No value for your money

Thomas K Thomas | Updated on June 26, 2012


Why do operators in India not take the consumer's consent before activating a value-added service?

Two days ago, a friend got a message on his phone from his mobile operator urging him to click on a link to access pictures of porn star Sunny Leone. Curious to know if the mobile operator had started peddling pornography, he clicked on the link but instead of the dirty pictures he got another message saying that he had now subscribed to a new value-added service for which he had to pay a monthly fee. Another mobile user did not even click on any link or reply to unsolicited message but shockingly found himself subscribed to a matrimonial service, which his wife did not take very lightly.

These are not isolated cases but instances of rampant malpractice wherein mobile companies are activating value-added services (VAS) without consent of subscribers. According to an audit conducted at the behest of the Telecom Regulatory Authority of India, there were 60 lakh VAS related billing complaints received in 2011 against a single operator. The actual number of complaints would be much higher as not all subscribers file a complaint.

To address this problem, in July 2011, the TRAI issued a regulation which essentially asked operators to do the simplest thing. Operators were told to seek the consent of subscribers before activating any VAS service. The operators were supposed to obtain confirmation from the consumer through an SMS, e-mail, a fax or in writing within 24 hours of activation of the VAS. Further, every service provider had to inform the consumer through SMS at least three days before the date of renewal of a subscribed value-added service. If there was insufficient balance in the pre-paid account of a consumer at the time of renewal of subscription to a value-added service, the service provider shall send a request, through an SMS. But even after one year, the operators are yet to fully comply with these rules.

The operators would like us to believe that the real problem is the outsourcing business model adopted by them. Just like key operational functions like network management and call centre work has been outsourced, value-added services have also been entrusted to other players in a bid to lower costs and maximise revenues.

The terms of this outsourcing agreement is heavily skewed towards volumes whereby the VAS companies offering the outsourced service are encouraged to get as many subscribers on board to get higher revenue share. In their greed to get higher revenues some of the VAS companies discreetly activate services without the subscriber's knowledge. As a result, a number of VAS companies have got blacklisted by the TRAI in the past 6 months. But the problem does not get resolved because most of the blacklisted VAS companies remerge through a subsidiary under a different name to escape the TRAI net.

The mobile companies have therefore proposed to do away with the outsourcing model with VAS players in a bid to address the concerns raised by TRAI. Mobile companies have brought in all push-promotions under an ‘in-house model'. This model will comprise a subscription engine, management system, hardware and software. Operators claim they will have greater control on the VAS activations and hence the number of billing related queries will come down. The mobile companies had promised TRAI to implement this alternative mechanism across all circles by June 30.

While the TRAI has rejected this alternate proposal, it is baffling as to why telecom companies can't take consumers' consent before activating a service. In any marketplace, no seller can force the buyer to spend money. Industry insiders say that the real reason for the reluctance on the part of the operators is the fear that the consumers may never want the services. . Mobile companies currently earn about 15 per cent of their annual revenues from VAS services on an average. If consumers are given the power to decide that figure may come down by 50 per cent. That's because most of the so-called value-added services hardly offer any value. Major chunk of the VAS revenues come from things like ring-back tones and wallpaper downloads which is a huge hit in non-urban areas and youngsters. But beyond this there's hardly any innovation happening in the VAS segment.

Therefore one of the ways to address the issue is to develop compelling applications and services that will make the consumers give their consent. But, in any case mobile companies should also follow principles of market mechanism rather than making their bucks through false strategies.

Published on June 10, 2012

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