VOICE\L\ 05-01-1998
Mr. Justice S.S. Sodhi
Chairman, TRAI
Jawahar Vyapar Bhawan
Tolstoy Marg, New Delhi
Sub: Telecom Pricing Consultation Paper on Concepts, Principles
and
Methodologies - VOICE comments.
Sir,
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
making
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.
The
several theoritical premises in the paper may not be relevant
unless the
DOT
methodology (or absence of it) is revealed in all its
ramifications.
Section
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
of
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
MRTPC
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
well
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
comments
on the questions and options given in Annexure to the Executive
summary
are
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
it
should be obligatory for operators to provide the system.
ii) The services may be categorized depending upon the nature of
services,
in
the following manner
Voice
Basic: Telephone+intercom facilities, STD/Trunk, Public Calls,
Pay Phones
Non-Baisc: PABX, ISD, Hotlines
NON-Voice
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
criteria
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
user
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
that
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.
Their
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)
above.
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
licence agreement/contract
iv) Yes
v) The price cap mechanism should apply to both tariffs specified
in
terms of
a specific level as will as tariffs specified in terms of floor
and
ceiling.
vi) No comments
vii) A price floor should be defined for all service. The
operator
providing a
price below the floor can do so if he can show that his costs are
lower
due
to any reasons.
3. Methodologies for price regulation
1) No.
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
vi) Yes
4) Subsidization and deficit
i) No, only actual cost should be used to calculate the fully
allocated
costs
(FAC) for deriving the difference between FAC and the long-run
incremental
costs (LRIC).
ii) After calculation of difference
iii) Yes. There should be upper limit on local call charges.
Subsidy
should be
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.
ii) Yes
iii) No
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
each
facility chargeable separately.
7. Structure of prevailing Indian Tariffs
i) Yes
ii) Yes
iii) Thereis no justification for any timing per call. The timing
per
call
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
be
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
to
all countries.
8) Others
i) It should be incumbent upon the operator to provide requisite
information
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
initial
determination was excessive.
Hope our comments will be useful from the consumer point of view.
Thanking you.
Yours faithfully,
(H.K. Awasthi)
Legal Co-ordinator VOICE
CC: 1. Sh. Harsh V. Singh For necessary consideration and
action.
Economic Advisor
TRAI
New Delhi.
CC: 2. Secretary For information.
Ministry of Food and -
Consumer Affairs
Krishi Bhawan
New Delhi.
CC: 3. Dr. Arun Mehta For information.
M/s. Indata Com. Pvt. Ltd
B-69, Lajpat Nagar-1
New Delhi-24
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