With the draft New Telecom Policy, 2005 proposing speedy implementation of the carrier access code (CAC), several issues have been raised by the concerned players. While the CAC is expected to spur competition in the long distance sector, issues like costs, customer education and interconnection agreements need to be addressed first. We bring you the views of industry experts…
What are the main concerns in implementing the CAC?
Vishal Malhotra: Under the CAC, users can select the operator who offers the most competitive call rates by dialling a specific code (which will be issued by the Department of Telecommunications), followed by the STD/ISD code and the telephone number. The implementation of the CAC should give a much-needed boost to competition in the long distance telephony segment, which will in turn benefit the end-users.
However, to be able to go for CAC, basic and cellular operators would need to upgrade their switching system and set up a call data record (CDR)-based billing system, which has a cost implication. As of now, we understand that the billing system of the incumbents (BSNL and MTNL) does not support CDR-based billing. The key concern would be to upgrade their systems. Further, we believe that in today’s scenario, with the emergence of integrated players like Bharti, BSNL and Reliance, the CAC may not be very beneficial. However, with the recent liberalisation of long distance telephony (reduction in licence fee and other rollout obligations), if India sees more pure-play long distance operators, the CAC would definitely benefit the end-users.
The other major concern would be allocation of costs between access providers and long distance operators for putting the CAC in place and its recovery mechanism. Further, interconnection agreements would also need to be revised/renegotiated between access providers and long distance service providers.
Archana Sassan: There are two main concerns in implementing the CAC. One pertains to the cost involved in the setting up/upgradation of the network of a service provider in order to provide for the dynamic carrier selection and carrier pre-selection. The second relates to the technological changes required to be carried out by the concerned service provider.
In addition, polling and subscriber education are also concerns affecting the implementation of the CAC. Polling is a process undertaken by the access providers to ascertain the choice of each subscriber with regard to the pre-selected long distance carrier. Subscriber education is important, as customers need to be fully aware about the choice of carrier available to them and how to operate the new system. Subscriber education is a major challenge to service providers, as they need to educate subscribers through advertisements and other promotional measures on how to operate and take advantage of the new system.
Further, agreements would need to be executed between the access providers and national and international long distance operators (NLDOs/ILDOs) so as to enable one service provider to directly access customers of another.
Rajat Sharma: Implementing the CAC is an expensive proposition. Although it is customer friendly and provides an important choice of NLDO/ILDO, from an operator’s perspective, the CAC means extra costs. Tariffs in the Indian telecom market are already low and the margins are being squeezed by the day. This is a big concern for private operators. Moreover, for BSNL to implement the CAC across its entire network is a Herculean task since it has legacy switching systems, which do not currently support the CAC.
Mahesh Uppal: The challenge is to deliver the benefits of a competitive market in which several operators provide long distance services to the consumer. Till now, a subscriber has had little say in who carries the call after the number is dialled. The main concern is the cost of implementation and preparedness of operators (especially mutual billing arrangements) in delivering the CAC affordably and conveniently without, for instance, requiring the consumer to dial a long string of digits to access the carrier of choice.
What is the international experience in this area and how can Indian operators benefit from it?
Vishal Malhotra: Many European countries like the UK and Switzerland, and other countries like Mexico and Argentina have already implemented carrier pre-selection. Implementation of the CAC together with the recent decrease in licence fees should lead to greater competition in the long distance segment. This will result in a reduction in long distance call charges. More importantly, it will provide the “power of choice” to consumers. A large part of the long distance market was becoming unaddressable as an access provider with a captive long distance operation would not outsource its long distance requirements. With the implementation of the CAC, end-consumers would have a choice of long distance service providers rather than being forced to use captive services. However, the real benefits of the CAC can be derived only when the number of pureplay long distance players grows.
Archana Sassan: Internationally, implementation of the CAC, or carrier pre-selection as it is commonly referred to, has been a success. Many countries that have introduced carrier pre-selection have put in place state-of-the-art systems. It is this aspect of carrier pre-selection implementation that would help the Indian telecom sector as systems manufacturers in these countries would be able to supply readymade software modules to Indian operators, thus saving the Indian telecom industry the cost and time required to develop a new software module for carrier pre-selection functionality from scratch.
TRAI had recommended implementation of the CAC three years ago, keeping in mind the obvious advantages for customers. Once the CAC is implemented, the chances are that customers would have more choices and call charges would reduce. Other than these obvious advantages, implementation of the CAC is necessary in India considering the rural and far-flung areas that need to be connected with other parts of the country.
Rajat Sharma: The CAC has been implemented in countries like Singapore and Korea. However, at this time there are no best practices that can be drawn upon since the CAC is more like a peripheral practice and is not mainstream.
Mahesh Uppal: Most major telecom economies have implemented call-by-call carrier selection. Regulators now require access providers to offer the feature for all types of long distance calls. Many countries offer the service even for local calls. Resistance has always come from the incumbents who see this as a threat to their market share.Delays in offering the facility and billing disputes are common. The competitors too have frequently indulged in “slamming” ?? a practice in which the consumer’s choice of long distance operator is changed without his/her explicit permission or by obtaining such permission fraudulently. TRAI will need to mandate appropriate systems to prevent abuse by interested parties. Every effort should be made to ensure that delays are avoided and that the cost to the consumers for the service is not so high that the feature benefits only a few. Transparency in billing is a major challenge when multiple operators are involved in completing a call.
What are the costs involved in implementing the CAC?
Vishal Malhotra: Upgradation of the switches and billing system of the access providers, especially those of the incumbents, would involve reasonably high costs. Further, for implementation of the CAC, long distance service providers should be in a position to pick up calls by interconnecting their network to that of the access provider’s network. Therefore, the cost of setting up points of presence (PoPs) would need to be considered. The cost of educating subscribers about the CAC would also add to the expense. However, we believe that the cost involved should be fully sustainable because of the benefits the industry is likely to derive.
Archana Sassan: As indicated earlier, the costs involved in putting the CAC in place would be primarily related to upgradation of the system and carrying out technological changes in the software. Further, the cost incurred for the changes to be made to the subscriber database and office data required for implementing the CAC also form a part of the system setting-up costs for providing interconnection between the access provider’s network and that of the NLDO/ILDO.
On a general analysis of the existing telecom network in the country and the switching systems installed therein, TRAI had come to the conclusion that in most of the new technology switching systems to which the majority of subscribers are connected, the upgradation cost would not be very high. It is expected that the hardware and software changes required would involve only modest expenses, which can be reasonably met. Further, the cost involved would be incurred only in a phased manner during the rollout period to cover all service areas.
Rajat Sharma: The cost of implementing the CAC is quite subjective as it depends from vendor to vendor and such add-ons are always more expensive. It further depends on the size of the network, which is where the economies of scale come in.
Mahesh Uppal: Unconfirmed estimates of combined costs for GSM cell companies are about Rs 500 million. This is a very small fraction of the overall revenues. TRAI and the operators have several options in dealing with these costs. Some part is likely to be passed on to the subscribers in the form of fees to avail of the service. The rest will be shared by connecting operators. One would hope that the magnitude of these costs or the hassle in signing on to the service does not become a deterrent for consumers to use the service.
Are the operators adequately equipped to implement the CAC?
Vishal Malhotra: Considering that TRAI had issued directions for putting in place the CAC three years ago, the operators should have adequately equipped themselves by now to implement the CAC.
Archana Sassan: Most of the operators should be adequately equipped for providing services relating to the CAC. This is primarily because no major system changes are required. It should be possible to implement the CAC as most of the mobile switching centres have adequate capacity to store the extra four digits dialled by subscribers.
BSNL’s CDR-based billing system is in the final stages of implementation and cellular operators are already technologically equipped to implement the CAC. Further, it may be noted that as most of the access providers have a unified access service licence and since the licence condition mandates that the equipment support the carrier selection facilities, one may conclude that the operators should be equipped for implementation of the CAC.
Rajat Sharma: The private operators are definitely better equipped than BSNL to implement the CAC as they have new systems as compared with BSNL’s legacy systems.
Mahesh Uppal: The problems with carrier selection are rarely technical; it is commercial issues that generally dominate. Most operators, besides the incumbent, should be adequately equipped to implement the service without much delay since their infrastructure is new and should have the requisite technical features. The incumbent, BSNL, too should have made the required upgrades by now.
