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Idea Cellular says net neutrality will raise data price to Rs 1,000-2,500 per GB

Idea Cellular has warned that companies like itself will have to raise data prices to 108-250 paise/MB (Rs 1,105-2,560 per GB) if government imposes net neutrality on wireless providers.

This would required as voice call rates will fall to 7.5 paise per minute if net neutrality is allowed in the current situation, Idea Cellular said. Idea Cellular said it would have to raise data prices to these levels to account for a steep decline in voice rates.

Voice calling rates at present are about 75 paise per minute, but if net neutrality is allowed, voice calling rates will fall to 7.5 paise per minute to maintain competitiveness with WhatsApp calls.

Explaining in detail, Idea Cellular said that a single minute of voice call on applications like WhatsApp and Skype consumes only 300 kB. Since currently 1 MB of data is priced at just 25 paise, therefore, one minute of WhatsApp call will cost only 7.5 paise (including the cost of incoming.)

This will result in huge disruption of revenue to companies like Idea Cellular, it said, as consumers will use WhatsApp to make calls instead of paying 75 paise per minute to make ‘normal’ calls.

To cope with this, they will be forced to increase the price of its data packs to Rs 1,000-2,500 per GB, it told TRAI in the ongoing net neutrality discussion.

Net Neutrality Idea TRAI
Source: Idea Cellular submission to TRAI on Net Neutrality

Currently, people are able to enjoy data at just Rs 250 per GB only because people who make voice calls are footing the bill for them, Idea pointed out. If data cannot be subsidized by voice customers, then the full cost of data has to be passed on to data customers, Idea warned.

This will be an impediment to the growth of data, it added. Right now, voice accounts of about 80% of the revenue for companies like Idea and Bharti Airtel, and data accounts for only 15%. As a result, the higher price charged from voice is helping to subsidize the cost of data, and if voice prices are brought down to 7.5 paise per minute, then data prices will have to be hiked, it said.

However, it did not address the question of how players like MTS, which gets half of its revenue from data and the other half from voice, are able to provide data at just around Rs 100 per GB at present. Since MTS does not have a lucrative voice business to ‘subsidize’ its data business, the company should already be charging around Rs 1,000 per GB. However, in contrast, the company charges as little as Rs 80/GB.

In addition, upcoming 4G player Reliance Jio will also not have voice services to subsidize its data services. According to Idea’s logic, therefore, Jio will have to price its data at Rs 1,100-2560 per GB to meet its costs. However, industry indications are that Jio will price it between Rs 100-200 per GB.

AIRTEL

Airtel too echoed similar sentiments. “While a minute of voice.. realizes a revenue of 36 paisa, telecom service provider realizes only six paisa when the same network resource is consumed as data for OTT (app) communication services,” it added.

Airtel also said that apps like WhatsApp and Skype do not pay service tax, spectrum charge, and other charges such as electricity charge, tower rent, power bills etc., which are all paid by telecom operators.

The following are excerpts from Idea’s submissions on Net Neutrality to the TRAI.

The industry has evolved with voice as the main service. Hence, the base cost of the investment was largely allocated to voice business and voice pricing is a reflection of that cost. When data services came to India in a big way post the allocation of 3G spectrum in 2010, in the interest of growing data business, the data pricing was based on incremental cost of providing data services. Hence, the full cost of mobility services has been absorbed by the voice business and the data pricing is based on incremental cost principle only. This was workable in an environment where data traffic was a small proportion of the total business. However, with the growth of data traffic, the ability of the voice business to absorb the investments required for data business is constrained.

More importantly, with the advent of VOIP services riding free on Indian mobile operators expensive data network, the voice business which was absorbing most of the costs of telecom operators will no longer be able to do so. This will result in the following – a. Data prices will have to go up significantly from current levels just to maintain the existing revenue. The difference in customer revenue between a CS call and a VOIP call is quantified below, based on data given in para 2.37 of the consultation paper, for revenue from a VOIP call.

It is clear that if data pricing for all services (including VOIP) will be the same, then the current tariffs of Voice (75p / min), SMS (20p/SMS) and Data (25p/MB) will have to converge to anywhere between 108 p/MB to 250 p/ MB for data just to maintain the current revenue as shown above. This will have to be increased further to be able to cover the current deficit vis a vis cost of capital.

The industry is presently supporting rapid in growth in data penetration as the data prices are at affordable levels based on incremental costs. However, if there was only one service being data which will fulfil all requirements, then while the voice price per minute may come down, the rate for data will have to be increased multifold from current Rs.0.25/MB as explained above. This will hinder growth of data services in lower end strata of society and vision of

In summary, there is a need to maintain parity between current tariffs for voice services and VOIP services by allowing the telecom operators to charge differential tariff for data traffic for VOIP applications. If the decision is made to have the same data tariff for VOIP and other data applications, it will result in the current data tariffs increasing anywhere between 6 to 10 times from the current levels – detriment to the growth of non-VOIP data applications and the vision of a “Digital India.” broadband for all.

If VOIP service is allowed to spread without any regulation and control, then it would lead to exponential increase in data tariffs. We know that VOIP is not the main application of Internet. We all use internet for much more critical online services such as e-governance, email, medical, services, commerce, education, browsing, IT industry connectivity, social interactions, video services etc. Today and in future for introduction of Machine to Machine Services.

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