Dot Seeks Nod For Higher Local Call Tariff & Rentals, Less Free

The department of telecom (DoT) has proposed higher local call charges and rentals while favouring a reduction in the number of free calls offered.

The department has put forth this view in its recommendations on telecom pricing forwarded to the Telecom Regulatory Authority of India (TRAI), which is now the sole authority to fix telecom tariffs.

The first step towards removal of cross subsidies (whereby relatively higher long distance telecom tariffs STD/ISD cross-subsidise local call charges, which are therefore substantially less than costs) should be a hike in rentals and local call charges, DoT said.

On free calls, DoT stated that the total number of free calls provided should be fewer than presently offered. It has also favoured higher telephone rentals for business class subscribers, as opposed to residential subscribers.

 

However, the department has cautioned against premature linking of telecom tariffs with costs citing relative underdevelopment of the countrys telecommunications network, with telecom penetration rates of a meagre 1.6 per cent.

While conceding that cost-linked telecom tariffs are the ideal long term goal, the telecom department has warned against premature emphasis on costs, which it feels, would hamper expansion of the telecom network in the country.

Hampering of surplus generation (through cross-subsidies) at this stage by a premature emphasis on cost orientation (of telecom tariffs) will cause a serious setback to future network expansion, though cost orientation should no doubt remain as the long term goal, DoT said. Instead, the department has asked for due weightage to be given to the ability to pay principle.

Telecom tariff setting is a complex exercise with more nuances than can be captured by emphasis on only cost orientation, DoT asserted, while pointing out that tariff rebalancing exercises in the developed countries were undertaken only after they had reached saturation levels of telephone demand.

Meanwhile, it has also claimed to be at a comparative disadvantage vis-a-vis the new entrants in the telecom sector, citing its huge sunk costs in the shape of old and obsolete plants not fully depreciated, large labour force and numerous social obligations.

It has highlighted its special burdens and liabilities as a government department that includes free subsidised service to VIPs and high dignitaries, MPs, the Railways and defence, to support its contention.

...It is DoT which operates at a relative disadvantage vis-a-vis newcomers. Hence, DoT does not believe that preferential treatment ought to be given to the new entrants, DoT said. On international telecom tariffs, DoT has asked for its preclusion from tariff rationalisation exercise in view of the ongoing international debate on the issue.

The departments views on telecom tariffs were found to be significantly at variance from those provided by 27 other interested groups and individuals, including various telecom associations, basic and cellular operators in their individual capacity, and consumer organisations, sources said.