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Quality Matters: Operators struggle to balance profitability and service standards

April 30, 2015
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Telecom service has been recognised as an important tool for the socio-economic development of a country. It is the prime support service needed for rapid growth and modernisation of the various sectors of the economy. The Indian telecommunications sector has been instrumental in driving the country’s growth. However, as India takes steps towards achieving the Digital India vision, the constantly deteriorating quality of service (QoS) delivered by telecom operators is emerging as a major roadblock.

While the Telecom Regulatory Authority of India (TRAI) has laid down standards for QoS for basic telephone services (wireline), cellular services and data services, compliance with these standards is still rather poor. The Ministry of Communications and IT recently asked telecom operators to improve their QoS, after consumers raised concerns regarding call drops and other quality-related parameters. Frequent call drops and slow broadband connectivity are two key concerns raised by consumers in recent times. While the ministry is of the view that adequate spectrum is available for telecom operators to improve their services, operators contest that it is becoming increasingly difficult to acquire new cell sites, which is essential for improving coverage.

TRAI has been pursuing operators to comply with the prescribed QoS parameters by imposing financial disincentives for failing to do so. According to TRAI, despite a drop in the percentage of non-compliance cases, there have been several cases of non-compliance with standards on the part of operators. For instance, as per the performance monitoring report for the quarter ended December 2014, Aircel failed to meet the QoS benchmark in 18 service areas, Bharat Sanchar Nigam Limited in five and Vodafone in two service areas. This implies that the current financial disincentives have not acted as an effective deterrent against non-compliance.

Regulating QoS

TRAI laid down QoS standards for basic telephone services (wireline) and cellular mobile telephone services in March 2009. These guidelines were amended to include QoS benchmarks for 3G services in May 2012, and financial disincentives for non-compliance became effective through amendments made in November 2012. These rules made operators liable to penalties, not only for non-compliance but also for delays in the submission of compliance reports and misreporting of performance. According to TRAI, compliance with the benchmarks for parameters related to fault incidences, fault repair and response time to the customer for assistance have been the major problem areas. Given the general view of the industry that adherence to these parameters is sometimes influenced by factors beyond the control of operators, TRAI decided to rationalise certain benchmarks in August 2014. This was done in order to strike a balance between resolving the problem faced by service providers and ensuring better QoS. For instance, the regulator revised the number of fault incidences from less than 5 per cent per 100 subscribers per month to less than 7 per cent per 100 subscribers per month. It also revised the parameter for resolving billing complaints from 100 per cent within four weeks to more than 98 per cent within four weeks, and 100 per cent within eight weeks.

While these moves seek to ease the compliance regime for operators, TRAI’s latest draft regulation for QoS standards has sought to levy a much higher penalty for non-adherence to standards. The draft amendments circulated among the stakeholders propose to levy a fine of Rs 50,000 per parameter for the first contravention; up to Rs 100,000 for the second contravention for the same parameter; up to Rs 150,000 for the third contravention; and up to Rs 200,000 for the fourth or subsequent contraventions. The regulations are expected serve as deterrents to false or delayed reporting of benchmarks. However, financial disincentives have not proved to be an effective deterrent. One reason for this could be that the penalty amount is insignificant compared to the size of the operations of the telecom service providers.

However, it would be unjustified to consider this to be the result of a serious lack of commitment or initiative on the part of the service providers to improve the QoS. As stated by state-run telecom operator Mahanagar Telephone Nigam Limited, in its response to TRAI’s draft fourth amendment to QoS standards for wireline and wireless services, operators are finding it increasingly difficult to maintain old sites as well as acquire new sites for expansion. This can be partially attributed to the public anxiety over the effects of radiation from telecom towers. Given the substantial investments made by them for acquiring spectrum, it is in the interest of operators to improve their radio frequency coverage and deliver better services. However, their efforts are being restricted by local authorities, including local courts, which are issuing various instructions for setting up towers.

As operators add more subscribers on their networks, the limited spectrum that they possess leads to network overloads. Further, factors like the growth in data subscribers driven by the greater adoption of cloud and 3G services, the increasing popularity of social networking and video calling, and the emergence of the internet of things are forcing operators to improve their infrastructure and technologies. Traditionally, operators considered network coverage and voice quality to be important differentiators in terms of delivering quality service to their users. However, customers have now started recognising the quality aspect of mobile internet as a significant factor in choosing an operator. In order to retain their competitive edge in the telecom market, companies are making capital expenditure on establishing differentiated infrastructure. Thus, operators have to spend a significant amount on acquiring spectrum, as well as on new technologies and other inputs. This is making it difficult for operators to strike a balance between making a viable business case for offering mobile services while maintaining the benchmark QoS. Such a situation cannot be resolved by imposing higher financial penalties on operators. Further, the amount collected from such penalties is not being used to compensate the end-consumers.

Conclusion

India is among the few countries that measure QoS across all kinds of telecom services and publish the data on a quarterly basis. However, the compliance regime in the country is not very effective. In order to make financial disincentives effectual, high penalties should be imposed for serious failures. At the same time, operators should be rewarded for performance improvements.

However, going forward, QoS is likely to be driven by market forces rather than further financial disincentives. It is an acknowledged fact that the purchasing decisions of consumers are driven by both price and quality of the service or product. In the Indian telecom market, prices do not vary much among operators; therefore, QoS becomes the key differentiator. In a highly competitive telecom market like India, where customers have the freedom to switch to any network of their choice, it is imperative for service providers to regularly monitor their networks and customer services in order to ensure better QoS than their competitors. Moreover, operators themselves are under pressure to maintain their QoS standards in order to retain their existing customers as well as acquire new ones.

 
 
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