Drop in cost puts telcos on path of recasting business strategy

How much data does a voice call of 400 minutes, the average monthly usage per subscriber in the country, consume? Well, it is only 40 MB (megabytes). And telcos have to fork out only Rs 2.50 for that.

That explains why the Telecom Regulatory Authority of India (Trai) on Wednesday asked telcos to bring down their voice call costs to the level of over-the-top (OTT) applications, such as WhatsApp. 

The dramatic drop in voice call rates has been possible because of new technology — the shift of telcos from circuit switches to packet switching-based networks enabled with voice over LTE (VoLTE). And this new change is forcing telcos to rework their business strategy, in which the bulk of the revenues would come from voice calls.

Circuit-switching technology is not efficient for voice calls because it blocks network resources even when the line is held unused (parties have paused during talking), points out Parag Kar, vice-president, Qualcomm India. 

In packet switch, calls free up resources dynamically for other users, thereby significantly increasing network efficiency. 

The clear implication is that as the cost of offering voice calls reduces, telcos will find it easy to offer it for free, which is what Reliance Jio has done.

Its competitors are following suit. Bharti Airtel, which just launched VoLTE services in Mumbai, expects to go countrywide by March next year. Analysts estimate that Vodafone and Idea, which will merge, are about six months behind Bharti and hence by the end of 2018 Jio will not have any advantage in terms of being able to offer voice free. 

Experts also argue that once this happens, the controversial issue of termination charges (which Trai has reduced from 14 paise to 6 paise a call) will become irrelevant as costs come down to virtually nothing.

However, this also means that telco revenues will soon come from mainly higher usage of data. 

Most analysts agree that the usage of voice tends to stabilise because consumers do not necessarily increase their duration of talktime, and the country has reached that stage. Also if telcos do not move to VoLTE, they will lose market share not only to Jio but also to OTT operators, which are seeing their usage go up. 

Experts say the data required to be used by the customer on these services are about double that of telcos with 4G networks and VoLTE, which is minimal compared to the 30 paise per minute, on average, he pays now.

Advances in technology are also making possible higher usage of data at the same price. Eighteen months ago, it might have required 3 GB to see a three-hour movie on the 3G network. Currently one requires only half that on the 4G network, at around Rs 6. And you can make a Facebook video call for an hour, say experts, at a mere 0.5 GB, based on prices charged by Jio, and it will cost you merely Rs 2.50.

On talking terms

• 400 minutes of usage per month — the average per individual — requires 40 MB on LTE networks. The trend is that usage will not go up substantially

• The cost of offering 400 minutes is a mere Rs 2.50. So it can offer voice free

• As a consumer you can make a video call on Facebook for Rs 2.50 anywhere in the world

• Because it requires only 1.5 GB, you can see a three-hour-long HD movie by paying only Rs 6