Trai's call drop fine questioned by Kotak Securities

The recent order of the Telecom Regulatory Authority of India (Trai) mandating telcos to compensate subscribers for call drops "is not in sync" with its Quality of Service (QoS) regulation since the compensation order "indirectly" mandates telcos to provide a "zero call drop" wireless network, says Kotak Securities.

The brokerage said the sector regulator's existing (QoS) regulation has "a below 2%" call drop benchmark in line with QoS regulations worldwide that strictly mandate a non-zero call drop regime.

Citing an instance of call drops happening even in sophisticated mobile networks in mature markets like the US, Kotak said, "We are not suggesting that operators be exempt from meeting any network quality standards, but a zero call drop wireless network is an impractical, even if noble/ideal construct".

The Mumbai-based brokerage also said Trai's order on compensating customers for call drops is not consistent with a telco's rollout obligations, which mandate 90% street level (not in-building) coverage in metros, and a much lower 50% in other areas.

This suggests "we have a situation where the operator is allowed 'no network patches' but has to pay a penalty if a moving customer moves into one of these patches while on a call, which reflects "policy inconsistency," the brokerage said.

Accordingly, Kotak feels Trai "needs to act in consumer interest, but without sacrificing policy consistency". Last October, the sector regulator had ordered mobile carriers to cough up Re 1 per dropped call with a cap of Rs 3 per day per subscriber in case a call drops because of fault in the telco's network.

In December, telecom industry associations had filed a case in the Delhi High Court challenging the regulator's directive, hearings for which are ongoing.

The brokerage is also against Trai's suggestion to the government to tweak airwave holding norms in the next auction by only keeping an overall cap and abolishing band-wise limits for the efficient 700 Mhz, 800 Mhz and 900 Mhz bands, arguing that such a move would "allow operators to monopolise" airwave holdings in a particular band.

At present, the government has capped the amount of spectrum an operator can hold at 50% in each band allocated and 25% of the total airwaves across bands in a service area. But Trai has proposed that all spectrum in the sub-1 GHz bands—700 Mhz, 800 Mhz and 900 Mhz—be treated as one for calculating the 50% cap, and limits not be applied to individual bands.

Kotak feels the proposed change of doing away with separate in-band caps for all sub-1 GHz bands and clubbing them together for applying a combined 50% cap, "would mean a single operator can (hypothetically) end up owning all the 700 MHz spectrum in the market or all the 900 Mhz plus 800 Mhz spectrum, or some such arrangement," enabling an operator to monopolise spectrum holdings in a particular band.

Recently, the Cellular Operators Association of India (COAI), the lobby body representing India's biggest carriers, including Bharti Airtel, Vodafone and Idea Cellular, had also argued that the intra-band cap was crucial to ensure that no operator cornered 100% spectrum in any particular band of say 800 Mhz or 900 Mhz.

In fact, the GSM lobby body has advocated an increase in the overall cap from the current 25% and sought retaining of the intra-band cap of 50%.