Ronnie05's Blog

Indian Telecom: Entry Barriers and Incumbents Wrath

Posted in Industry updates by Manas Ganguly on February 9, 2009

Incumbents wrath: I had defined this term for players in the market who are well settled and entrenched in the market with an established network all over. These are the incumbents who grow because of an established network presence, a brand that consumers are aware of and sheer economies of scale. By leveraging these points of strenght. these players are able to fight late entrants and challengers more effectively. The analogy is to some one who is firmly based on a hill and can roll off rocks down the hill to ward the challenger who intends to take over the control of the hill!

That is certainly what is happening between the incumbents (Airtel, Vodafone, Idea, Aircell) and the challengers (Datacom, Unitech, Swan Telecom, Shyam, Loop and Reliance Communications). The piece under contention is the mobile termination charge which one operator pays to the other when the customer of the further uses the roaming charges of the later. This is 30 paise a minute charge as of today. This is charged to the consumer as the cost of roaming.
With an all India footprint (or 80% coverage), the incumbents effectively donot have to pay termination charges. The full coverage ensures that calls are terminated within their network. So for instance a Airtel call from J&K will not have to pay the Airtel network at Kerala the termination charges! However, a Swann call from Delhi, will have to pay a Vodafone network in Pune, since Swan is not present in Maharashtra. It will take Swan at least an year to get into Maharashtra! The incumbents have either been pocketing the termination charges or passing them to consumers “no roaming charge” kind of schemes.
This puts the pressure on the challengers who would from day 1 not have the comfort of their network everywhere! Thus they will mandatorily have to pay the 30 paise charge! Thats a point of disadvantage!
TRAI is trying to mediate a free termination or a 10 paise termination charge! Only thatthe Lobby of incumbets is trying to put a spanner in the wheel by claiming that such a waiver will affect their rural roll outs as this would reduce revenue!
TRAI has to take a stance and i would vote it does so for the consumer’s good.

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