The Hindu Business Line : The ADC imbroglio

THE STAND-OFF BETWEEN private telecom operators and Bharat Sanchar Nigam Ltd over access deficit charges (ADC), if unresolved by the Telecom Regulatory Authority of India, can snowball into a telecommunications crisis. Not only have private CDMA and GSM operators come together demanding the scrapping of the onerous ADC levy, they are also threatening to stop payment of these charges to BSNL from September 10. The tough reaction of the mobile industry is hardly surprising as a showdown on ADC has been in the making for some time now. The trigger came in the form of a recent BSNL decision to slash pre-paid mobile tariffs to levels lower than that charged by the private operators and also drag the post-paid segment into the tariff war. Incidentally, by dropping the mobile tariffs by 40-60 per cent, BSNL emerged as one of the cheapest mobile operators.

Unlike in the past, this time around, the onus is entirely on TRAI to mediate and resolve this dispute over the next few days. In January 2003, when an interconnect row involving private GSM operators and limited mobility operators was getting out of control, the then Minister of Telecommunications was able to intervene and resolve the dispute. On that occasion, the government was able to use effectively the threat of Mahanagar Telephone Nigam denying interconnection to private GSM operators to make them fall in line. But now, with the private GSM and CDMA operators handling over 30 million mobile connections, they are a much bigger force to reckon with than in the past. TRAI must settle the ADC dispute once and for all, rather than allow it to fester any more. Even when TRAI had recommended a switch to the revenue share regime in July, it was obvious that BSNL and the private operators held diametrically opposite views. The latest salvo from BSNL reducing the mobile tariffs by 60 per cent clearly goes to demonstrate that it has the market power, the funds and the flexibility of pricing to sustain its operations without the ADC. The flip side is that as BSNL continues to maintain a healthy surplus in its operations, the private operators' demand to scrap the ADC carries greater weight.

Second, the sharp reduction in tariffs announced by the private mobile operators to match BSNL's rates can restrict the formers' operational flexibility and place them at a competitive disadvantage in the near term. As the operating cost per subscriber is coming down sharply for the private operators, their ability to sustain these tariff wars is hardly in question. But if the charge — varying between Rs 0.30 and Rs 0.80 a minute for domestic long-distance to Rs 4.25 for international long-distance — is abolished, the competitive dynamics will get a further boost across-the-board for all mobile operators with or without a national footprint. As the current tariffs of mobile private operators are almost at the lower end of the weighted average intra- and inter-circle tariffs as computed by TRAI, no longer is the cushion available in tariff fixation, including ADC. Any further leeway will be created only if the ADC is scrapped. The ball is clearly in TRAI's court and the time to act is now.

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