Mr. Justice S.S. Sodhi
Jawahar Vyapar Bhawan
Tolstoy Marg, New Delhi
Sub: Telecom Pricing Consultation Paper on Concepts, Principles and
Methodologies - VOICE comments.
1. At the outset we welcome this paper as the first attempt to initiate
debate on telecom pricing. As a consumer group we are not fully equiped to
deal with some theoretical concepts outlined in the paper, yet we are
a preliminary attempt.We hope to refine our response to these issues as we
gain a better understanding over time of the technical, economic,
accounting, legal,and administrative dimension of the issues in question.
While we do this we believe that the business interests are better
organised,equiped and placed than those of us who are seeking to represent
consumer interests in this process.Conscious of our limitations we are
making an attempt to serve consumer interests in this debate.
2. We would like to mention that there is no reference in the paper to the
methodology used by the DOT in determining telecom tariffs in the past.
several theoritical premises in the paper may not be relevant unless the
methodology (or absence of it) is revealed in all its ramifications.
IV of the paper documents the prevailing pattern of telecom pricing. It
however says nothing on the methodology on which it is based. Since bulk
users are going to continue to be served by DOT (the public sector) more
attention needs to be paid to costs incurred by DOT and their revenues
arising out of current telecom pricing. We feel that DOT has been basing
pricing not on its costs but on its need for money to finance capital
outlays to expand its network.
3. We are enclosing herewith a copy of our petition pending before the
challenging the hike of telecom prices effected in 1993. Annex - I We
believe, on the basis of available information, that the previous hike was
totally unnecessary and unwarrented as DOTs operating costs were being
covered by revenues to generate a surplus when the hike was affected. This
petition at MRTPC is stuck on legal jurisdiction issues raised by MTNL and
we hope that TRAI can pay some attention to the arguments in this petition
for determination of future telecom prices.
In continuation of our letter of even number dated 22nd Dec. 1997 our
on the questions and options given in Annexure to the Executive summary
in seriatum as follows:-
1. Choice of Services to be subject to Price Regulation
i) The interconnection services may be subject to price regulation because
should be obligatory for operators to provide the system.
ii) The services may be categorized depending upon the nature of services,
the following manner
Basic: Telephone+intercom facilities, STD/Trunk, Public Calls, Pay Phones
Non-Baisc: PABX, ISD, Hotlines
Basic: Telegraph system, e-mail
Non-Basic: Audio, Video Channel, Fax, Fasmile, Telex
iii) No, all services should be subject to price regulation. No such
of weaker price regulation to non-essential service need to be adopted
because even though the type of services being used by Non-Basic Voice and
Non- Voice involve newer technologies pricing, must be reasonable.
Therefore the criterian should be that the cost of Basic Voice services
should be separately biforcated from cost of services of Non-Basic Voice/
Non-Voice services. In that case the price for user of Non-Basic Voice and
Non-Voice services would already stand included for the reason that the
Basic Voice and Non-Basic Voice is common to Non-Basic Voice/ Non-Voice
but the converse is not true.
iv) The price regulation should depend upon nature and type of facilities
being rendered by the operator. The price competition would be depend upon
the market.We do not see a competitive market emerging as each circle will
have only two operators. The consumer will still be subject to a monopoly
in most geographic locations in a circle.
v) There should be open competition depending upon the area of services.
2) Choice of the type of price regulation for different services
i) The specific price level should be DOT level. TRAI must note that all
private operators in basic services have agreed to the term of licence
they would conform to the DOT level of price. i.e, each operator will have
to be subjected to a price cap which is in this case is the DOT price.
price can be lower, but not higher than that of DOT. However specific
level may be provided for local connection upon 5 KM, shifting,
installation, restoration, rental charges and closing of STD/ISD.
ii) The price ceiling may be specified for the services mentioned in (i)
iii) A price cap is not only essential but also one of the terms which
private basic operators are bound to follow under terms of the basic
v) The price cap mechanism should apply to both tariffs specified in
a specific level as will as tariffs specified in terms of floor and
vi) No comments
vii) A price floor should be defined for all service. The operator
price below the floor can do so if he can show that his costs are lower
to any reasons.
3. Methodologies for price regulation
ii) Yes, The criterion should be facilities demanded by user. There are
significant economies of scale which can lower telecom costs for users.
iii) No comments
iv) No comments
v) Ramsey mark-up should be used
4) Subsidization and deficit
i) No, only actual cost should be used to calculate the fully allocated
(FAC) for deriving the difference between FAC and the long-run incremental
ii) After calculation of difference
iii) Yes. There should be upper limit on local call charges. Subsidy
provided to residential non-business users.
5) Increase in rental, preferential tariffs
i) The following user grouping may be made for purposes of rentals
i Business-Rural-Residential-No increase
Business-Non-Rural - Residential-Upper limit call.
iv) Both ways
v) The following ratio may be useful for differentiation
High Rental = Lower usage fee
Lower Rental = High usage fee
Also please see (i) above
vi) The current preferance given to rural areas should continue.
6) Unbundling of services
I) The service should be provided in an unbundled form with the price of
facility chargeable separately.
7. Structure of prevailing Indian Tariffs
iii) Thereis no justification for any timing per call. The timing per
was introduced as a price escalation exercise.
iv) The current number of free calls should continue. There should be no
change in prices. There is no question of any link between the price of
initial calls and the subsequent calls. Currently ISD/STD calls are being
charged at higher rates after including them in local calls. ISD/STD calls
be charged at a flat rate.
v) Yes, many STD/ISD rates are very high.
vi) & vii) Discrete distance slabs are useful. The number of slabs should
based on the significant change in costs associated with distance.
viii) There should be no change in slabs
ix) There should be no change in the existing tariff
x) Yes, There can be a surcharge for operator use
xi) Yes. The off-peak times should not be the same for international calls
i) It should be incumbent upon the operator to provide requisite
in sufficient detail if it seeks a revision in any existing price cap.
ii) Ramsay Thumb Rule
iv) Yes, provided any excess charges are refunded to consumers if the
determination was excessive.
Hope our comments will be useful from the consumer point of view.
Legal Co-ordinator VOICE
CC: 1. Sh. Harsh V. Singh For necessary consideration and
CC: 2. Secretary For information.
Ministry of Food and -
CC: 3. Dr. Arun Mehta For information.
M/s. Indata Com. Pvt. Ltd
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