More talk on intra-SAARC talk

Posted on October 15, 2008  /  0 Comments

The South Asian Telecom Regulators Council (SATRC) met in New Delhi 12-14 October 2008 and discussed among other things, the implementation of the SAARC Declaration commitment on reducing intra-SAARC voice telephony call charges.

This is the policy memo we sent to all the SAARC regulatory agencies immediately after the SAARC Summit:

Options for lowering intra-SAARC international voice telephony tariffs

The South Asian Association for Regional Cooperation (SAARC) was created in 1985 to foster regional and economic cooperation within South Asia. It has made several attempts to improve connectivity within the region by actions including the lowering of telecommunication prices among member countries, but has met with little success so far.

In its most recent effort to reduce international call tariffs within the region, the Colombo Declaration of the 15th SAARC Summit (August 2008) points out in paragraph 6 that “an effective and economical regional tele-communication regime is an essential factor of connectivity, encouraging the growth of people-centric partnerships.” The Declaration stresses “the need for the Member States to endeavour to move towards a uniformly applicable low tariff, for international direct dial calls within the region.”

A recent study on international call rates among the members of SAARC and the rest of the world shows that in most countries, calls to distant destinations (for example: US, UK, and Canada) are significantly cheaper than calls within the region. India, Pakistan and Sri Lanka have the lowest international prices, but not for SAARC destinations. Only Nepal’s published rates to member countries are significantly lower than to non-member countries, while published rates from Afghanistan and Bangladesh are lower (not significantly) for Asia, including SAARC, than the rates to distant destinations.

Why are international call rates high?
The cost of an international call is made up of three components: (a) cost from caller to international exchange; (b) cost of hauling the call from the international exchange of Country A (for example, from Sri Lanka) to a destination exchange in Country B (for example, to India); and (c) cost of terminating the call, i.e., cost of hauling the call from destination country’s international exchange to the recipient’s phone. While (a) is the cost of a local call (declining), and (b) is rapidly declining, especially on heavy-traffic routes, (c) is usually a monopolistically set price. The biggest factor influencing the cost of international calls is, therefore, the termination charge (c). Competition is also a key determinant. If there is little/no competition in the international-outgoing-call market, operators may maintain high margins even if termination charges are reduced.

Options for reducing international call prices
• Option 1
Order that all incoming international calls be charged the same termination charges as domestic calls.

• Option 2
What matters is that calls to SAARC countries should cost less than calls outside the SAARC. The regulatory authority should simply issue a rule that per-minute tariffs for international calls to SAARC destinations (peak/off-peak) must be equal to or lower than tariffs to non-SAARC destinations. It need not get involved in how an operator achieves this.

If this is to be achieved on a sustainable basis (i.e., cost is below the retail price), it will be necessary for the operators to negotiate lower termination rates from their SAARC counterparts. If an operator provides evidence that the refusal of one or more SAARC operators to reduce termination charges to the necessary levels is making it impossible to reduce retail prices, that operator should be given a time-bound waiver from the rule. During that period, the relevant regulatory authority, with the assistance of the Foreign/External Affairs Ministry as required, should initiate discussions with the counterpart regulatory authority with jurisdiction over the offending operator on reducing the termination charges in order to implement SAARC policy. In the unlikely event that this proves impossible, the exemption should be extended and the matter referred to the SAARC Secretariat.

• Option 3
Each regulatory authority within the SAARC should issue an information request to all the operators authorized to provide international voice calls to supply detailed information on a per-minute basis of termination charges paid to all operators in all countries and all termination charges levied on incoming calls. Based on this information, the regulatory authority can ensure that operators in SAARC countries are offered termination charges as low as any that are on offer. The regulatory authority in each country can then ensure that retail prices of calls to SAARC countries are the lowest on offer.

Comparative assessment
Option 1 is a simple proposal that can be implemented quickly, but it is likely to be resisted at the outset by the operators and by those who believe in maximizing foreign-exchange earnings from international calls. It will, for example, not be consistent with Bangladesh’s current international telephone policy. It is fully GATS compliant and has the advantage of ending the international bypass problem and shutting down the attendant inflow of black money.

Option 2 is superior to Option 3 because it is less intrusive and focuses on the desired end result, leaving the method by which it is achieved to the operators. Option 2 can be implemented very quickly. Option 3 will take a lot of doing because even in government-owned monopoly times, it was difficult to extract information on termination charges. It cannot achieve results quickly.

Achieving lower call rates within SAARC will have several positive outcomes: a) promoting the welfare of the people of South Asia by facilitating affordable communication, b) fostering business and economic partnerships within SAARC, c) building trust and understanding among the citizens of SAARC countries, and d) giving credibility to SAARC as a regional body capable of furthering regional and economic growth. Now that the resolution has been adopted, it is imperative that quick and action to be taken to implement it, yielding benefits to all stakeholders and improving the credibility of SAARC.

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