The Hindu Business Line : Calls go cheap

THE COMPETITION IN the telecom industry continues to rain goodies on consumers. The latest is the decision of Bharat Sanchar Nigam to slash both international and domestic long-distance (ILD/STD) tariffs by 15-25 per cent. BSNL has turned the tables on its private sector competitors, which, caught off-guard, are no doubt scrambling to rework their long-distance tariff plans.

The latest reduction in rates came after Videsh Sanchar Nigam, the ILD operator, slashed its charges for carrying the calls overseas. The point to note is that BSNL has not exactly passed on the full benefit that it secured from VSNL. Consumers may be happy with what they have got; they can still hope for more. From their standpoint, the real "death of distance and time" in the ILD business can be termed only a trend-in-progress. The full impact will be visible only when the Telecom Regulatory Authority of India decides to review its fixed levy of "access deficit charge" payable by all ILD operators, mainly to the public sector operators, BSNL and MTNL. From February 1, all ILD operators have been paying a fixed Rs 4.25 per minute as ADC on both incoming and outgoing calls. This has artificially pegged high the ILD tariffs. If TRAI removes this fixed ADC element, that can have a beneficial impact on tariffs on both incoming and outgoing ILD calls. Take for instance, the incoming call traffic that has been open to competition since 2002. In the last two years, vibrant competition has shifted the pricing power from the Indian ILD operators to foreign carriers. Since 2002, the settlement rate (charge received from an overseas carrier for an incoming call into India) has nearly halved, from 23 cents (Rs 11) to 13 cents (or Rs 6). There may be no further significant drop in these rates until the ADC regime is in place.

However, if the ADC of Rs 4.25 per minute is removed or reduced, it will drive down the international rates towards the local termination rate component of less than Rs 0.50 payable by an ILD operator to the basic network. This will straightaway have a two-fold impact on incoming call rates. First, it will offer greater scope for tariff reduction, even if foreign carriers renegotiate the settlement rates to a lower level. Second, the lower termination rate will reduce the incentive for grey market operators to illegally terminate ILD traffic outside BSNL or any private sector fixed/mobile network. A combination of these factors will provide a big stimulus to incoming call traffic volumes. A similar logic will hold good for outgoing calls also. Hence, just by tweaking the ADC, TRAI can completely change the dynamics of the ILD business. Sooner or later, it will be as inexpensive to call someone the other side of the world as across the street. With the right policy prescriptions, that day may not be far off.

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