Are operators fleecing you on SMS

Fifteen years ago when mobile phone services were launched in the country, operators used to charge Rs 16 per minute for phone calls and Re 1 for every SMS sent. Over the years as competition increased and as costs went down mobile tariffs for voice calls kept falling. Voice calls can now be made for as less as half a paise a second making it the lowest tariffs in the world. However, despite so much competition in the mobile market, SMS still continues to be charged at Re 1.

This can happen only if for some reason the cost of sending an SMS has not changed over the years. But is that the case? Mobile network comprises of various components such as routers, switches, radio antennae, core and signalling. Operators spend billions of dollars to set up this infrastructure and charging consumers is the only means to recover the cost. In the case of a voice call, the entire mobile network is activated from the time a user presses the green button on the handset till the conversation ends. However when you send an SMS, only the signalling part of the network is utilised. Logically, the cost of sending an SMS should be just a fraction lower than transmitting a voice call.

According to data submitted by a leading mobile operator to the Telecom Regulatory Authority of India, the cost of sending an SMS is just one-fifty sixth of the cost incurred for carrying a phone call. This means that if operators can offer voice calls at an average of 50 paise a minute, SMS should actually be free.

A standard SMS message comprises of 160 characters which is just about a tenth of a kilobyte. With a tenth of a kilobyte you could fit 1/4000th of a song on it, which is simply nothing. Operators, therefore, assign only limited bandwidth on the signalling channels that carry SMS. That's why in a situation of massive usage of texting which happens on Diwali and New Year's eve, the control channel gets saturated.

Professor Srinivasan Keshav at the University of Waterloo in Ontario showed in a paper that wireless channels contribute about a tenth of a cent to a carrier's cost, that accounting charges might be twice that and that other costs basically round to zero because texting requires so little of a mobile network's infrastructure.

Keshav concludes that a text message doesn't cost providers more than 0.3 cent

So why are operators charging you Re 1 when the actual cost is close to zero? That's because mobile operators in India earn close to 8 per cent of their revenues from SMS. On an average mobile subscribers send 45 SMS each month according to the Trai. That's a whopping 40.5 billion messages a month considering there are 900 million mobile connections.

You don't have to be a rocket scientist to do the math and realise that operators do not want to give up on a service which gives them near 100 per cent profits, not at any rate when subscribers are willing to pay. This is the reason why mobile operators are able to offer SMS at 1-10 paisa to telemarketers and still make profits. This is also why operators are able to offer you schemes wherein you get to send unlimited short messages for an additional charge of Rs 50 a month. While you think that you have landed a great deal, the service provider is laughing all the way to the bank.

Telecom operators have so far been able to get away with this because mobile tariffs are under forbearance, i.e. not regulated. The telecom regulator recently floated a paper seeking to undertake a review of this policy. While operators are up in arms against any regulatory intervention, perhaps it should look into the SMS pricing, which despite competition, has not changed over the last decade.

Why not have a business class in telecom customer care?

Almost every day I hear sob stories from my colleagues, friends, family and readers about how their phones aren't working or how their operator has overcharged them for services they haven't even used.

While the nature of complaints differ, sadly, all of them have one thing in common – “Calling customer care doesn't help. They don't understand the problem.” As someone covering the telecom sector, I have brought some genuine complaints to the notice of various telecom companies. And voila, problems which could not be resolved by customer care for weeks and months get resolved within a matter of hours.

But why is it that the operator is able to resolve customers' problems when a special request is made, while regular complaints remain unnoticed?

I asked a source working in a telecom company how he is able to resolve ‘priority' user issues in a jiffy. He said he flags all ‘priority' complaints as important and urgent which then get dealt with instantly by dedicated teams. This privilege, I am told, is given on request to big politicians, high ranking bureaucrats and a few journalists. But why restrict this to a chosen few, why not deal with all consumers problems with the same promptness and willingness?

The problem is that telecom companies in India work on thin margins and therefore, can allocate only limited resources in a bid to manage costs. There are over 900 million telephone connections in the country but operators get only about Rs 50-100 from nearly 85 per cent of these connections. It's the remaining 15 per cent which really bring in the big bucks. As a result, customer care operations of most companies are struggling to put enough resources together to meet the demands of the huge subscriber base. Airtel, for example, has 180 million mobile subscribers but only 7,500 customer care agents manning call centres across the country.

Therefore, it is no surprise that 16.8 per cent of all complaints registered by the National Consumer Helpline, set up by the Ministry of Consumer Affairs in 2010-11, were related to telecom services. In comparison, complaints related to sectors such as banking, insurance and automobiles were less than 5 per cent of the total. This fiscal has not been any better. The Department of Telecom has already received 41,341 consumer complaints against telecom operators in the seven months to October 31. The actual scale is much larger because the majority of complaints are not registered with any Government agencies.

One way out of this mess is to look at how other services industries such as aviation and hotels deal with their customers. When you book a flight ticket or a hotel room you are given the option to decide what type of service you want. For instance, flight seats are allocated according to class. Those paying higher fares for executive class or business class get the best facilities, in terms of access to lounge areas at airports, special check-in counters, bigger comfortable seats and an unlimited supply of drinks. Those who opt for economy class seats board the flight knowing that there will be lesser leg room. Similarly, when you check into a five-star hotel, you have the option of picking a luxury suite which comes with king size bed, personal Jacuzzi and with the best view or you can settle for an ordinary no frills room.

Telecom operators could take a leaf out of the airline and hotel industry page and should also categorise their consumers depending on usage. A high paying customer, who spends more than Rs 1,000 a month, should be entitled to a higher grade customer service. I am not suggesting that those who pay Rs 50 should be given a shoddy treatment. After all, the customer who stays in an ordinary suite is still given basic services by the hotel. But by offering graded customer care two things will happen. Firstly, it will help operators retain the high paying subscribers. Secondly, acustomer will be empowered to choose for himself the kind of service he wants and hence it will act as an incentive to the low paying subscriber to start using more to upgrade himself to the next level. Technology is already available which can enable telecom companies to set up such a system; it is only a question of when.

The real story behind MNP numbers

Recently, the TRAI shot off a notice to cellular operators including Airtel for failing to implement mobile number portability properly. The action against the operators was initiated because the regulator's investigation revealed that number portability was not taking off due to bottlenecks created by the operators thus blocking users from shifting over to rival players. A look at the reported numbers seems to indicate that the TRAI has got it right. A year since the service was first launched, only 23 million porting requests have been reported. Of these, only about 19 million requests have actually been carried out while the remaining 4 million requests have been rejected by the operator on various grounds, some of which are highly questionable. Considering that there were 881 million wireless subscribers as on October 31, the total reported porting request is just fewer than 3 per cent of the total user base. This seems to be far short of the TRAI's own estimates of 10 per cent in the first year. Hence many have already written off MNP.But numbers that are not in the public domain reveal a different story. Data tracked by MNP operators reveal that nearly 60 per cent of the porting requests made by subscribers never get reported, and hence do not reflect in the system. This is because the moment a subscriber sends in a request for the unique porting code, the operator begins taking steps to retain him by offering freebies, extra talk time and reduced call rates. Once the subscriber agrees, the operator does not forward his request to the MNP registry and therefore this does not get reported. So, in reality, there are 34.5 million more consumers than reported, who sent in their request for porting. This means that if the actual number of subscribers who want to change their telecom operator are accounted for, the total porting request will be about 6.5 per cent of the subscriber base, much closer to the TRAI estimate.

While the TRAI should investigate how to reflect the complete picture in reported numbers, this highlights another important point beyond the statistics. Apart from giving the consumers more choice, one of the other key objectives of introducing MNP was to get operators to be more competitive and offer better services to customers. If 60 per cent of subscribers who thought about shifting to another operator ended up changing their decision because their service provider took proactive steps to retain them, then one could say MNP has actually succeeded.