Till some months ago, telecom czars like Sunil Mittal and Asim Ghosh appeared the epitome of concerned corporates, waging a battle with the government on behalf of their customers.
I’m not talking of the cellular-vs-WiLL battle, because that was one for their own survival, but of the fight they were having with the telecom regulator, the TRAI, which was unfairly trying to burden cellular subscribers with something called an ADC charge, in which their contribution would run to anywhere between Rs 2,000-3,000 crore a year.
In other words, given that the turnover of the cellular industry is today around Rs 7,000 crore, this means, on an average, a 15-20 per cent hike in most people’s phone bills.
In early 2003, when the Access Deficit Charge, or ADC, proposal was first mooted, to subsidise the state-owned BSNL, the cellular association, the COAI, filed an appeal against it.
Their point was simple: apart from little logic in getting a cellular phone user to subsidise someone else, there was no evidence that BSNL was losing the kind of money the TRAI said it was while providing telephones to rural areas (BSNL does not maintain separate segment-wise accounts, but makes an overall profit).
Within a short while of the COAI’s protest, the TRAI miraculously reduced its estimates of the ADC from Rs 13,000 to Rs 5,335 crore. But, once the cellular industrialists made their peace, or whatever, with the government last November, they’ve refused to take up the matter again — mind you, this is the same COAI, that sent letter after letter to the TRAI, insisting the ADC was really zero.
Instead, what the cellular operators have done is to go and jack up prices across the board, and while members of the TRAI have come out saying the hike was unjustified, no one’s lifted a finger to reverse it! As Alice would have said, the story’s getting curiouser and curiouser.
Immediately, prices of STD calls have gone up by around a third, and those on local calls by around a tenth. STD calls on cellular networks, from one Airtel phone in Delhi to another Airtel number in Mumbai, cost Rs 1.99 per minute earlier but is now up 50 per cent, to Rs 2.99.
Calls to fixed lines have also gone up — under its Plan-150, a cellphone to fixed line call on an Airtel network has gone up from Rs 1.99 earlier to Rs 2.49. While Hutch has made no changes in its local call rates, the increases in the STD rates are broadly similar.
While there are allegations that cellular firms have used the ADC as a pretext to hike prices beyond what the ADC forced them to do, the picture is blurred.
The ADC on a local call from a cellular phone to a fixed line is just 30 paise, but Airtel’s hiked the price by 50 paise, while Hutch has not changed this at all.
So, has the customer being short-changed? Hutch has raised the rates for all STD calls by one rupee, but the highest hike in the ADC is only 80 paise — in fact, the ADC is 50 paise for the 50-200 km distance slab, and 30 paise for the 0-50 km slab.
But then Airtel has kept STD rates the same, at Rs 1.99 per minute, for all cell-to-cell STD calls for distances of below 200 km (in other words, it’s absorbing some costs in one segment of calls).
And what complicates things further is the issue of the grey market. Apart from the ADC on local and STD calls, the TRAI is also insisting that companies pay an ADC of Rs 4.25 per minute on whatever international calls originate or terminate on their networks.
Now, since international calls cost less than this ADC (Airtel used to charge Rs 3.99 per minute for calls to the US from its Punjab network), a large proportion of international calls could simply go into the grey market — that is, they’ll take place, customers will pay the ADC, but they may be shown as local calls. This can happen for STD calls as well as it’s difficult to police the calls coming in on someone else’s network.
While the picture on whether the cellular firms have hiked tariffs in excess of the ADC remains blurred, what’s clearer is why the COAI abandoned the fight on behalf of its customers. You could call it the Reliance factor.
Under the earlier dispensation, WiLL-mobile services were equated with fixed lines, and so Reliance customers didn’t have to pay the same charges as cellular customers. Now, however, with WiLL-mobile and cellular customers on a par, and both paying the same kind of ADC, the field is levelled.
So, if cellular customers have to pay more, the industry’s argument probably goes, how does it matter since they aren’t going to go to Reliance because of this!
What will happen, of course, are two things. One, since BSNL does not plan to hike its tariffs in the post-ADC regime (a sign it doesn’t need the money as desperately as is being made out!), customers would have a greater reason to migrate to it now — as against Rs 2.99 for a long-distance call on an Airtel network, that on a BSNL cellular network continues to cost Rs 1.80.
Second, tariffs on fixed lines should fall since ADC charges on them have been cut sharply — the ADC on a fixed line to fixed line STD call for a distance above 500 km has been cut from Rs 4 per minute in May to 80 paise now. In other words, the industry could see a churn away from it.
Under the circumstances, both investors as well as subscribers of cellular firms need an explanation for the dramatic silence of the industry.