Friday, October 09, 2009

Impact of the One Second Tariff in India

Yet another instance of a revolutionary feature introduced by a market laggard to leap ahead of competition forces TRAI (Telecom and Regulatory Authority of India) to think of mandating the feature across cellular service providers. Tata DoCoMo garnered a big chunk of subscribers by offering the one-second mobile tariff plan. And heavens opened up. Idea, BSNL, MTS followed suit. Bharti  Airtel said a no-no. Reliance entered the fresh season of price wars by announcing alternate schemes.

All this leaves TRAI mulling on making the One Second Tariff mandatory. Looking at this from two perspectives

Customer Perspective

  1. Welcome ChangeThe customer was suffering under the 1 min pulse plan where on an average 20-25 seconds of unused airtime was being paid for by the customer for every call. With the 1 second tariff, the customer pays 1 paise per second that translates to a lot of rupees saved for heavy usage customers over a period of time.
  2. Accelerate Mobile Connectivity in India – A greater section of the society for whom owning a mobile was still a borderline dream will now come under the throes of the mobile revolution.

Service Provider Perspective

  1. Negatively affects the ARPU (Average Revenue Per User). In a country where the average ARPU is one of the lowest in the world (about $7 per month per user), this will put additional pressure on the players and might even lead a fresh round of consolidation among the players.
  2. Tougher Entry Barrier – Mandating the one-second tariff also means that TRAI might be erecting an inadvertent barrier to the entry of new players. The need to work with a lower ARPU and garner a huge subscriber base without any real differentiator in offerings is a tough job

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