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suffering cellphone users had hoped their bills would decrease after the
telecom regulatory authority of India said in March it would introduce a
calling party pays regime. But plans for a CPP regime have been dealt a blow
by the judiciary. The prolonged turf and legal battles between the statutory
regulator and the department of telecommunications seem set to continue.
At the start of this
month, TRAI was humiliated when a Supreme Court bench dismissed its challenge
to a Delhi high court order restraining TRAI from implementing the CPP regime.
The high court order had been issued in October following a writ petition by
Mahanagar Telecom Nigam Limited and a public interest litigation by an
organization called Telecom Watchdog. On November 16, MTNL filed a revised
petition in the Delhi high court claiming, among other things, TRAI had no
jurisdiction to regulate revenue sharing between operators. The Cellular
Operators Association of India also joined the fray. The next hearing is on
At present, Indian
cellphone subscribers pay both to make calls and receive them. This practice
originated in North America two decades ago because of technological
restrictions with analog mobile telephones. The United States stuck with this
billing practice though new digital technology overcame this technical
obstacle. Today, only the US and a few developing countries like India still
persist with this system.
CPP is prevalent in
Europe, Asia and Latin America. However, fixed line callers pay several times
more for calling a mobile phone than to call another fixed line phone. The
multiple differs — seven times more in England, 13.5 times more in South
Africa. The fixed line operator then pays part of this revenue to the cellular
operator for the service of completing the call. This payment, the mobile
termination charge, is a source of dispute worldwide. Regulators often
intervene because the cellphone operator is normally in a weaker negotiating
position. The average charge varies again — 70 per cent in England, 82 in
South Africa. Many European and Asian cellphone operators get 75 per cent of
their total revenue from such charges.
operators favour CPP. Because bills drop, cellphone users increase and the
number of calls rises. Currently over 80 per cent of Indian cellphone users
generally refuse to accept incoming calls. They phone the caller back on a
landline. Average talk time in India is a meagre 90 to 120 minutes per month.
Even the US suffers from not having a CPP regime. People make less incoming
calls and US cellular tariffs are higher than in Europe. New York City’s
tariffs, 40 cents a minute, are the highest in the world.
Telecom Watchdog, an
organization rumoured in industry circles to be a front for the department of
telecommunications, claims that in CPP the landline caller ends up subsidizing
the normally wealthier cellphone user. This is nonsense. In India the landline
caller knows he is calling a cellphone number because such numbers are
prefixed by 98. He knows he will be paying extra if he calls up the cellphone
user. Further, India’s proposed CPP regime will charge a much lower premium
than most countries — a maximum of four times for calls over three minutes.
By bringing down
subscriber bills, CPP regimes encourage more users and bring down costs on all
fronts. In CPP friendly Europe, one third of adults have cellphones, erasing
talk of elitism. The global trend is clear: ever more countries are adopting
CPP regimes. To bring India in line with this trend, TRAI proposed a switch to
the CPP regime by May this year. This has now been stayed in court, while
Indian cellphone users pay bills four times what they should.
The court and TRAI
should examine the legal and regulatory arguments that led other countries to
switch to CPP regimes. In Mexico, for example, CPP was also blocked in court
by the main fixed line operator, Telefons de Mexico. In February 1999 the
court ruled against it and gave the go ahead for a CPP regime. Mexico’s
telecom regulator estimates cellphone subscription will double in one year.
Europe and Asia have been CPP from the start. In Latin America, 11 countries
have switched to CPP regimes in the past eight years. In every case, the
result was a big jump in mass use of cellphones. Chile’s telecommunications
minister, Claudio Hohmann, this year predicted Chile would actually have more
cellphone than fixed line users by 2000 because of CPP.
The US stills holds
out against CPP. But it is also changing. The Federal Communications
Commission in June this year asked cellphone operators to provide CPP as an
optional service. The present FCC chairman, William Kennard, is a strong
supporter of a CPP regime in his country. One reason is that he believes it
will make cellphones affordable for lower income groups. The US Personal
Communications Industry Association argues a CPP regime would lead to more
efficient use of spectrum by boosting wireless network usage.
One reason fixed line
operators are so hostile to CPP regimes is that it would require them to
upgrade their exchanges, install expensive software, burden them with the
administrative task of collecting and disbursing more payments, even assume
the bad debt risk that was once borne by cellular operators. US fixed line
operators say increased traffic would not cover the high costs involved in
switching to a CPP regime. They demand that cellphone operators compensate
them through a lumpsum payment or a larger share of revenues.
MTNL estimates that
CPP implementation would cost it two billion rupees. Going by Latin
America’s experience this would probably be correct. MTNL’s claim it
should be compensated by a higher share of revenues is justifiable. US
companies like BellSouth Cellular Corporation, which experimented with CPP
regimes, found they did not recover switching costs from increased traffic.
Rick Rappe, chief executive of Minnesota’s WirelessNorth, has said, “I am
sceptical of the value of CPP being greater than the hassles of implementing
Note that MTNL has
not opposed a CPP regime, partly because it plans to be a cellular operator
itself. It has only asked for a bigger share of revenue. At a TRAI meeting on
September 7, cellphone operators wanted mobile termination charges to be more
than 85 per cent, as in Europe. MTNL and the department of telecommunications
argued for a top figure of 40 per cent. The Association of Basic Telecom
Operators says the charge should not exceed 50 per cent. TRAI initially fixed
the charge at 85 per cent. It then revised it to 60 paise per pulse after
hearing arguments from all parties. It finally notified a charge of 80 paise
per pulse, irrespective of the source of the call.
The department of
telecommunications has said the 80 paise charge would cause a loss of five
billion rupees a year for it and MTNL. Cellphone operators claim MTNL’s
revenues will increase by Rs 700 million a year because of increased traffic.
Judging whose model is more correct will be difficult.
operators’ assume the number of fixed to cellphone calls will increase by 50
per cent, cellphone subscribers by 20 per cent, and the average length of
calls triple to 150 seconds. Going by Latin America, if the average length of
land to cellphone calls is less than three to four minutes it is likely MTNL
will incur losses with a 80 paise charge.
The various Indian
players should examine two studies by the US PCIA in September this year, five
country studies by Strategis Group on the impact of CPP regimes, and a study
by Detecon, Deutsche Telekom’s consultancy arm, which focusses on the
billing and collection problems of a CPP regime. The Detecon study considers
many different revenue sharing and payment scenarios. Dataquest, another
consultancy firm, has studied CPP regime impact on the US.
An early judgment in favour of a CPP regime would benefit cellphone users and operators. It would also instill confidence among investors in the telecom sector. But TRAI’s track record in court has been poor. The same high court bench stayed the operation of CPP in the first place and has issued several judgments against TRAI in recent months. An even bigger challenge lies in the amended petitions filed on November 16 which question the regulator’s authority to decided revenue sharing arrangements in the first place. The court may uphold this view. It was a Delhi high court division bench that earlier said the government did not have to seek TRAI’s recommendations before introducing new service providers and that the regulator had no jurisdiction over the government’s licensing authority.
Published in The Telegraph, Calcutta, India, on Monday, 29 November 1999 on the Edit Page
http://www.telegraphindia.com, Click on Archives, Go to Issue of Monday, 29 November 1999, Click on Editorial, Click on “Locked In A Cell"
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