Will the second pulse win over minutes?

BANGALORE, INDIA: Will the Telephone Regulatory Authority of India's (TRAI) plan to bring per-second billing for mobile phones prove to be a bitter pill for cellular operators? The answer seems to be 'Yes' though the same can benefit the consumers in a big way.

The telecom regulator has planned to ask cellular operators to bill customers on a per-second basis from the the current minute pulse rate plan. Though TRAI Chairman J S Sharma has indicated this he has not given a  time frame for implementing the per-second billing plan.

However,  the whole idea is not going too well with the telecom biggies, it seems. Bharti Airtel CEO and joint MD Manoj Kohli has ruled out introduction of per second billing plan with the current tax structure. But Kohli has also stated that there was enough room to further reduction in the call charges being offered by telecom players if the government reduce taxes.

Over 30 per cent of the gross revenue earned by the cellular operators goes as various taxes. This means, that for every rupee a consumer spends on a call, 31 paise go as tax, the highest in the world, explains Kohli while stating that if taxes are reduced, Airtel could further reduce the call charge.

How the new tariff war began

The new tariff war among cellular operators started with Tata DoCoMo introducing the second pulse plan. The plan has proved to be an instant hit with a record number of new subscriptions. It emerged the biggest attractor of new GSM subscribers by signing 3.4 million subscribers in August.

Soon, Aircel followed the suit. However, the bigger players like Bharti Airtel, BSNL, Reliance Communication and Vodafone refrained from the per second billing; they offered less attractive 50 paise per minute billing plan to their GSM customers instead.

Effect on Cellular operators

Deepika Chaubey, managing analyst - OVUM India, feels that Indian telecom operators are struggling with low voice and data average revenue per user (ARPUs). “While these operators have started focusing on the rural markets for greater growth, rural clientèle has further slided their ARPU.” 

However, Chaubey opines that the per-second billing appears to be a good strategy for players who want to gain subscriber market share in India but if it is made mandatory for all operators, it will directly impact their voice ARPU.

This will make ARPU growth a challenge as with per second billing voice ARPU will go down and operators can't depend on data services to a large extent as data is still in a very nascent stage in India. Rising competition from new entrants and international players entering India would further make ARPU growth a challenge.
Sidhant Rastogi, senior consultant, Zinnov Management Consulting feels the move is positive and in keeping with TRAI's history of pushing for end-user benefit.

“However, one might argue that in the existing hyper competitive telecom market, this move by TRAI amounts to discounting market forces of pricing and an attempt to micro manage the operators,” he said.

Benefit to mobile users

According to Rastogi considering the fact that on an average, a user underutilizes about 15-20secs per call, the impact on revenues are estimated to be as much as 15 per cent. “However, we believe that the eventual plans launched by telecom operators and the subsequent increase in usage by the customers will ensure that the final revenue impact will be less than 5 per cent.”
Assuming that the usage remains constant, the percentage reduction in bill for an average user is expected to be about 17-20 per cent.

The Tata DoCoMO website claims that a call of four seconds on its network can translate to 93 percent saving for a caller compared to networks still having one minute pulse rate as 56 seconds can be saved. Similarly, a call of 8 seconds can result in 87 per cent saving as 52 seconds is saved.

Naveen Mishra, manager, Communications Research, IDC India too feel that the per second billing is beneficial to the subscribers. According to him, more operators my introduce the per second billing.
“It looks like the established players have adopted a wait-and-watch policy as the number of new subscribers for per second billing is still negligible,” observes Mishra.

So will the big players in mobile business follow the newcomers or bank on their vast network resources to provide quality service and give the new players a run for money?

Will the TRAI take a tough posture and force the mobile operators to introduce the per second billing in customers or wait for operators to take their own decisions. Only time can answer.