Financial Daily from THE HINDU group of publications
Saturday, Feb 01, 2003
Info-Tech - Telecommunications
Is it the end of the road for PCOs?
NEW DELHI, Jan. 31
THE STD-ISD public call offices (PCO) that have crowded the corners of most streets across the country, kick-starting the telecom "revolution" in the mid-eighties, could be history in the next couple of years.
Even as the consumers may be grinning from ear to ear, with a 60 per cent drop in STD and ISD long distance tariffs in the year gone by, and slated to go down even further in the weeks to follow, it certainly has spelt bad news for the 1.5 million PCO owners who now face a bleak future.
The reason - the long distance traffic volumes have not picked up substantially following the rate-cuts, even as their commission rates continue to remain the same.
As a result, the average earnings of the PCO owners have dropped by close to 60 per cent in the past one year, according to estimates of the basic operators.
To top it, the recent interconnection regulation issued by the Telecom Regulatory Authority of India (TRAI), slapping an access charge on calls made from landlines to different networks will further eat into their revenues.
The Authority by introducing a termination charge of 30-40 per cent of the revenue on outgoing calls from landlines seems to have encouraged the growth of limited mobility and cellular operations which will directly impact the revenues of the PCO owners.
According to industry sources, at present the commissions being offered by the basic operators (BSNL, MTNL and the private service providers) range between 18 and 25 per cent of the revenues depending on the circles of operation.
In other words, for every Rs 100 that is collected from the customer, the PCO owner gets to keep between Rs 18 and Rs 25, with the remaining amount accruing to the service provider.
With high STD and ISD tariff rates, it was a viable business proposition to earn a decent living. Even with daily revenue of Rs 500 from STD-ISD calls, the PCO owner could manage to earn over Rs 3,000 per month, apart from additional earnings if any.
Following the sharp decline in call rates, the traffic volumes would need to rise by more than double in order to earn the same amount of money. This, however, has not been the case.
Now with ISD tariffs expected to fall by a further 50 per cent, the revenues from this will also tumble.
The sources noted that unless the TRAI makes suitable amendments in its orders to protect the interest of the PCO owners, they will certainly go down under.
One way would be to issue separate tariff structures as well as the interconnection charges for the PCOs, which will help them, sustain and grow in the thriving telecom market.
It remains to be seen whether the Authority hears the cry for help.
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