Relooking telco models PDF Print E-mail
Monday, 19 October 2015 05:21
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Telcos will now hesitate to woo low-end customers


Given the tone and pitch of the Trai consultation paper, it comes as no surprise that the telecom regulator has imposed penalties on telcos for call drops. What comes as a surprise, though, is the quantity of the penalties proposed. At a time when the average realisation on voice calls is around 40-45 paise per voice call—it can go down to 25-30 paise in various packages—Trai wants companies to pay customers R1 for every dropped call, subject to a maximum of 3 calls per day. And if call drops don’t reduce, the regulator has threatened to review the situation after six months. Part of the fault, of course, is that of the telcos who, including the two PSUs, opposed compensation. As FE has been arguing, since most customers were on a per second billing plan anyway, it made sense for telcos to agree to credit the last few seconds of a dropped call by way of compensation—airlines, for instance, refund tickets if the plane doesn’t take off due to a storm, don’t they? Trai’s order recalls this when it says ‘CMTSPs and their industry associations have cast aside the option of not charging the consumers for the last pulse of a dropped call’—had telcos agreed to this, the nature of the penalties may have been different.

Assuming that telcos don’t go to court against the Trai order, the next few months will have to be spent in coming out with a mechanism to prevent customers from gaming the system, or customer disputes from arising. If a call disconnects, is it a problem with the handset, has the call been cut off by the customer or is it a network issue? Trai chairman RS Sharma says he expects industry to come out with solutions by January 1 when the new regime comes in place. Since the call can get disconnected due to problems in the network being called, that would have been another source of dispute—Trai has said that the originating network has to pay the penalty.

The real issue, of course, is whether the penalty will improve the call drops situation. Since the main reasons for call drops are the change in spectrum frequency—most telcos got completely different frequency spectrum after the last auction and need to harmonise their networks which can take 12-18 months—lack of spectrum and sealing of towers, it is not clear that there will be a short-term solution. A top telco in Delhi, as FE has pointed out before, carries 49 hours of voice calls per MHz per tower as compared to 6.5 for Shanghai; for data, it is 3.4 GB per MHz per tower as compared to 0.2 for Shanghai—since there is a maximum number of towers that can be put up before their signals jam into one another, the only way to fix this is to make more spectrum available as is done globally. While spectrum sharing/trading will alleviate some of the spectrum pain, an immediate outcome will probably be telcos no longer wooing low-end customers since, with a theoretical R90 of penalties to be paid to each subscriber every month, telcos will be servicing new customers out of their pockets with ARPUs of R50-60. Talk about unintended consequences.


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