Airtel's decision to charge extra for VoIP data arises from its conflict of interest. Its *Phone* business is suffering due to its *Data* business, and so it's tempted to make up the difference by charging us for what it has no right to charge us for. How about we split it up into 2 companies instead. Let the *Phone* Airtel be a separate business from the *Data* Airtel. Problem solved! <br></br>
creative commons licensed (BY-NC) flickr photo by Artiii: http://flickr.com/photos/artisandhu/3795482706

Airtel's decision to charge extra for VoIP data arises from its conflict of interest. Its *Phone* business is suffering due to its *Data* business, and so it's tempted to make up the difference by charging us for what it has no right to charge us for. How about we split it up into 2 companies instead. Let the *Phone* Airtel be a separate business from the *Data* Airtel. Problem solved!

creative commons licensed (BY-NC) flickr photo by Artiii: http://flickr.com/photos/artisandhu/3795482706

VoIP Charges – Time to Split Airtel into 2 Companies?

Airtel’s decision to charge extra for VoIP data compared to others is clearly anti competitive. When Airtel sells us a data package, we are paying for just that – data. Bits and bytes. Bandwidth. That is what Airtel sells, and that is what we use. To make us pay extra depending on how we use that data is illegal. Like your electricity company charging you double the rate for power consumed by televisions compared to that used by other appliances.

Now Airtel and their supporters are claiming that they need to cover their costs. But what costs? If they are talking about the costs for providing data services, then that’s already taken care of because Airtel anyway charges us based on bandwidth used. There are no other operating costs for them other than providing bandwidth. So applications like Youtube are already more “expensive” for us since they swallow more data.

Split Airtel into two companies. Let’s call them “Phone” Airtel and “Data” Airtel.

No, what they mean by “covering their costs” is that their voice business will be hurt by VoIP. But wait a minute – that is a completely different service altogether! It just so happens that Airtel provides voice calling services along with data services. But just because they do both does not give them the right to unfairly charge one product to subsidize the other.

On close inspection, this dual business is the cause for the conflict of interest. Airtel is afraid that one product will cannibalize the other, and so it is deliberately crippling data to prop up voice. From their point of view, charging extra for VoIP data compared to other bits is perfectly natural.

Apart from implementing strong net neutrality laws, there is another alternative. To split Airtel into two companies. Let’s call them “Phone” Airtel and “Data” Airtel. Each will have its own operations, profit and loss accounts, and assets. Structuring things this way will cut the rug from all ridiculous practices like charging extra for VoIP. “Data” Airtel will have no reason to charge extra for VoIP since the profits and losses of “Phone” Airtel are irrelevant to its business model.

“Phone” Airtel on the other hand, will just have to learn to compete with VoIP on an even footing. Let the market decide which is better – regular phone calls, or VoIP. And if “Phone” Airtel loses business to VoIP, well…that’s too bad. You cannot continue to run the same business when a new technology provides a superior product.

As for the towers, Internet equipment etc, let “Data” Airtel simply lease them from “Phone” Airtel. In fact, we’ll take things one step further. Make it mandatory for “Phone” Airtel to lease its infrastructure to anyone on the same terms. This will have an immediate impact on the data market and introduce dozens of new players all with an even playing field.

Now, that’s a free market!

What do you think of this post?
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  • You're an asshole (3)

Comments

  1. I think Airtel is just trying to be too-smart for people who can’t see it. We don’t like it, because as consumers we don’t want to pay more. They can charge whatever they want, as long as they are upfront about it. They can have as many stupid rules as they choose to have. That is free-market.

    Two things can happen (a.) Consumers who use Data for VOIP will shift to other providers, especially pure-data players (just like you suggested), and both Airtel-voice & data’s share will be eaten into by another company… Or
    (b.) Other players will follow-suit to try some similar back-hand way of increasing charges to cash in on this new route., which way there is a new equilibrium..

    Unless there is a regulation from TRAI to this effect, I don’t see a reason to worry.

    Reply

    • In reply to Murali

      Actually, I don’t think this is a free market. Huge barriers to entry, use of common public property, natural monopolies… None of this fits the criteria for free markets that I learned in economics class in my MBA.

      If there were dozens and dozens of providers not acting in concert, this wouldn’t bother me. However, it’s widely expected that other companies will follow suit. And THAT would never happen in a free market. Cartel like behavior is almost unheard of, and is a usual outgrowth of more competition.

      Reply

      • In reply to bhagwad

        If we don’t get caught up in the macro-scenario of all licensing (which no doubt is another topic), I doubt if this case falls into any category…
        Barriers to entry – The question is, is it due to regulation or cost of technology/setup etc?
        Use of Common Public Property – Is it distributed fairly or unfairly?
        Natural Monopolies – This definitely is not.

        BTW, Such areas of business that need huge technological expertise and connectivity will rarely have dozens of providers for same service.

        While I agree that the regulation in India isn’t that fair, this particular case is far from cartel. One good competitor is enough, and in each circle Airtel faces many hungry ones.

        The biggest & possibly the only setback to free market is govt regulation, either pro-/anti-consumer, both of which only increase the cost at least by the amount needed to follow the regulation. As long as we don’t complain enough to bring in the government, we are safe.

        Take the case of Uber… the stupid tv channels made it seem like Uber was promoting rape… and led to its banning., and the only party responsible apart from the perpetrator, “police”, being let off.

        Reply

      • In reply to Murali

        I’m sure there are both legal, as well as cost based barriers to entry. The use of public property definitely precludes a free market since it places a hard limit on the number of competitors. I was always taught that a key difference between a free market and an oligopoly is the number of competitors.

        Whether or not other competitors will follow suit is something to be seen. If they do, we will know that it’s certainly not a free market. If they don’t, then that question is still up for grabs.

        I have no problem with regulation when it comes to companies using public property. Whether that is spectrum, or public infrastructure, the business cannot be run purely from a profit motive when public resources are being doled out.

        Reply

  2. Free Market doesn’t restrict competitors, but few competitors does not necessarily mean oligarchy. It may just mean the few producers are so efficient that it prevents new ones from entering the market.

    Similarly, all competitors raising charges does not necessarily mean collusion. Although in a strict definition of ‘free market’, cartels aren’t actually wrong as long as there is no law preventing new competitors from entering and/or there is no force to comply with the cartel.

    Today AIRTEL has dropped the plan for differential charges and is waiting for TRAI’s guidelines. This is exactly what I feared.

    AIRTEL brought the spectrum with some cost. If the technological advancement makes the spectrum less worthy, then they have every right to increase their charges to recover their cost or profit as much from it due to changed conditions. This is fair.

    TRAI restricting/preventing new technologies so as to ensure AIRTEL profits from its decision to buy spectrum is unfair and not-free market. This is far more damaging to the consumer in the long run.

    Reply

    • In reply to Murali

      I disagree. Airtel has every right to raise the cost of their product. By charging differential rates of VoIP however, they are charging for what is not theirs.

      It’s like the Electricity company saying “Power consumed by your TV will be charged at double the rate of that used by your fridge”. The electricity company sells power – they can charge for power increases. They have no right to dictate what we do with that power after we buy it.

      This is actually a question of fraud. One cannot add an item to a bill for something one does not provide.

      Reply

  3. Yes, I agree to an extent. I don’t think is fraud, but a bit unprofessional.

    Spectrum is not brought, it is more like lease, since you pay for using it for a limited time. When you don’t use, someone else is using it and paying for it.

    You buy a TV, and you can keep it on much as you like. Cable on the other hand is different. If you watch alone, it is charged differently, if you watch together with 1000 people it could be charged differently, if you watch specific channels it is charged differently. For some channels it can charge extra, although the channels themselves may not charge any amount to the cable provider.

    Even power in your home is charged differently to power at offices or industry. The provider can base charges on the purpose, before the deal is made, not after.

    Reply

    • In reply to Murali

      Sure, I don’t mind paying a power high rate. But then…I’m paying a higher power rate! With cable, the differences in billing you’ve cited rise from restrictions on the content side, not on the delivery side. Copryright laws etc mandate what is a “performance” vs what is a private viewing. Services delivered over bandwidth need not have the same considerations

      The question Airtel has to ask is – “What am I selling”? If the answer is “bandwidth”, then they should charge me for bandwidth period. What I do with the bandwidth after I purchase it, is my decision.

      If not, Airtel must own up and stop calling themselves an Internet provider. Or stop calling themselves bandwidth providers. Both of those have very specific meanings. You cannot sell a crippled version of the Internet and still call yourself an Internet provider.

      So that’s the key question – what is Airtel’s product? They cannot charge me for what they don’t provide. That to me, is outright fraud.

      Reply

  4. Airtel already charge us high and again they are planning to increase he charges….???

    Reply

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