WiLL: A winner for FSPs - Views on News from Equitymaster

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WiLL: A winner for FSPs

Apr 5, 2001

Wireless in local loop (WiLL) is finally here. The Telecom Regulatory Authority of India (TRAI) has finalised the revenue sharing agreements as well as mobility spectrum for providing WiLL services for basic fixed service providers. WiLL means that companies like MTNL, Hughes Tele and Bharti, which provide basic telephony services are allowed to provide limited mobility to their customers. However, the spectrum of mobility is limited to inter-circle at the rate of Rs 1.20 for 180 seconds (the prevailing local call charge). Each operator will get upto 5 mega hertz of frequency on a first come first service basis. They can also provide WiLL services at a price upto 10 times lower than existing cellular charges.

What would this mean for fixed service providers like MTNL or Hughes Tele.com? With WiLL being freed, both these companies as well as other major basic fixed service providers would have significant advantage. There is every possibility that both the new as well as the existing cellular subscribers could opt for WiLL thanks to the lower usage charges. Besides, this would also allow Fixed Service Providers (FSPs) like HTL, MTNL and HFCL to tap a different set of consumers and for multiple revenue streams instead of just relying on fixed line.

Since FSPs can provide WiLL services in a short distance calling area (SDCA), cellular service providers are at a big disadvantage. SDCA would typically mean a local call area. Interestingly, all metros are SDCAs. So, a user can avail for the WiLL service, which will allow him mobile communication facility, for say, entire Mumbai! Currently, almost 60% of cellular subscribers do not use roaming facility. As a result, FSPs have significant advantage as opposed to cellular service providers (this has also resulted in cellular operators applying for fixed service provider license).

So, these FSPs can provide WiLL services at a cost, which is unmatchable by cellular companies. For instance, BSNL has commenced its WiLL services in the state of Gujarat (while incoming calls are free, outgoing calls are charged at the local call rate i.e. Rs 1.20 per 3 minute). But the only disadvantage is that the subscriber has to buy an instrument, which costs around Rs 10,000 plus deposits, depending upon the technology (a CDMA set costs higher than the GSM based sets).

The Cellular Operators Association of India (COAI) has been opposing against WiLL because allowing limited mobility to fixed service providers would have adverse impact on cellular operators revenues. However, since the TRAI has reduced the annual revenue sharing of cellular operators from 17% earlier to 12%, this to a certain extent would insulate the loss due to limited mobility.

Though FSPs tend to benefit in the short-term, the long-term scope is not all that promising. Why? In the long run, cellular air charges are bound to decline once the fourth operator starts his service in each of the service areas. Though cellular air charges may not be commensurate with the WiLL charges, the chances of consumers preferring cellular service are higher due to the falling rental charges and handset prices.

However, the launch of WiLL service could be delayed even further. After three months of deliberations, TRAI has again postponed the specifications for monthly rentals for the WiLL service by a month. So, FSPs have to once again wait for the entire package to be announced for a month.

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