TRAI and tariff reform The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership.

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TRAI and tariff reform The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership. Dr Kelly can be contacted by at Dr Tim Kelly (ITU), Seminar on tariff strategies for competitive environments, ALTTC, Ghaziabad, July 1999

TRAI and tariff reform Agenda Objectives of TRAI tariff reform process Initial TRAI proposals New tariffs implemented, 1/5/99 Fixed charges Local call charges Long distance call charges International services Discussion

TRAI and tariff reform TRAI tariff study: Objectives Encourage access to and use of the network Cater to social objectives (e.g., targeted subsidies) Cost-based prices as preparation for competition so that benefits are shared by all users Maintain profitability for all operators

TRAI and tariff reform TRAIs proposed price regulation regime

Rural subscribers, monthly rental, in Rupees, by exchange capacity

Urban subscribers, monthly rental, in Rupees,

< '000 1' '000 30' ' ' '000 >300'000 lines Old New TRAI proposed Urban subscribers, monthly rental, in Rupees, Old, new & TRAI

TRAI and tariff reform Reform of rental charges Some progress Reduction from 6 to 4 in number of slabs Increase of between % in value of urban monthly rental Average increase around 30 per cent But, major problems ahead for DoT and MTNL No change in rural rentals TRAI had requested an increase of % in rural rentals and % in urban rental Further rises will be necessary in near future

Former local call charges, and TRAIs original proposals, India Source: TRAI Consultation Paper on telecom pricing, September 1998.

New local call charges, Urban & Rural (calls per month)

No. of calls Original TRAI proposals Former tariff Rupees per call Cost per call, by no. of bi- monthly calls, rural subscribers old & TRAI proposed

No. of calls Original TRAI proposals Former tariff Rupees per call Area of revenue gain Area of revenue loss Cost per call, by bi-monthly no. of calls, rural subscribers old, & TRAI proposed

No. of calls Former tariff New tariff Rupees per call Area of revenue loss Cost per call, by monthly no. of calls, rural subscribers old and new tariff

TRAI and tariff reform Reform of local call charges Some modest improvements minor simplification to system of call slabs But major opportunity missed TRAI proposals for reform of local call charges largely rejected Free call entitlement untouched Net loss of revenue to DoT/MTNL from high volume business subscribers DoT/MTNL now in poor position to compete

Long distance tariffs, Rps per 3 min peak rate call, by distance

Rupees per 3 min call Former tariff New tariff TRAI proposal Distance, km Long distance tariffs, Rps per 3 min peak rate call, by distance

TRAI and tariff reform Reform of long-distance call charges Some improvements Reduction in call zones from 8 to 5 Reduction in price of long-distance calls greater than 800 km Some degree of distance-sensitive rebalancing But, much more remains to be done Distance element still far too significant Middle-distance calls actually rose in price Ratio between cost of maximum-distance to minimum distance call is > 90 (should be less than 10, preferably less than 5)

International tariffs, for peak rate call, in Rps per minute

International call charges, peak rate, in Rps per minute, Old tariffNew tariffTRAI proposed SAARC & neighbouring Europe/Africa North America

TRAI and tariff reform Reform of international tariffs Some progress Average reduction of 16.7% to North America and 20% to rest of world Indias international call charges now below those of China & Russia But, urgent need for further reductions India still losing millions of minutes of traffic to call-back operators TRAI had requested reductions of more than 50% India is still one of most expensive countries in world for international calls, especially to USA

TRAI and tariff reform Questions for discussion Why were DoT and MTNL so opposed to TRAIs proposals? The net result means that DOT lose potential revenue on rentals & fail to gain extra revenue from local call charges. How will DoT make up for the lost revenue? How great a share of the long-distance market will DoT lose to new market- entrants? When will be the next round of rebalancing?