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Looking for a Leader

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VoicenData Bureau
New Update

Wanted: A brave new operator, preferably with multiple

points of presence. It should have characteristics of a price warrior, ready to

operate international calls on lower margins. This perhaps is the most apt

description of what is required from an operator in the SAARC region in order to

lessen the burden of exorbitant roaming charges and intra-region calling

tariffs.

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SAARC, that swears by its commitment for regional

cooperation and building strong relations, has failed to do something which is

most crucial for leveling those ties-to bring intra-SAARC telecom tariffs down

so that people in the region can talk more frequently. Strange but true, it is

much cheaper to make a call from Kolkata to a distant city in the US than to

make a call to Dhaka, which is only about 245 km away.

The scenario of roaming charges is no better. Subscribers

in the region have grown used to bill-shocks while on roaming in neighboring

countries. Moreover, India and Pakistan do not have any direct roaming

relationship, for obvious reasons. Interestingly, Pakistan has the lowest

international telecom charges in the world, but strangely, those are not

applicable to its SAARC neighbors.

The declaration made at the 15th SAARC Summit (August

2008), Colombo states that "an effective and economical regional

telecommunication regime is an essential factor for connectivity and for

encouraging the growth of people-centric partnerships."

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The declaration also points out that "there is a need for

the member states to move towards a uniformly applicable lower tariff-for

international direct dial calls-within the region."

At various SAARC and international forums, operators in

the region have been expressing their collective will to bring down tariffs.

Unfortunately, there have been only talks and no action. The operators have

consistently failed in translating their intent in to some tangible result. This

lip-service is hardly likely to be translated into action since the business

imperative will ensure that the tariffs remain high.

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While operators from all the SAARC countries have to

collectively decide about how to bring down the tariffs, it goes without saying

that the Indian operators should make the first move. India being a dominant

economy in the region could set an example for others to follow.

The Tariff Tangle



It is pertinent to know why the tariffs are so high when the cost of

completing a call is not too much. Satyen Gupta, chief regulatory officer, BT

explains that the cost of international call can be broken into three

components-the cost of origin (from caller to international exchange), transit

cost (of hauling the call from the international exchange of one country to a

destination exchange in the other country), and termination cost (of hauling the

call from destination country's international exchange to the recipient's

phone).

Gupta further explains that in India, the cost of

termination is between 20-40 paise, depending on the distance from the gateway.

But there is a huge difference between the cost and tariff charged and that is

mainly because of the other two cost components.

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Dr Mahesh Uppal, director, Com First says, "The tariffs

are high even though the incremental cost on the ILD network is very low. The

tariffs go up because of the high termination fee that an operator charges the

other."

Most operators complain that it is the third-party carrier

who charges them a fortune to route a call. Thus, there is no choice but to

charge a higher termination fee to balance the pressure. V Ravisankar, CEO, Tata

Communications Lanka differs, saying that international long distance carriers

have their own costs, such as licensing costs, which are very high. The charge

that these service providers offer does not always earn them fat margins. "At

times these carriers are forced to serve at as low as 4 paise margins," he says.

Operators agree that none of them on either sides would

like to compromise on the revenue that they earn by terminating the call on

their network. Uppal says, "Costs of international calls are determined by

termination charges imposed by foreign operators, who receive the calls.

Domestic competition determines whether the lower costs are passed on to

customers."

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Tough Terminator
  • International tariffs are high because of the high termination

    charges. Every country wants to maximize the earning from termination

    charges
  • Besides, governments of some of the SAARC countries also take taxes on

    calls terminating in their country. Bangladesh and Sri Lanka are some of

    the countries which do levy taxes on calls ending in their country
  • Another reason is that the operators see it as an opportunity to

    bypass the normal route and show the ISD calls as local calls and this

    becomes a generator of black money

Christopher Almeida, senior VP, global voice solutions,

Tata Communications agrees, "Operators in all the SAARC countries are operating

on very low ARPUs. Especially, in markets like India and Pakistan, the domestic

competition is very intense and operators are making meager margins. In such a

scenario, ILD revenue comes as the milch cow. They want to earn higher revenues

from it."

Chicken and Egg?



The operators typically blame each other for higher termination fee. Thinley

Dorji, CEO, Bhutan Telecom agrees, "Lowering tariffs within the SAARC makes

business sense for all operators in the region, but we have all neglected

talking and convincing each other."

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Some operators contend that low traffic is one factor that

drives the tariffs up, while consumers may argue that high tariffs dissuade them

from using international calling and roaming services. Hence, a vicious circle

sets in.

"I do not think high tariffs are a matter of low traffic.

We should then analyze the traffic to some other places. Are the tariffs too

high from Delhi to Dibrugarh or Gorakhpur?" says Uppal.

"Over half a million people from Bangladesh visit India

every year for either medical care or business, and a large number of students

choose India to pursue higher studies. This creates significant international

traffic," says Mir Masud Kabir, MD, Mango Teleservices, Bangladesh.

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HC Soni, consultant, Reliance Communications suggests,

"Profiling of roaming subscribers is important-people traveling for health care,

education, business, or for tourism. All these travelers either use roaming in a

very restrictive way or buy a local SIM. If roaming rates are reduced, the

people will use mobile liberally and perhaps in the long-run, there may not be

any effect on roaming revenue." He further adds, "This can be verified by

analyzing the Singapore-Bangladesh pre and post roaming revenues on local rates.

However, Rajat Mukharjee, chief corporate affairs officer,

Idea Cellular sees the entire scenario from a traffic vs circuits point of view;

"It is more of an egg and a chicken situation. If there are enough circuits they

will attract higher traffic, and thus the other way round."

In 2007, Bangladesh had proposed to cut bilateral telecom

tariffs by 25-30% with SAARC countries, despite the then mechanisms that allowed

tariffs to be cut as high as 50%. A year later, Bangladesh Telegraph and

Telephone Board (BTTB) expressed its inability to go for all-in-one cut in

regional rates due to uneven negotiating position of Bangladesh's state-run

telecom company with private carriers in other SAARC countries.

Currently, the BTTB has direct circuits with India,

Pakistan, Sri Lanka, and Nepal, that allow calls through bilateral agreements

with four Indian private carrier-VSNL, BSNL, Reliance, and Bharti-and one

private carrier each from Pakistan, Sri Lanka and Nepal.

Road to Reforms



Minuscule reforms have taken place over the past few years. According to

Rohan Samarjiva, LIRNEasia, "Till early this year, on the fixed side, the only

countries with intra-SAARC tariffs lower than non-SAARC countries, are Bhutan

and Nepal. Bhutan, because it has a special price for India (prices for other

SAARC countries are high) and Nepal, because it has not changed its extremely

high tariff structure (and the lower-by-comparison intra-SAARC prices). UTL

Nepal has recently slashed tariffs for India. The subscribers can now make calls

to India at Nepali Rupees 3/minute. However, the charge for the rest of the

region, except India, is Nepali Rupees 15/minute.

Some countries are taking a lead in reducing the calls

rates being made in the region. For instance, Sri Lanka based Dialog Telekom has

recently reduced the rates for calls being made to India. Lanka Bell is another

operator which has reduced the call rates.

Going the EU Way



The Telecom Regulatory Authority of India had long proposed that the SAARC

region could emulate the European Union (EU) model, whereby all member states

cut international roaming rates. Industry experts say it makes sense for India

to go for this model. This would reduce the roaming charges, which are one of

the highest in the region. It would also allow the functioning of the same

number in the SAARC countries without any additional charge.

There are other good examples that SAARC can learn from.

South Africa based Zain has decided not to have any roaming charges in the three

countries it operates in.

Similar revolution is needed for the SAARC region as well.

Almeida of Tata Communications says operators having multiple properties and

multiple points of presence can bring about a change. It must be mentioned that

it is not going to be easy. There was a strong resistance from operators in EU

as well in implementing the common roaming tariff regime. It was the

government's dictate which forced them to implement it.

In comparison, Zain explored the model on its own and

reaped the benefits since usage went up and other operators were forced to

reduce roaming charges. It is up to the operators in the region to explore this

opportunity.

Malaysia Telekom and Telenor are the two operators present

in three countries in the region. For instance, Telenor is present in Pakistan,

India and Bangladesh. The company can reduce the roaming charges and bring down

tariffs in the region.

Will and Way



It will be a big challenge for operators to negotiate lower termination

rates from their SAARC counterparts. Thus, experts feel it is important that all

the regulatory authorities in the region collectively decide to bring down the

prices. Since India plays an important role in the region, India can set an

example by reducing the tariffs first. The regulators on both the sides will

have to take initiative to make this happen. A regulator's goal should be to

simulate the market and create an ecosystem that supports traffic between the

SAARC countries.

Since the regulatory framework in each of the SAARC

countries is different and may not enjoy equal powers, the regulator alone may

not be able to push for lower intra-SAARC region.

Miraj Gul, director, interconnect & regulatory affairs,

National Telecommunication Corporation, Pakistan says, "Sometimes, even the

regulator becomes helpless and is not able to implement these suggested

measures."

Ananda Raj Khanal, director, NTA says, "NTA does not put

any cap on the tariffs, it can only make recommendations to the operators to

lower them in case they are too high."

"But no regulator wants to bell the cat," says Gupta of

BT.

Regulators will have to come together and work out

cost-based tariffs. Analysis needs to be done on what kind of usage is required

and on giving more choices to the users, so that the operators do not exercise

their autonomy.

"Opening up VoIP will change the way how people in the

SAARC countries communicate," suggests Naresh Ajwani, president Cyber Cafe

Association of India. Unfortunately, broadband penetration in the SAARC region

is 1.8%. The fight will soon be on the cost/MB rather than cost/minute once

Internet telephony spreads its wings.

Tariffs will fall when there is competition among

operators and also for the services they offer. When there are limited

operators, they form a cartel.

"The regulator will have to ensure competition not only

with in the SAARC region, it will also have to offer competitive functionality,"

suggests Uppal. "If a subscriber is able to make a call to some country through

the Internet by paying only Re 1, it will be illogical for him to spend on

mobile services also," he adds.

Earlier this year, the Government of India was considering

to allow calling-cards issued by the STD/ISD operators, hence offering customers

the choice of making calls from any access network and yet have the calls routed

through the network of their choice. If implemented, this may bring down

international calling-charges by up to 70%. The governments, regulators and

operators in these regions will have to innovate new practices to retain

customers and keep the revenues flowing. A lot of invasion has happened from

Google Talk and Skype.

Some industry veterans suggest government policy can play

a crucial role in realizing SAARC's dream of lower telecom tariffs.

Chandi Sreshtha, board member, Spice Nepal says, "Making

it mandatory that all incoming international calls be charged the same

termination charges as domestic calls in the SAARC region. This will be a bold

move that will bring competition in the market."

The region at present needs one bold player that is

prepared to offer international long distance services at lower margins and set

the ball rolling. Experts feel that big players will not be in a position to

take that risk, but new operators with multiple points of presence, are most

suited for this kind of daring act.

A kick-start can be offered by an operator who is

providing access, NLD and ILD in collaboration with another operator in a member

country, providing the rates similar to domestic roaming rates. Slowly, all

other operators will come in line-as it has happened in India, the rates for NLD

have come down from Rs 16 per minute to Re 1 per minute. Future-proof OFC media

is mostly available, thus, there may not be any problem to accommodate any

amount of traffic. Operators, regulators, and decision making bodies should come

together to explore a mutually beneficial initiative. So is anyone listening?

Heena Jhingan



heenaj@cybermedia.co.in

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