Call drops penalty can hit a third of revenues: Telcos

The telecom regulator’s call-drop penalties could end up eating over a third of telco revenues, the industry has said in a hard-hitting letter that questions some of the basic assumptions made by the Telecom Regulatory Authority of India.

The telecom regulator’s call-drop penalties could end up eating over a third of telco revenues, the industry has said in a hard-hitting letter that questions some of the basic assumptions made by the Telecom Regulatory Authority of India. The letter, signed by both industry bodies Cellular Operators’ Association of India (COAI) and Association Of Unified Telecom Service Providers Of India (AUSPI), signals a rare agreement between the cellular-mobile and CDMA-mobile players and accuses Trai order of being “coercive, grossly unjust, and its unintended impact will be catastrophic”.

The letter says that, by definition, mobile networks cannot run on 100% capacity/coverage everywhere “even if infinite resources are assigned” — so Trai asking networks to have “full coverage and capacity everywhere is an oxymoron”. This is why, COAI and AUSPI say, a 2% call-drop ratio has been accepted as a global norm, and by asking for compensation for call drops, Trai has in a sense said that India must have a zero call-drop regime.

Since there is no way to figure out whether a call has got “dropped” due to a problem in the network or whether it was intentionally terminated by a user, the telcos have talked of the possibility of users gaming the system. While the average earning per customer is Rs 125 per month, Trai rules of a Re 1 compensation per call — subject to a ceiling of three a day — could end up with the telcos paying Rs 90 to each user a month. To compensate for this, the telcos have said, they might have to raise tariffs across the board, almost in direct proportion to the amount they stand to lose.

The telcos have outlined three scenarios (see graphic) of compensation, ranging from one where a tenth of subscribers want this to one where half are asking for it. As a result, this will take away anywhere between 7.4% and 36.8% of telco revenue.

Apart from the fact that the call drops are due to reasons beyond their control — shortage of spectrum and sites to install their towers — the telcos have pointed out that no other industry has been asked to compensate customers for poor quality of service, not even those supplying essential services like water and electricity.

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