Too Good to be True

Posted in Uncategorized by stories of an authentic self on November 27, 2009

First there was DOCOMO that introduced per second tariffs for GSM cellular services. Then BSNL, Reliance, Airtel, Idea followed, due to expansive customer base that DOCOMO managed to create within a span of a couple of months.

Then there was talk of  prices being slashed for text message services. Last week I read about Airtel slashing its Roaming service rates.

In the face of this, in early October this year, the TRAI announced its plans of considering making per second tariffs as a mandatory option to be provided by all service providers, available to all customers, contingent on how the industry reacts to it. This in derogation from TRAI’s long standing policy of not interfering in pricing policies of telecom service providers.

While this may benefit the users a great deal, it virtually stamps out the prospects of new entrants into the telecom industry, who will have little profit margins to work on, as against already existing telecom giants in the country. Up until now, India’s been a conducive industry for new market entrants in cellular services because of India’s developed tower sharing plans, which resulted in the need for less capital expenditure at start-up. It seems highly doubtful that the industry will react well to such a proposal by the TRAI.

(Investors lose too, considering how the stocks of telecom service providers crashed following TRAI’s announcement.)

Just a thought..


3 Responses

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  1. […] This post was mentioned on Twitter by Eric Broker and Jennifer Springston, Steven van de Berg. Steven van de Berg said: Too Good to be True « IMPLICITY: … which resulted in the need for less capital expenditure at start-up. It se.. […]

  2. armalcolite said, on December 9, 2009 at 10:59 pm

    Two things. One, the TRAI had interfered in pricing before when in 2008 they asked service providers to reduce roaming rates because of some measure they had implemented to ensure it didn’t cost them too much to reduce the rates. Two, this measure if implemented will in fact help new entrants as the per second pulse was introduced by a new entrant on the scene, DOCOMO. Also the other new players on the scene (and there are quite a few) have embraced the per second pulse. So, the TRAI is not exactly mandating an alien policy, but merely recognising what will in the days to come be industry standard in terms of pricing.
    I’m not aware of the stock market angle to this, but I would also point your attention back to a time when messaging was relatively free until companies decided en masse to start charging (or charge higher than existing rates) SMSes. In this case the TRAI did not interfere as the companies needed to hike prices to make profits. Thus, any pro-consumer measures adopted by the TRAI.

  3. Mika said, on December 9, 2009 at 11:27 pm

    Per second pulse helped DOCOMO cuz it was introduced to a market that had never been offered per second pulse. Now, (should the TRAI’s consultation paper come through) a new entrant will have to mandatorily offer per second pulse in a market in which every other established service provider already provides it. It gives a new entrant little scope to establish a profit margin.

    Consider that Uninor’s offering 29p/min local calls. (It reverted to minute pulse.) The considerations for Uninor however, are slightly different; for one, Telenor has been around as the Norwegian telecom service provider for a while now.

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