Cellular Call Drops: Nuisance or Symptom of a Larger Problem?

The Telecom Regulatory Authority of India (TRAI) has recently released a consultation paper (pdf) on how customers should be compensated for cellular call drops. It is indeed a bit embarrassing for the Indian telecom industry that this has become such a major public interest issue. Customer experience on most mobile networks has worsened considerably in the recent past. Not only do the dropped calls cause tremendous inconvenience and loss of business productivity, they are also a financial burden to the customers.

It was not always like this. Indeed, our nation has to be proud of this rapid growth, from almost nothing in 2000 to almost a billion subscriptions in 2015. In just two decades, mobile telephony has become inseparable from every person’s daily life. What was once conceived as a luxury at price-points affordable only to very few people is now ubiquitous; today, more Indians have access to a cellular network (95% population) than they have to a utility like electricity (79%). 

Underlying this success story, however, is the unsavoury reality of an industry that has been plagued by cartelization, political scams and regulatory uncertainty. What should have been a sunrise sector stands as a shining example of crony capitalism, particularly in the past decade. Even though it appears that the Indian telecom industry is highly competitive, the truth is that incumbents have regularly prevented true competition from emerging. If it was the Government-owned BSNL that misused its fixed line incumbency to hurt the prospects of broadband in India, then it is the private operators that created and used policy uncertainty to prevent high quality competition in mobile. 

Coming back to the issue of call drops, invariably, every stakeholder complains that the other is to blame.

If indeed blame is to be apportioned, in my opinion, the mobile operators have to take primary responsibility. The TRAI consultation paper shows that operators have not made adequate investments to support the growing traffic. In fact, it has been said that most of the leading mobile operators have spent so much money acquiring spectrum rights that they have none left to build out the networks to effectively use the spectrum. During 2013-14, as per TRAI assessment, operators invested only Rs 9,325 crores in network equipment; in the same year, the industry invested Rs 61,162 crores in spectrum. Between 2012 and 2015, the mobile operators bid Rs 181,656 crores for spectrum, an amount close to the entire network gross block of the industry. This is over and above the Rs 37,000 crore one-time fee that the DoT has demanded from the operators (subject to the outcome of court cases) for holding excess spectrum in the past.

Mobile operators complain that spectrum prices are too high in India. Of course, the government policy of releasing small chunks of scarce spectrum at irregular intervals and setting high reserve prices is faulty. But that has not prevented mobile operators from bidding huge, unviable amounts to corner that spectrum even if it has come at the cost of required investments in network expansion. Indeed, there are now demands that spectrum in 700MHz be released by the government for which there would presumably be a mad rush. Some industry insiders say that the leading operators would rather wait to invest in building networks in the more efficient 700 MHz spectrum than in 1800 and 2100 MHz. Naturally that begs the question why so much money was spent in acquiring the latter spectrum.

There can be no denying that a lot of spectrum in India remains underutilized by the defence and other government bodies. But it is also true that private mobile operators have been extremely inefficient in using the spectrum for which they have paid huge amounts. A recent audit by the Department of Telecommunications (DoT) has reportedly  shown that better optimization of the network could result in dramatic improvements in quality of service. It has also been found that operators have set aside spectrum for data capacity expansion at the expense of their voice quality. And then we have the spectacular case of spectrum inefficiency: an operator who acquired 20MHz of pan-India spectrum in 2010 for Rs 12840 crore has not launched services even five years later.

An additional issue that has prevented network roll-out, at least in some cases, is that of permissions for tower infrastructure. Recent push-back amongst municipal authorities in permitting cell-sites in dense urban locations coupled with unnecessary and unscientific scare-mongering about the impact of radiation have added to the problem. The government needs to create certain national guidelines for critical infrastructure like cell-sites and fiber networks. The ambitions of a Digital India cannot be held ransom to by local municipalities, building societies and activists.

 

The suggestion in the TRAI consultation paper that operators should not charge for calls that are dropped is welcome: why should customers pay for a service that they did not receive? Unfortunately, the devil would be in the detail of its implementation. Envisage a scenario of a customer of Operator A calling the customer of Operator B and the call drops in the 50th second of a minute; how is it established which operator dropped the call? Should both operators not charge for that minute, in which case the more efficient operator would lose revenue due to the failure of the other? How do customers keep track of this? TRAI should provide clarification on the mechanisms for not charging and compensating customers for call drops.

The most important action, however, that the DoT and TRAI must take is to examine the real causes for the deterioration of voice networks in India by doing an actual technical audit of all the mobile networks. Instead of being pressured into giving out more spectrum to those who are seeking to corner it, they must ensure effective utilization of spectrum that has already been allocated. If commensurate capital expenditure in network expansion does not follow spectrum acquisition, then a question must be raised about the underlying strategic logic of such investment. Further, the TRAI must study if a few players are blocking effective competition by pricing spectrum out of reach of the others. Do customers really have competitive choice in terms of enough differences in service offerings, quality and prices between various operators? Are call-drops just a symptom of a bigger structural problem in the Indian telecom industry?


(Disclosure: I was associated very closely with the Tata group's telecom business for many years. I continue to remain engaged in advisory services (mostly, teaching/training) with the Tata group telecom companies and other mobile/tech companies.