Saturday, March 19, 2005

TRAI wakes up to pass rules on Broadband and Telephony

TRAI seems to have discovered its powers all of a sudden. In the past 2 weeks, it has passed orders with far reaching consequences. The first and foremost is the broadband speeds. It said that anything less than 256 kbps is not broadband. We all knew about that one Sir! For almost a year there has been enough noise being made about the way, companies are cheating its customers. Sify was the earliest on the block and hence deserves a mention here. Sify Broadband totally distorted the concept of what Internet access should mean. In this regard, I feel sorry for the customers who had no other option except to sign up for something marginally better than dial up but all being disappointed with the offerings. The worst part is that there is no mechanism of redressal.

The other players in the “broadband” market were quick to distance itself from the offerings. However, companies like Airtel market their pathetic 128 kbps or less under the brand name as Airtel Broadband. I feel that this may be a major lacuna in enforcing the recent TRAI order. Well, as they say, it is easier to get away with almost anything in India.

Why is it that these people tend to restrict the offering to such pathetic levels? The major reason is that most of the users use it mainly for checking email or web surfing which don't take in account the amount of bandwidth consumed. Tata's have an unlimited account of 128 kbps which is over priced at Rs. 6000. Tata's can easily lower this price offering and set the market on fire. However, high upstart costs mean that they want to suck out the money as fast as possible.

Given in this scenario, it is indeed laudable that TRAI finally acted. I believe that someone higher up might be reading these columns to make an effort to bring about a change. The second significant order that came in was regarding the Push to Talk telephony. This walkie-talkie style of conversation did not find many buyers and the companies offering the same, namely Hutch and Tata's did not have the license for the same. Tata has claimed that they were offering it under their ISP license. How far it is true is not known since the law can be twisted to change its meaning totally. However, TRAI's order assumes significance because it clamps down on the operators. I am sure that Hutch and Tata's would make their lawyers busy now!

Another significant ruling that came in was the barring of the Fixed Wireless phones as “mobile phones”. These phones would now have to be clamped down in a particular place and not be used as they have been used as before. This is because they have landline tariffs and do not attract the same ADC as the mobile phones do. The familiar culprits are BSNL! They have done it again exposing the idiocies in regulation. I sincerely believe that these Fixed Wireless Phones were a Godsend opportunity for small businesses and individuals who did not have to depend on the all-powerful linemen or bribe them to get connections. Everyone knows about them but no action is taken against the erring employees. In this regard, it was easier for Reliance and Tata's to scale up margins and hence profits. This decision by TRAI is much uncalled for indeed.

TRAI recently chastised Tata's for the threat of national security. Now the heat of national security is shifting on to other operators. Tata's have been accused of the same issue that Reliance had to face recently, namely changing the international caller id to local calls in order to avoid paying the ADC component. I had earlier mentioned about the foolhardiness of Tata's to share the essential equipment with other players in the market. Network is the jugular for any operator. This way any grey market calls landing in India become extremely difficult to trace and hence a potential for breaching the national security exists. In order to cut down the costs and scale up rapidly Tata's carried on board other operators without realizing the implications of their actions. In this matter, any action taken by TRAI is indeed appreciable. How they follow up on the same is another matter.

Last but not the least. TRAI, in a significant move called for a consultation paper on reducing the ADC charges further. Again, the usual suspects BSNL and MTNL cried foul about the supposed losses. It is another matter though that BSNL is supposed to fund the rural expansion accruing from its own resources. However, they applied for Universal Obligation Fund and were able to bag the contracts. More on that in a later post. Howsoever I may detest BSNL for its lousy services; it is the dark horse of Indian Telecom. It can do in broadband what it did in mobile phone services.

In a recent survey on the quality of services, most of the operators fell short of the prescribed norms. It is not surprising given the obsession to scale up customers by all means possible. A part of the advertising budget can clearly be earmarked for improving on the services or perhaps cut down on the fringe benefits of their marketing heads. I have no idea as to how everyone arrives at a consensus on NOT improving the customer satisfaction but think of gimmicks. Surely, there must be a whole department to come with “out of the box ideas”!

Let us wait and watch as to how things unfurl in the Indian Telecom market.

Discuss on: Sify Broadband, Tata Indicom, Airtel Broadband, Reliance Broadband, MTNL - BSNL Broadband, Dial Up, Others

This post was submitted by Dr. Abhishek Puri on the Broadband Blog on Techwhack.

Sunday, March 13, 2005

Smaller Telecom Operators in India

In the complex telecom muddle, there are a few independent operators that have stood the test of time and branched out on their own. However, the biggest drawback is that I cannot comment on them because of simple reason that I have never ever used their services. Over the period of time, telecom policy was designed to give equal representation to anyone who could sign up for the licenses and collaborate with a foreign telecom company.

Most of the independent operators survived the hostile takeover bids in the name of consolidation, especially by Airtel. In fact, Airtel has consistently raised money and diluted its stake to be “aggressive”. All in the name of expansion and ramping up numbers. Independent operators like BPL and Spice have so far stood out.

Spice has a stake in Karnataka and Punjab. However faced with falling customer base, it decided to market its value added services with huge amount of advertising splash. The network remains pathetic and I would rate the customer care as below average. As for BPL, all I know is that they remain mired in family wrangles, the trouble spot between the son in law and father in law. It was recently featured in the mainstream media too. Interestingly, both of these operators have branched out in handset manufacture. Perhaps to offer low deals on new connections and keep the overheads low.

Idea remains a study of contrasts. Again, I have never used Idea ever. Yet I do know that Tata's have a stake in the same. This goes against the accepted grain of logic because Idea is pitted against Tata's in the same circles trying for the pie of customers for GSM and CDMA.

There were some rumors in the market that Idea may be sold off to some independent operators or those having pan Indian presence. Possibly Hutch. Obviously, these remain exactly that-rumors. I have a feeling that Idea may be sold off to some kind of a consortium in the near future. A consortium, which can consist of Japanese players or Russian operators. Possibly European too. It is strange that despite the 74% FDI limit, there have not been many telecom companies lining up still. Last heard, NTT's Docomo may enter the Indian market in a big way. This may mean that promised acceleration for the 3-G networks may be earlier than expected; the cut off date was about end of this year.

The fact is that most of the earlier starters had so far staked out in the cities and metros where they milked the consumers. Rural expansion is tricky, given the expected low costs of recovery and infrastructure risks. The other players so far limited to South India are Aircel promoted by the maverick investor Chinakannan Sivasankaran, who sold out his stake in the same. He had earlier invested in Dishnet to promote Internet through Digital Subscriber Line (DSL) and sold that to Tata, which has this under the brand name VSNL broadband. He is now promoting Dishnet Wireless in a big way. Arguably sniffed out an opportunity in North East, which is relatively under served, including parts of Uttar Pradesh. In what could be a money-spinner for him, is good for the customers since he promotes his ventures using a lot of hoopla. I am sure he is going to make huge amounts of profits for himself after he sells out. Interestingly he has opted for GSM. In any case, it would make much more sense to have 3-G networks ready since they can accommodate far number of subscribers in the same spectrum for voice calls.

Coming to the fixed line operators, Airtel has a sizeable customer base apart from BSNL. In fact, Airtel is spreading itself over the other circles, as it needs scale rapidly to make profits. The primary reason is that it knows that much of the future revenues would come from the data services. This is in contrast to HFCL Connect, which is currently localized to Punjab. However, the fact remains that it is on the verge of the sell out if the market rumors are to be believed. Their fixed line telephony is basically pathetic being let down by lousy services and CDMA is limited to a few cities only. Despite their claims, I do not have anything to recommend them about. Their DSL remains very costly. In fact, with just a download limit of 400 MB on DSL! This fact is generally not known to most of the people outside the state. I believe that recent advertising binge is surely for ramping up the customer base and they are eventually looking out to sell off to Airtel, possibly. They were in talks with Tata's recently, most likely for their Internet division, which for some reason did not work out, and talks broke midway. These are again market rumors, which have not yet been confirmed. Yet they do give an indication for the way telecom market is moving across.

Do we need these smaller players? Well the answer is yes and no. Smaller players lack the marketing muscle of the bigger ones. They are encumbered to localized regions and cannot offer economies of scale. However, the smaller players can offer faster customer response times. Sadly, this fact has not really reflected as far as Connect is concerned. I have mailed and personally talked to the people in charge for extending the services to my area, which they consistently refuse to do so. I gave up in disgust. However, I was lucky enough to try out their Internet services. Given the paucity of customers, the access speeds are better in both dial up mode and the “broadband” services. Still the Internet access is way too expensive.

This more or less is the round up of the existing operators in India. It remains to be seen as to how they scale up to the challenges in the future.

Discuss on: Sify Broadband, Tata Indicom, Airtel Broadband, Reliance Broadband, MTNL - BSNL Broadband, Dial Up, Others

This post was submitted by Dr. Abhishek Puri on the Broadband Blog on Techwhack.

Wednesday, March 09, 2005

Insanities in Indian Telecom

Much has happened in the past few months. I could sit back and report on every single issue. However, I had to wait for the final resolution on the same. The first and the foremost is that Reliance has had to pay out the fine it was forced on them for the non-payment of the dues. BSNL blew the lid on the “scam” that involved changing the caller ID from abroad to local calls in order to avoid paying the access deficit charge.

Well, I really doubt whether the ones in BSNL are really smart enough to pull this out. I believe that it is the dirty tricks department of the other operators who might have tipped off. Now we get to hear that Department of Telecom too has jumped in the fray and issued notices to Reliance on the same. After getting no relief from the TDSAT and Supreme Court, it had to pay up the fine or risk loosing its license.

Herein, Reliance has kept its lawyers extremely busy over the past few months. I am not taking sides over who is wrong and who is not, but so far, the media has been focusing totally on Reliance. The left parties, given their animosity to Reliance demanded removal of the TRAI chief for good. I fail to understand that how the removal is going to prevent what has been happening for the past few months. Well, with moth eaten brains and even worse ideas, everyone chose to ignore the basic reason behind the diversion of calls. It is simply Access Deficit Charge.

In my earlier columns too, I have been raising this particular point that ADC does not help the telecom industry in anyway. Instead, it diverts the real resources to spread telecom far and wide. Given the onus on the government owned agencies, they ought to have spread the rural telephony far and wide. How much time you need? 50 years is not sufficient? Despite the ADC component in place, we have seen growth of mobile phones rather than fixed line telephony. BSNL is loosing its telephone connections on a rapid scale that is not reported widely in the media. Perhaps because it is paid exposure anyway. ADC is unfriendly and anti competitive. BSNL declared a profit of almost 5000 crores. Much of it was the ADC component that was reflected in their books.

Obviously, as it happens, there is bogey of national security that has been raised. Clearly, once the ADC goes off and BSNL is not subsidized indirectly, we could see some semblance of sanity there. Free form competition would bring down the prices considerably. For too long we have had to suffer at the hands of ill designed and badly implemented policies of Department of Telecom. For heavens sake! Leave this alone and think of the end consumer.

Broadband is officially a non-starter. BSNL did introduce and barring a few exchanges that were covered, only a few people are utilizing the same. The download limits kick on in by June 30. 1 GB of download limit is asinine. Rs.2 per MB is proposed to be levied thereafter. That means that another GB of data would cost you almost Rs.2000/- If that is the rough calculation, factor in the tax that you would have to pay on your phone bills. After the download limit kicks in, use your broadband not even for checking you email. See the modem and kick yourself on your stupidity to invest in one. However, there is a BIG if here. If, the prices for the bandwidth gets cut down or TRAI wakes up from its slumber and actually decides to take pro consumer action, then it might just make sense to invest in one. Be prepared though to put up with a lousy customer care and technical support. Or well, you could bribe someone to help you out. In India, anything is possible.

Reliance has come out with its anniversary offer. It is offering the double of the talk time when you recharge for the same. Looking back, these people can be justifiably proud of themselves and pat themselves on their backs. They have expanded at a breakneck speed and got their fundamentals absolutely right.

Well, the GSM majors Airtel and Idea were forced to eat crow recently. In a rare proactive step taken by TRAI, they were forced to refund the money taken on behalf of the migration fee. The migration fee was ostensibly taken for shifting from one plan to another. If that sounds rude, it really is. Who gave them right to do so? I fail to understand that why their licenses were not cancelled for dereliction of duties and anti consumer action. All these companies were asked to do was to refund the fee. Anywhere else, they would have to pay a penalty with interest on the same. It really is a shame that anything goes in the name of doing business. Why would these people need fancy people to endorse their products? Are they falling short of money? Or they wish to hire another army of morons and intellectually challenged idiots to serve them?

Over and above, there is enough muck that can be raised at these people. In the name of telecom services, there is much more than that meets the eye. I hope that one-day customer would truly be the king. Until that time happens, I do not want that illusion for myself at least.

Discuss on: Sify Broadband, Tata Indicom, Airtel Broadband, Reliance Broadband, MTNL - BSNL Broadband, Dial Up, Others

This post was submitted by Dr. Abhishek Puri on the Broadband Blog on Techwhack.

Sunday, March 06, 2005

Future Trends in Indian Telecom

Given the pace of expansion of telecom, it is very hard to predict the future trends in telecom industry. I am trying my bit to make some sense of the same. Consolidation. That is the buzzword of the present state of industry. However, barring Airtel, there seems to be no other provider who would straddle in the fixed line as well as mobile telephony business. Airtel would be keen to gobble up the small time fixed line operators in order to avoid the duplication costs. They have done so with their mobile telephony business.

Why consolidation is a not good for us? For all the arguments that these companies forward in the name of economies of scale, ultimately it boils down to the user options and choice. There are a few players now in the telecom landscape. Few of them who had bid for the licenses exited out their business realizing ineffectual regulatory regime. Some of them had jumped in the fray little realizing the incremental costs. In the meltdown that happened, the few with deep pockets survived. So what do I do if I am not happy with one operator? Well, given that the thrust on quality of services is almost nil, there is nothing really to differentiate one from another. In fact, the multiplicity of their plan options serve to confuse me rather than track my usage options or get me the best deal on my investment. True that these people are not in charity. However, when I get to hear first person accounts of faulty billing and a raw deal that they give to their distributors, well, I am better off minus all the headache. Especially with the GSM operators. We might see better billing systems in the future!

Similarly in the fixed line telephony business. BSNL hardly has any competition in this field. It s true that people are surrendering their phones on a big scale and shifting on to mobile telephones. However, for broadband access one has to depend on the fixed line operators. Especially when Internet through cable has been a non-starter. I have read first person accounts of Sify broadband here. Well, there are enough reasons to tear your hair apart rather than fight out for what is due to you given the upfront payment costs that one has incurred. Given the talk of imminent merger of BSNL and MTNL, that again is not really a good idea. It is like merging devil and the Satan together. Two sides of the same coin. I have a feeling that the stage maybe set up for privatization of this behemoth. Howsoever I may loath at this entity; the fact is that one needs them. This is because, being a government enterprise, it is essentially important for national security because telecom is one of the most crucial sectors of the economy. There is no guarantee that a private operator may not pull the plug in times of emergency. Well, perhaps it may sound laughable at this time; no other country allows FDI to the extent that we have done. Given the fascination of Indians to “emulate” the white races, well, it is surprising that we have not learnt this thing from them. For arguments sake American government does not allow FDI in its own telecom infrastructure.

Hence, consolidation is not good for the consumers.

Broadband Access down the line would be feasible. In my earlier post, I had mentioned that how Reliance would change the face of Internet access. However, that would take another 5 years or so to be commercially feasible. That is my estimate. Until then, one has to suffer the insanities of the government owned telecom operators. Interestingly, there is 100% FDI in the Internet sector. However, there are not players in the international market that are falling over to invest in this sector in what is called as IT destination of the world. One major reason is the local loop owned and operated by BSNL. They are not ready to either open up the same or willing to share it on a national scale. Part of the reason is that much of the local loop cannot be utilized for broadband. Perhaps because of outdated exchanges. Where is the thrust on the quality here?

In the article under telecom muddle, I had mentioned about carrier access codes. It would give a real choice to the consumers to choose the operator to carry voice service across the nation at extremely competitive rates. However, the recent mandate by TRAI had ended up in a deadlock. First, it would give an advantage to the private players to drop the prices to capture the market. BSNL would be hurt in the process. If Reliance can offer unlimited calls on its network for a fixed limited sum, it is trouble for others too. For too long we had to suffer high access rates. I believe that once the broadband is a reality, I would prefer to load up something like Skype. It would be real freedom to call anyone anywhere in the world to any Skype user. Perhaps we might see the growth of telecom operators like Vonage in India. That would be the death knell of companies like BSNL here. It is possible down the line though.

Last but not the least. We might just have a better regulator. That would REALLY look in the interests of the consumers. Complaining to TRAI on the service issues of telecom operators does not yield any result. It is much better to articulate the same concerns here. What we need is a voice of the consumer. I really wish that someone from TRAI actually looked in the forums designed specifically to discuss the issues of ISP. Perhaps then, we might have some action taken on ground. In India, just like broadband, this seems to be a far-fetched dream!

Discuss on: Sify Broadband, Tata Indicom, Airtel Broadband, Reliance Broadband, MTNL - BSNL Broadband, Dial Up, Others

This post was submitted by Dr. Abhishek Puri on the Broadband Blog on Techwhack.