards and use new technology, they will soon turn sick. Technology changes do no await the capricious wishes of pampered government employees — they are already here. Cellular technology is already the far cheaper alternative to high cost fixed line installations and even the aggressive MTNL has yet to get a slice of this business. If one heavy shower in Mumbai puts 35,000 telephone lines out of commission for over 15 days, then the future of fixed lines is fairly obvious. Today, the high cost of cellular calls is a barrier, but that is only in cities such as Mumbai. In the non-metro areas as well as Chennai and Calcutta, operators such as Reliance Telecom are already providing cellular services at a fraction of the cost in Mumbai.

Wireless technology and cable are almost in a position to provide Internet access at extremely low rates and the spectacular changes in technology will only increase their scope of use. If telecom unions are allowed to block technological change, they would only be playing into the hands of private service providers who are steadily eating into the market of DOT and MTNL.

Individual telephone users will always have the option of switching to the better alternative, but if the public sector monopolies turn sick, the losses and high wage bills will eventually be borne by the exchequer. In these circumstances, there is an urgent need for some clarity regarding the role of the TRAI and its obligation to protect consumer interests. Surely, it is illogical that the TRAI should fix tariffs, largely based on submissions of telecom monopolies, but have no say when policy decisions lead to a tremendous increase in costs.