TRAI squeezes big players, but customer is king

Mumbai: The Telecom Regulatory Authority of India (TRAI) has announced a reduction in the 'access deficit charge' (ADC) for STD and ISD long distance calls, effectively cutting rates by 62.5 per cent and 41 per cent respectively. However, state owned BSNL, and companies that have invested heavily in network infrastructure.

Every phone call, both cell phones and landlines, uses three networks. The network from which the call originates is the caller network This call connects to the connector network, which routes the call to the appropriate region, and the receiving network.

The caller and receiving networks pays ADC as a charge to the connector network in return for its routing services. This is the reason rates double on long distance calls, which is passed on to the customer. Many mobile phone service providers have their own networks, two or all three can be owned by a single company. That is how recent entrants into the telecom like Reliance have by-passed the ADC.

Though tele density in India has increased, the penetration has been far from satisfactory. To this date, there are rural areas where the concept of telephony is a myth or a bada sheher (big town) facility, internet is magic and the mouse is the magic wand.

Mobile phone service providers reap benefit of a large tele density in urban areas, the responsibility for providing rural telecom penetration ends up entirely with BSNL, Reliance Infocomm, Tata Indicom and other companies that have established their own networks of under-ground lines.

As the core network provider in rural regions BSNL has to bear the brunt of this decrease in the ADC. While increased telephone usage would boost BSNL's revenue, now the more calls channeled through it's network, and improved routing services to facilitate it, will negatively impact revenues from it's B2B services.

This would mean that the public sector giant would have to reorganise its proposed fund allotments to cater to the shortfall from target revenues. Though TRAI has said that BSNL's revenues will be unaffected by the move, this decrease in ADC puts a cog in it's revenue-generation gears. Prima facie this measure seems to be too focused on the users of private telecom services, and gives a raw deal to the infrastructure provider.

The ADC had loopholes in it, and private service providers like Reliance exploited it by routing international calls as local ones. After BSNL took up the issue, Reliance was penalised Rs188 crore. The private player's strategy also helps it recover non-traffic sensitive costs can be offset by traffic-sensitive charges.

The league of metro-centric private service providers will jump at the sop. However, the giants are sceptical about its feasibility. It is only service providers with their own networks that can be pressurised by the government to invest in increased rural reach. The customer benefits, and so do the middle-men, but the big players might have to pick up the tab.