Telecom smiles

The inevitable is happening. Telecom tariffs are taking a tumble and a competitive price war has been unleashed at least in some segments of the telecom services. This was long overdue. In fact, it has taken more than six years after the announcement of the New Telecom Policy in 1994, for the competitive forces to take charge and benefit the consumer.

For more than a year, the government-run monoliths in the overseas and domestic long distance and basic services segment have tinkered with and lowered rates here and there. Internet access rates were slashed, lease lines charges were reduced, registration charges for booking fixed telephones were lowered and long distance charges were marginally pushed down.

Yet, these were all seen as peripheral moves aimed at raising the entry-level barriers for the private sector. But the latest tariff cuts in the short distance calling rates for voice telephones by the BSNL is in a different league altogether. Along with the intended launch of cheap cellular services by another government operator MTNL (covering just Mumbai and Delhi) and the clearance for wireless in local loop, the latest moves are bound to overhaul the telecom tariffs in a big way. The effects are already visible.

The two private cellular operators in the lucrative Delhi market have slashed their air time charges drastically. Airtel has brought its basic telephone rate in Andhra Pradesh in line with that of BSNL. Most other operators are bound to follow these steps to match the dominant service provider’s reduced rates. This means that people will pay nearly the same local rates for calls within a 200-km radius at all times in a day. So far Indian operators have assumed that demand was inelastic related to the prices. Hence they have been reluctant to make telecom services affordable to a large section of the people, despite the downward movement of telecom tariffs all over the world due to rapid technological advancements and consequent reduction in telecom equipment prices. This assumption is likely to be proved wrong. The buoyancy in VSNL’s revenues after reduction in overseas call rates proves that people are bound to talk more if the tariffs are affordable.

India’s high telecom tariffs were fixed in the time of shortage. The rates were frequently increased to reduce network congestion. This absurd method was followed in lieu of investment in increasing capacities. Volume discounts were not given till last year. The Internet and the communication revolution has changed all that. Today, the policy planners look at communications as a key infrastructure for the national economy. The vested interests have slowed down the pace of reforms but they have not been able to halt the process that ensures a good deal for the long harassed telecom consumers.

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