Telecom tariff hike will hurt millions

Telecom wars and unfettered competition thus far had benefitted over a billion mobile and data users. Now, these consumers, mostly at the lowest end, have to fork out more for these services. The telecom oligopoly comprising Reliance Jio, Vodafone India and Bharti Airtel have come together to hike tariffs by up to 50%, apparently nudged into doing so by the government itself. In the short-term at least, the telecom players as well as the Modi government stand to benefit from the tariff hikes as they will translate into better revenues for the companies and larger tax revenues for a severely revenue-strapped Centre, and perhaps even timely loan repayments for banks so long as the additional revenues are not diverted elsewhere by the telecom companies.

But what about the consumers? Together, they will shell out about Rs 10,000 crore more to the three companies following the tariff hikes. Reliance Jio will take the largest chunk of that at an estimated Rs 3,900 crore, while Airtel and Vodafone-Idea will gain by Rs 2,400 crore and Rs 2,100 crore in additional revenues annually. The tariff hikes come close on the heels of the government giving the companies relief by allowing them to defer paying spectrum and inter-connect charges by two years. The opposition Congress has charged that all this translates into a Rs 36,000-crore bonanza for the telecom players.

The end of competition amongst the telecom players does not augur well for the industry, the consumer and the economy. Price cartels are anathema to free markets and must not be allowed to form. Since the State-run BSNL and MTNL have been systematically destroyed to promote the private telecom industry, the government has lost its lever to regulate price surges such as those witnessed in 2007 and 2013. Will the telecom companies stop at just one coordinated tariff hike? The current hike may only be a springboard for the three companies to exploit telecom and data users in the future with more hikes. The telecom industry must sustain itself and make profits by innovating and foraying into new revenue streams, including net-based offerings, cloud computing and the Internet of Things. In essence, they should be looking at structurally transforming themselves into integrated technology companies. Instead, they have fallen on the idea of burdening hundreds of millions of low-end customers to earn higher revenues. Justifying the tariff hikes, as some quarters have done, by comparing telecom tariffs in India with those in the advanced economies of the US and Europe is untenable. Let’s not lose sight of the fact that India is a low-income economy that cannot sustain high consumer tariffs.