The Hindu : Opinion / Editorials : One State, one local rate

Online edition of India's National Newspaper
Wednesday, May 25, 2005

Opinion

Opinion - Editorials

One State, one local rate

It was a quirk of history that saw the mobile telecom map of the country divide customers in Chennai, Mumbai, and Kolkatta from those in the rest of Tamil Nadu, Maharashtra, and West Bengal respectively, and customers in eastern Uttar Pradesh from those in the western part. The division had sprung from keenness to extract the maximum licence fees from mobile telephone companies when bids were sought a decade ago. The three metropolitan cities were expected to attract huge bids, and the Government apparently thought it better to isolate them from the lesser towns in their respective States so that the bids would not get diluted. As it turned out, high licence fees were collected but customers in these metros felt pinched: calls, say, from Chennai to Tiruchi or from Mumbai to Nagpur were charged at the higher, long distance rates. Consumer chagrin swelled because this bisection was not done in other States, for example in Kerala. The phone users in the metros, who account for 40 per cent of all mobile phone users, will therefore welcome wholeheartedly the decision announced on Saturday by the Ministry of Communications to erase those artificial boundaries, for they will save up to Rs.2 for every minute they speak to someone in another part of their State.

A continual reduction in tariffs is the mantra that has drawn so many new customers to the mobile telephone over the past decade. Tariffs on a mobile call from Chennai to New Delhi that were as high as Rs.42 per minute in 1995 are now down to less than Rs.3 per minute, among the lowest in the world. Local calls cost just a third of that. With ownership and usage of the mobile instrument becoming highly affordable, the number of users has grown from zero to 60 million in just 10 years. The reduction in tariffs would not have been possible but for a willingness of the Ministry of Communications to iron out the rigidities in the regulatory framework whenever these became too inhibiting. The most effective, yet most contentious, of them all was the migration in 1999 of all cellular companies from a licence fee to revenue share mode. Having once snatched at the golden goose and created no joy for either service provider or customer — high licence fees only resulted in high user tariffs — the Government is now being rewarded with a 20 per cent share in the rising revenues of the industry. It also has the pleasure of seeing cellular ownership virtually quadrupling in two years, from 13 million in April 2003 to 53 million in April 2005, and the total subscriber base for telephones doubling in the same period to exceed 100 million. If this growth is to be sustained — the Government's target is to reach 200 million users by 2007 — further tariff reduction will be needed in due course. That can come about only if the competitive environment is sustained, the other rigidities in the regulatory framework get straightened out, and the sharing of infrastructure in the thin rural markets is facilitated to lower costs and tariffs.

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