Ringing in the low

Consumers did not stop long to ask whether they should thank the prince of populism or the gods of competition for tumbling cellular phone...

Consumers did not stop long to ask whether they should thank the prince of populism or the gods of competition for tumbling cellular phone call charges. They just lined up to get application forms for Mahanagar Telephone Nigam Ltdacirc;euro;trade;s Dolphin. The queues in Delhi where Mahanagar Telephone Nigam Ltd MTNL, the third cellular operator, is to start services by January end proved demand at reduced prices is higher than current supply. Demand in Mumbai will likely be as strong or even stronger when MTNL starts services there a month later. The whole telecom industry is having quickly to adjust to high volume-low margin prospects. Predictably, private cellular operators are being compelled to reduce rates steeply to match the public sector operatoracirc;euro;trade;s Rs 400 a month rental charge and 1.50 a minute tariff for incoming calls and 2.70 a minute for outgoing calls. Within a week Hutchinson-Essar and Airtel came out with reduced tariffs and rentals and others are expected to follow suit. Consumers in other circles whereBharat Sanchar Nigam Ltd BSNL is the third cellular operator can look forward to similar outcomes later in the year when BSNL is ready for action. Meanwhile private sector operators are scrambling to cope with the impact of BSNL and MTNLacirc;euro;trade;s dramatic one-half to one-eighth cuts in fixed line call charges for distances up to 200 km.

There is more for the consumer in this public sector-led revolution. With the Telecom Regulatory Authority of India finally making up its mind about wireless in local loop WLL and announcing the rules, another low cost telephone service will soon be within reach. However, the restrictions on WLL are illogical and mean that apart from making both mobile and basic service providers unhappy, many consumers will unnecessarily be left out of the loop. Make no mistake, though, it is the consumeracirc;euro;trade;s day. The outlook for the industry, on the other hand, is not so clear. Exactly what the latest developments mean will begin to be revealed over the next few months. There are complaints of unfair competition from public sector entities, of too many policy shifts, too many controls and over-management of the telecom industry. A stable policy environment is desirable but not completely achievable in an area where technology changes almost by the day. It would help to have a small set of clear rules rather than a telephonedirectory of dos and donacirc;euro;trade;ts as is the case just now. One thing that seems certain is rate wars will necessitate fresh thinking in the industry and expansion and acquisition plans will be put on hold while the market is reassessed. The terms for the fourth cellular operator have been announced.

Apparently learning from experience the ministry of telecommunications has abandoned the idea of a flat licence fee and settled for a one-time entry fee and annual payments equal to 12 per cent of revenue. But with cellular tariffs starting to fall, Videsh Sanchar Nigam Ltd VSNL, a major player, seems to have got cold feet. It loses it monopoly in long-distance calls in 2002 and so is looking for other avenues. Whether it will go ahead now with plans to bid as fourth cellular operator in some circles remains to be seen. Indications are VSNL and other potential bidders will wait and see how the market shapes up.