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COLUMN: Why Khullar’s VOIP comments are not fully correct

Rahul Khullar is IAS officer with an excellent reputation in Delhi circles. He’s reputed to be honest, frank (even blunt) and very efficient. But the TRAI chairman’s latest suggestions on Bharti Airtel’s separate-billing-for-VOIP data scheme do not paint a full picture of the situation.

In an FE interview, he seems to have made broadly two points – a) telecom players are ‘losing revenue’ due to applications such as instant messengers, and b) it can be rectified by imposing a license charge akin to what the operators are paying or termination charges.

rahul-khullar-trai-chairman

Let us examine the first point of revenue loss caused by data services.

Over the past two years, a proliferation of applications (called apps in telecom lingo) have enabled smartphone consumers to take advantage of the new data networks put in place by the operators using public property (spectrum).

The proliferation has been so fast that the demand for data has zoomed, and data today accounts for about 40% of the incremental revenue of Indian operators.

This heavy consumption of data is exactly what is allowing telecom operators to continue to grow 12-15% per year in a situation where voice growth is only about 5% year. For example, Airtel’s total voice traffic was up only 5% in the latest quarter compared to a year ago, while its total data traffic zoomed by 95% (or nearly doubled) in the same period.

Of course, operators keep saying that if WhatsApp and other messaging platforms were not there, it would be able to generate even more revenue from SMS.

Let us check this out using Airtel’s example.

For the three months from June to September this year, Airtel’s mobile data services generated revenue of Rs 1,805 crore. A year ago, data services generated 1,039 crore of revenue for Airtel.

In other words, over the past one year, higher consumption of data added Rs 766 crore to Airtel’s revenue.

Now let us see how much Airtel’s SMS and VAS suffered because of lower usage, and see if whether higher usage of data applications resulted in ‘revenue loss’.

In June-September 2014, SMS and VAS generated revenue of about Rs 672 crore. A year ago, the number was 740 crore.

So indeed, Airtel has suffered ‘revenue’ loss from lower usage of SMS and VAS services. But how much? And more importantly, has this ‘revenue loss’ actually led to a net ‘revenue gain’ because of increased data revenue?

The net revenue loss on VAS and SMS is only Rs 68 crore, while the revenue gained from data charges is Rs 766 crore. In other words, Airtel ‘lost’ 68 crore due to the proliferation of data applications, but gained much much more from data charges.

This does not look like a bad deal to us. This is certainly not a case of ‘revenue’ loss. If anything, proliferation of WhatsApp and Viber is actually doing a lot of good for Airtel and other operators.

Now let us take the second concern raised by TRAI chairman Rahul Khullar – that of a non-level playing field and the need for termination charges. Of course, there are two issues here.

Let’s take non-level playing field first.

From the Khullar interview: “OTT players (apps) would be brought under a licensing regime similar to mobile operators where an entry fee would have to be paid followed by revenue share licence fee as a percentage of adjusted gross revenue… ‘If the telecom players fall under a set of rules, then should not the OTT players be also brought under some kind of rules? Otherwise there would be a non-level playing field,’ he said.”

Now let us understand why telecom operators have to pay spectrum charges and license charges to the government. It is because they use ‘government’s’ spectrum. If they were not using government’s spectrum and other resources like numbering system, right of way etc.., they would only be paying service tax.

Apps don’t get any such privileges from the government, and are bound to pay only service tax on the service they render, just like most private businesses. If they are not directly given any special privileges like spectrum, number system, right of way etc, why should they pay these charges? Anyway, even if they are made to pay revenue share, how much revenue do you think Viber makes from India? Zero rupees.

Now let us take the second point – termination charge. What is a termination charge?

If customer A from Idea calls a customer B on Airtel, then the payment for the same is made by Customer A only. Customer B does not pay any money to Airtel for receiving the call. Incoming is free.

This is called ‘calling party pays’ system. In such a system, to compensate Airtel for completing the call, Idea is asked to pay to Airtel 20 paise from the call charge paid by ‘A’ to Idea. This is called termination charge. It is there to ensure that the money generated by Idea is equally split between Idea and Airtel.

Now imagine I am a data subscriber on Idea’s network. I make a Viber call to a data subscriber of Airtel’s network. In this case, when Airtel subscriber attends the call, he is charged by Airtel for doing so. Why? Because he has to pay data charges to attend the call.

Receiving a Viber call is not free. So Airtel already gets money for connecting the call in the form of data charges. Why should it again get more money from Idea? After all, the amount of data charges levied by Airtel and Idea will be same for that single call. If the caller uses 10 MB to make that call, the receiver will also use up roughly that much data. In both cases, they will pay the amount to their operators – Idea and Airtel.

Where does ‘termination’ charge come in this picture from? If termination charge is imposed, will Viber calls be made free for the receiver?

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