Indian Telecom is a Farce

The old adage of the business rule is that it takes ten times more cost to earn a customer than to retain one. I am sure no one high up in the mobile company has ever heard of this saying. Why spend crores on celebrity endorsements and try to entice people with empty promises? However, since we do not have a regulator worth its name, this routinely is ignored. That is discussed later.

GSM mobile companies started their services as a lifestyle and luxury product. I remember the atrocious rates they used to charge as a premium. The interest of the consumer be damned. Perhaps at that time this industry was besotted with high taxes and an indifferent government regulation. This did not help the matters at all. In fact overestimating the demand and the invisible middle class potential, these companies fell over each other to buy out the spectrum and license. Much of the details remain out of scope here. However, fact of the matter is that until to date, voice calls remain prohibitive, perhaps with the exception of Reliance.

GSM companies have tried to communicate their message through various means and make people adopt the cell phones more out of necessity. The central aspect of any mobile service remains the billing. This one area remains ignored. There have been many complaints of customers who have been facing the wrong billing cycles or difficult to understand across the board tariffs. Incase one is not happy with the settlement, the only way out remains that of the consumer court. One knows how long the court cases can linger on.

The different plans that seem to be flooding the market are in a way designed to fool the customer in parting money more than it’s due. For example, much of the value of recharge card is taken upfront. This almost amounts to half of the talk time value. If the needs to be connected there is no choice.

The private operators tried very hard to prevent the entry of BSNL as the third service provider. However, the entry was delayed. The main reason why this was done so because the operators has so far concentrated only on the towns and cities which had potential to cough up the exorbitant charges put to them. Over the past few months there have been reports that BSNL’s sim cards are not available or only at high premiums. I fail to understand the artificial scarcity as well inattention of the persons concerned. This is perhaps an unproven allegation that private operators have so far tried to stem the spread of BSNL or cause frequent disruptions thus an insider job. However, it remains unproven but anything is possible in this country.

This coupled with the ineffective network, which dropped after one moved out of the city limits. Call drops and frequent disconnections were routine. Adding salt to the wounds was the problem one had to face while dealing with a vast army of morons. The so-called customer care executives.
Surely, logistics define the scale of operations. Yet a careful analysis reveals that much of the spend is in advertising little realizing that word of mouth advertising is much better than hiring celebrities to endorse. What of those fancy MBAs these companies hire? This has indeed spawned a whole subculture of studies to analyze consumer-buying patterns. Yet the media agencies apply little brains when it comes to working on the actual brass tacks. That is another sob story.

Hutch advertised with minimal investments with the result that it has the highest Average Revenue per User (ARPU). Given the fact that Hutch laid much emphasis on the quality of the network. However, this is from the media reports and I have no reason to take them for their word. Since the accounts of these private companies are not publicly listed, it would be difficult to prove the extent of their claims. ARPU is sacrosanct in the mobile industry and each operator tries to shore up its ARPU given the need to have returns on investments.

The recent controversy over the increase of the FDI in the telecom sector is again an unwise decision. This is because Indian companies are not content to raise money through the Indian banks or lending agencies for reasons best known to them. In fact, the decision not to hike the FDI limit from previous 49% to present 74% was taken in the interest of the nation. This is because the nature of the telecom is that it is a crucial industry and in the event of the national emergency, the foreign investor would sell its stake in distress and devalue the national currency. This fact is somehow not apparent to Bharti Group that was at the forefront of calling for increased investment. Perhaps to a host of other operators also.

The Calling Party Pays regime or free incoming has resulted in the hike for the landline rates. The biggest windfall has been for the BSNL who owns the largest number of lines. This has helped them to cross subsidize their mobile operations as well as shore up the balance sheet with the free money of ADC regime levied on the mobile companies.

Despite the spread of the network, the roaming costs remain the highest for the GSM companies. I fail to understand the tactic arrangement these people have among themselves; the fact remains that it is an open loot of the customers. The Cellular Operators Association of India is in constant tussle with the fixed line of operators. As I had mentioned, it is just another bunch of trade unionists who have platitudes to mouth to media.

Data is one big issue with GSM. GSM remains an uneconomical way of providing data services as it hogs a lot of spectrum. This means that the voice spectrum is affected, which would lead to the detioration of the quality; and spectrum is a scarce resource. Voice remains the main bread and butter of the operators. Hence, the best way is to price the data component higher than average (totally unjustified) and sell the same as value added service. This helps them to set up a differential feature from other networks. However, still way to expensive. Contrast to this, is the CDMA, which can support high network speeds of up to 144 kbps. This has explained the success of Reliance’s Fixed Wireless Terminals, which have an inbuilt modem too. There is no doubt about the superiority of the CDMA over the GSM platform despite the claims of the operators.

The only way to make these operators make the services far cheaper than they are is to complain to them. Not in the Customer Centre because those poor brainless sods are overworked anyway. Write back to the top heads and the TRAI. Fight them on the facts and refuse to become a willing victim to their loot. TRAI needs to get its act together and exert its superiority. Sadly, it has been reduced next to nothing after constant court rulings cutting its jurisdiction. Shifting over to other operator is also not feasible because none of them offer any real differentiator on service upfront.

So much for Indian Telecom Revolution. Just eyewash. A farce.

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