Network congestion

The Indian Express, January 20, 2015

By Pradeep S Mehta

All of us suffer because of the frequent call drops and lousy services of mobile phone service providers. Last year, the Telecom Regulatory Authority of India (Trai) had imposed fines amounting to Rs 5 crore on telcos for poor services. But what is the reason for bad service? Fines have not been deterrents and too much competition has resulted in poor quality services.

Indian telecom is frequently cited as an example of the benefits of a market-based sector. In 2000, there were barely a million Indians with phone lines. But today, after deregulation, most people in urban areas and many in rural India have mobile phones whose services are cheap. India is the world’s second largest telecom market and also the fastest growing. It presents huge opportunities for telecom operators. However, there are concerns that too many operators are competing in the Indian market.

Few could deny that competition in the telecom sector in India has yielded immense benefit to consumers in terms of choice, availability and lower tariffs. Competition also drives out players who do not belong in the market — the costs of procuring spectrum, launching services and ensuring quality while generating revenue would either drive out the inefficient or force them to merge with larger players.

The protagonists of hyper competition often lament the lack of consolidation in the sector and are quick to point out that other countries have fewer players. Notably, China, which used to have five operators, now has only three. Similarly, the United States and Malaysia, too, have reduced the number of players, thus boosting quality while maintaining low prices. In India, consolidation prospects can be estimated by the following fact: over the last five years, the top five operators have accounted for 75 to 84 per cent of the subscriber base of wireless (GSM and CDMA) services.

There is a similar trend in the market share of the rural wireless subscriber base. This is an important indicator, given that in metropolitan and urban areas, saturation is evident in the subscriber base and much of the user growth in future is likely to be in rural areas. In rural areas, Vodafone leads the pack with 24.02 per cent market share, followed by Bharti Airtel (23.9), Idea/ Spice (19.2), BSNL (10.7) and Reliance (8.57). The other operators account for the remaining 14 per cent market share. It is clear that, despite large numbers, smaller operators have only a small share of the overall business. The concern that the “big five” have about hyper competition is to do with the role that the others play in aggressive pricing, customer services etc. Trai needs to undertake an optimal competition study in the Indian telecom sector.

Concentration of service providers comes with insensitive consumer handling for the majority of the subscriber base, particularly in areas such as activation of value-added services without consent, inflated bills and overcharging, unfair deductions, disconnection without notice, call drops etc. Mobile number portability (MNP), introduced in 2011, continues to be a cause for complaint. What should ideally take about a week to do takes between 60 and 90 days. This is one of the factors leading to inactive subscribers.

That said, it is necessary for the government to take steps for stabilising the market, addressing the need for consolidation and laying out a stable, long-term policy. Take, for example, the need for clarity on mergers and acquisitions as well as spectrum auction policies. It has been reported that, in November 2014, Airtel had to call off its Rs 700 crore deal to acquire the Mumbai-based Loop Mobile. This deal would have enabled Airtel to acquire Loop’s assets but the agreement was time-bound and expired on October 30, 2014, because the department of telecommunications did not convey its approval, which was sought in March. Meanwhile, Loop Mobile has chosen not to participate in the February spectrum auction. The fate of its three million customers has been jeopardised. This could have been avoided with timely action.

Regulatory mechanisms play a pivotal role in ensuring fair competition. But in India, this involves the department of telecommunications, the Telecom Commission and Trai. Added to the fray is the defence ministry, which holds much spectrum. Critical issues are bounced from one to the other, delaying timely action. Perhaps we need a single-window system or a centralised regulatory authority that is independent, transparent, stable, accountable and adaptable. Only then can a holistic view emerge to enable the mobile telecom market to function optimally and insure consumers against lousy service.

With inputs from Rajeev Mathur. Mehta is secretary general, CUTS International. Mathur is also with CUTS.

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