Business Today Net Special

Limited Mobility; Unlimited Woes?

Why cellular companies do not want the government to agree to basic services providers' plea that they be allowed to offer limited mobility.

By Ashutosh Kumar Sinha

Net Specials

At the Connaught Place office of the Cellular Operators Association of India (COAI), the lack of activity belies the undercurrent of tension running through the industry. But the cellular phone of COAI Executive Director T.V. Ramach- andran---TVR as he is popularly known---is ringing more frequently than it has in the recent past. As he lights a cigarette between two calls, TVR knows that there are troubled times ahead for the Indian cellular industry. If the plea of the basic telephone services operators for limited mobility is allowed, the industry's dreams of being at the vanguard of the telecom Indian telecom may just go up in smoke.

If the current turmoil in the cellular industry has to be understood in the proper perspective, a small, but significant, happening (it happened a year ago) has to be recounted. MTNL, the basic telephone service provider in Delhi and Mumbai, announced that it was offering 10,000 CDMA standard telephone services, which offered limited mobility, at Rs 1.40 for three minutes. The way the crowds lined up the MTNL office seemed to suggest that the offer was gratis. Such was the surge of crowds that police had to be called in to control the impatient crowd. So, will we see a repeat if the Telecom Regulatory Authority of India (TRAI) permits limited mobility for basic telephone operators?

What is the dispute?

Basic telephone service providers, who are using the CDMA standard wireless in local loop (WLL) technology to roll out their network faster, are demanding that their subscribers be allowed limited mobility. GSM standard cellular service providers claim that there is nothing like limited mobility, and hence, this should not be permitted as it encroaches on their turf. Obviously, the largest cellular companies, Bharti and BPL, stand to lose the most.

Argues Sunil Mittal, CMD, Bharti Enterprises, which operates in four cellular circles: ''We think the impression that has been given is that we are opposed to the technology. That is not correct. The issue is regulatory.''

The cellular industry's fear stems from the fact that MTNL is offering its service at Rs.1.20 for three minutes whereas the peak rate for cellular services at present is Rs.4 per minute. While the quality of voice on the CDMA network leaves much to be desired, a number of low-end consumers may prefer CDMA, which will negatively affect cash flows for cellular companies. Says lawyer Ramji Srinivasan, who advises several telecom companies: ''I would be happy as a consumer if I had a choice both in terms of cost and quality.''

But cellular operators are demanding that the CDMA service be treated as a cellular service and that basic telephony service providers pay the same license that cellular service providers did before being allowed to offer limited mobility. Says Jayant Kumar, MD, BPL Cellular Limited, which operates services in four circles and has already paid Rs 860 crore as license fees: ''If the level playing field is not maintained, the cellular industry will be decimated.'' Adds Mittal: ''If there is no entry fee, it will be injurious to GSM service providers.''

Will CDMA really decimate GSM?

It is difficult to believe so: most service providers are seeing the volume of data on their networks increasing. Hence, revenues from voice will only decrease in the future. Says Atul Chopra, MD, Asia Pacific Capital, a boutique investment bank: ''CDMA cannot provide data service or any other value-added service; it has to be a primarily voice service. The cellular operators will, therefore, do well to focus on services other than merely voice.'' In other words, GSM service providers should be concentrating on business customers rather than the home user.

Further, as Srinivasan points out, CDMA services cannot provide roaming and other similar services which have been the cash cows for GSM service providers. Even MTNL's CDMA experiment in Delhi has not been one to write home about. The monolith has received more than its fair share of complaints regarding the quality of service. K.H. Khan, MTNL, CGM Delhi, accepts this but claims that with just five cell sites till now, 'mobility' was not smooth. ''We are shortly going to increase the number of sites to 30, and expand our customer base to 30,000 customers,'' says Khan.

GSM service providers are beginning to fight back too. They are preparing to offer fixed-line services while keeping the subscriber fixed within the a particular cell area. When the subscriber moves out of that cell area, he can be charged for mobility. TRAI is already considering allowing this. Says BPL's Kumar, ''We are experimenting with providing fixed-line wireless service to subscribers.''

Still, with TRAI's clearance and the ten-fold difference in tariffs, CDMA seems to have fit snugly into the space between the basic and the GSM services much to the delight of some customers.

Additional Reporting by Suveen Sinha

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