The Telecom Regulatory Authority of India (TRAI) has issued a tariff order reducing roaming charges by up to 56 per cent. It has also stated that no rental charges will be permitted on roaming. While the Cellular Operators Association of India (COAI) is dismayed, customers are rejoicing. Telecom experts analyse the new order and its implications…
What is TRAI’s rationale for fixing usagebased ceilings on national roaming tariffs?
Rajat Sharma: In any market, the task of the regulator is to direct and optimise market forces such that the forces favour both customers and service providers. However, in the case of national roaming tariffs, levies have been lopsided with only service providers setting tariffs favourable to themselves. Thus, TRAI has stepped in to ensure that the tariffs are no longer based on fixed rentals but on usage.
Moreover, historically, intra-circle tariffs have been witnessing dynamic adjustments since the early days. As the wireless market has matured, so have tariffs. The current low tariffs in intra-circle operations are a derivative of the broad usagebased trends. However, this has not been the case with national roaming tariffs. To offset this trend, TRAI has proposed setting ceilings on roaming tariffs.
Romal Shetty: The new roaming tariff regime has been largely influenced by the interconnect usage charge (IUC) system and the lack of competition in the roaming services’ arena. Roaming calls made within the circle and those outside the circle have been priced differently based on the premise that the operators will be compensated adequately through the IUC system. The new structure has also resulted in the removal of surcharges, thereby making roaming calls significantly cheaper than before. Further, TRAI has used costbased computations to assess the new structure and in the computation, many charges levied by operators were not justifiable. Therefore, charges such as roaming rentals have been done away with.
The new roaming tariff structure has been built on the premise that it will enhance competition in the roaming arena. Presently, there is virtually no competition in roaming services between operators. CDMA operators had relatively lower roaming tariffs and, due to the difference in technology platforms, did not provide any competition to GSM operators. TRAI has tried to enhance competition by providing a common tariff system and this will force operators to compete not only on price but also through quality of service. By bringing in uniformity in tariffs, TRAI has tried to break the “cartelisation” by GSM operators. In the consultation paper released by TRAI, it had indicated that one of the reasons for the very high roaming tariff was the “coordinated arrangement in pricing of roaming services among private mobile operators”.
Prashant Singhal: TRAI took into consideration three key factors while taking its decision. First, it held the view that the market for roaming services was not sufficiently competitive as compared to the competition witnessed in mobile voice telephony. Second, the regulator observed a mismatch between the cost of the service provided and the price charged to the end-user. The charges levied by operators were on the higher side and lacked transparency. Since the regulator also noticed a coordinated arrangement in pricing of roaming services among private GSM service providers, this directive also challenges the apparent price cartelisation in roaming charges. Third, over the years, TRAI has introduced regulations that are customer friendly. And since the consumers felt that roaming tariffs were high, the regulator had to introduce costsensitive interventions.
Mahesh Uppal: The idea is that when a market is not competitive, users need protection. It is often forgotten that while users can select from several operators for signing on to a service, they are completely captive for services like SMS, caller-ID, roaming, etc., which are charged separately, without the subscriber having any choice in the matter.
The arrangements between operators for roaming are not set up each time a customer travels to another network. TRAI is effectively saying that customers should therefore not be overcharged through the levy of all kinds of other fixed fees for the use of the service.
What are the advantages and disadvantages of TRAI’s “home pricing rule” (HPR) for setting roaming tariffs, where calls in the visiting network are priced at the same rate as in the user’s home network?
Rajat Sharma: At the outset, HPR considerably favours end-users by decreasing their bill payment burden. The majority of operators in overseas markets have HPRs in place, with only a handful of countries where this is not followed.
However, there is a strong advantage favouring operators too. With time, lower tariffs will promote higher airtime usage while end-users are on roaming.Thus, the loss of revenue from fixed rentals will be offset by increasing airtime volumes. Finally, network operators who have a strong national presence can lure more customers by offering HPR services. HPR can be a strong value proposition for big operators to woo strong regional players.
Romal Shetty: The HPR has obvious advantages for consumers as it dramatically reduces the cost of roaming services for them. However, from an operator’s standpoint, it not only affects the revenues earned from roaming but also raises extremely complex settlement issues. In a home pricing environment, settlement of roaming charges between operators would be too complex to ensure accuracy of charges and maintenance of home tariff tables between operators would be operationally unviable.
Prashant Singhal: The clearest advantage for overall telephony is the death of distance. It is bound to usher inseamless connectivity at cheap prices for the end-user. Under the HPR approach, a Mumbai mobile subscriber roaming in Delhi and making a local call, for instance, to a Delhi circle number would be charged a rate not exceeding that for a local call in Mumbai. Thus, it would usher inseamless connectivity, which will come as a relief to many frequent travellers in India.
Similarly, there may be a demand for not levying any charge for incoming calls while roaming because the mobile subscriber is not required to pay for incoming calls in view of the calling party pays regime while in the home network. The same holds true for pricing an outgoing STD call while roaming.
Thus, a key advantage would be a movement away from cost-based tariff determination for roaming services. The directive is beneficial for the user since the ceiling tariff on roaming airtime charges can be reduced further to bring in greater affordability to subscribers.
There are several other schemes that have been recommended. However, the basic advantage of HPR is that it is simple, transparent and does away with the complicated incremental cost levied for roaming service, thereby reducing tariffs for consumers.
On the other hand, the incremental cost for roaming services was being used to cross-subsidise voice telephony by operators. So a disadvantage is that if this tariff is slashed, operators may revise their customer tariffs on the higher side, which will hit the masses.
In addition, industry associations have suggested Rs 9 billion as the cost of the cap on roaming charges. If this amount is squeezed out of small operators or consumers as an additional surcharge, the objective of slashing roaming tariffs will be defeated.
Lastly, local calls might become expensive as this move will necessitate an increase in local call tariffs and thus could adversely affect the marginal consumers who may have to pay higher rates for basic local connectivity.
Mahesh Uppal: The idea is that since operators have no “work” to do in taking calls outside of the two users’ network, they do not incur any “cost” beyond small administrative costs, and should therefore not charge the customer extra in such cases. TRAI’s argument is sound. One could see such a rule as a bit too “micro” and “interventionist”. However, it has value till at least the time when charges come closer to the underlying costs.
Since there is no incremental cost for providing SMS facilities to a roaming subscriber, what is the justification for levying an additional charge on outgoing SMSs while roaming?
Rajat Sharma: Mobile average revenue per user (ARPU) in India is by far the lowest in the world.
There need to be supplementary avenues for operators to generate additional revenues to meet their increasing capital and operating expenditures. In India, there is forbearance on SMS. Thus, SMS as a service stream is seen as conducive by operators to induce additional revenues. If the additional charge on SMS while roaming was not to be levied, the operators’ sustenance will become difficult.
Romal Shetty: Roaming services may continue to be given a premium tag by operators, unlike data services like SMS. The primary reason for differential pricing of SMS is the premium tag given as of now and also the additional processing requirements such as clearing processes. In the long run, some of these basic services may be priced at a smaller premium to account for the additional processing requirements only.
Prashant Singhal: Operators suggest that provision of SMS while roaming involves signalling network and clearing house service expense, and thus it should be treated differently from SMSs sent by subscribers in their home circle. However, the regulator is of the view that the capital and operating costs for provision of roaming are already factored in while arriving at the cost estimate for incoming and outgoing roaming calls.
Mahesh Uppal: There is little justification for this, except for a small administrative fee.
Should visitors be charged for using their home operator’s network while roaming?
Rajat Sharma: If the visitor is in the same network, he should not be charged while roaming. Most operators already have a strong panIndian network layout and backbone. The advantage of such networks should be extended to the visitors.
Romal Shetty: India has a unique telecom infrastructure and regulatory set-up. Telecom operators in Europe are, for example, licensed to operate across the country as one entity; unlike India, they do not have a circle concept. India has a circle concept and technically, each circle is an operating entity on its own and the licence fee payable by each circle is computed independently even if the entity pertains to a large telecom operating entity. Due to this fundamental structural difference, national roaming has come into existence. Consequently, even if a subscriber of one operator moves into another circle of the same operator, he is technically in a different licensed entity and hence, roaming charges are levied.
Prashant Singhal: If roaming is charged when the visitor is in the same network, we are a long shot away from the much-touted “One India” plan. In the two-tier exchange network that operates in India, every STD call is distributed to the other circles in the country and within-the-circle calls are normally handed directly to cities, ignoring the national long distance (NLD) network. As it stands, the One India plan envisages a standard calling rate across India on local and STD calls or removal of STD barriers completely, allowing intercircle carriage and removal of the circle barrier. Thus, the visitor should not be charged.
Also, as the regulator has indicated, the tariff ceiling will take into account the interconnection usage, incremental roaming cost and ADC involved in roaming. Any additional charge paid by the user is an unnecessary toll.
Mahesh Uppal: No.
What is the current international trend in roaming tariffs?
Rajat Sharma: In most countries, operators have a national licence, unlike India. Through this national licence, they allow visitors roam for free, provided the visitor’s home network is the same as the operator’s roaming network. For international roaming, the trends are not uniform because there is no single international regulator. International roaming is always considered a premium service and hence, different operators charge international visitors differently. The charges are always on the higher end of the tariff spectrum.
Romal Shetty: Roaming tariffs across the world have been under regulatory scrutiny for some time now. In Europe, leading telecom operators have started reducing roaming tariffs before they are forced to do so by the regulatory authorities. Due to changes in technology and, more importantly, the reduction in long distance telephony rates, operators are unable to justify the steep prices they charge for roaming calls.
Prashant Singhal: Roaming tariffs is a contentious issue the world over. In India, unlike some other parts of the world, users pay charges for receiving mobile calls while they are roaming, contrary to the calling party pays principle. Moreover, the service area in the Indian context is on a circle basis, unlike many other countries where the entire country is treated as one service area. In most cases, the charges are often not justified by the cost of the provision of the service.
Roaming tariffs have also been a topic of debate in Europe. Taking a cue from jurisdiction in most countries, TRAI has held the view that policy changes such as reduction in ADC, carriage charges, annual licence fees payable by operators on the adjusted gross revenue have boosted the industry. Even as these policy changes have helped pull down cost, mobile operators have not passed on the benefit to the end-customer.
Mahesh Uppal: Roaming rates are high in most countries. Often they are even higher than in India. Abuse has been rampant. Business associations, whose members are the most frequent roamers, have often complained about abusive roaming charges. Regulators worldwide, especially in Europe, have been bothered about operators overcharging for roaming services.
