Tariffs should be left to the markets.

Telecom regulator Trai’s decision to seek billing of mobile telephone calls on a per second or actual use basis is undue micro management in an
extremely competitive market. Trai should concentrate, instead, on removing obstacles to internet telephony or VoIP and a quick roll out of number portability.

The government could also auction off 3G spectrum at the earliest so that telecom companies could move up the value chain and depend less on voice revenues. Trai’s tariff initiative comes even as companies such as Tata DoCoMo and Shyam Sistema already offer plans on the basis of seconds of usage. Each telecom circle now has close to ten players and more are joining the fray. Some operators offer 50 paise per minute, some others meter calls, not minutes per call.

In such a competitive environment, all operators are likely to offer use-based plans soon, but that would be a commercial decision based on business logic. In contrast, Trai’s regime would be a forced one, which could well be premature and may not be in the long-term interest of the industry or consumers. Analysts estimate that industry revenues could drop 10-15% if the per second regime is imposed on operators. Share prices of telecom companies have already crashed following the news.

Reduced profitability and lower valuations in a Trai-imposed pricing regime would impair the industry’s ability to raise funds for expansion. We have still long way to go in obtaining our basic telecom penetration goals and then there is the large fund requirement for infrastructure in 3G and broadband services. The industry should, therefore, be allowed to evolve without any unwarranted regulatory shocks.

Telecom companies are themselves under competitive pressure to de-risk their business by reducing reliance on low-value voice services and migrate to a business model with diversified revenue streams from multiple value added services. The government and the regulator need to facilitate the transition by making more spectrum available for 2G services and holding the 3G spectrum auction at the earliest. Using the idle USO funds for spreading broadband services, of which voice would be a part, should be the other priority. Tariffs should be left to the markets.