Monday, December 29, 2014

Let the relative cost efficiency of VoIP technology drive the Indian telecom market's future course

Airtel's decision to charge for VoIP calls made using applications such as Skype, WhatsApp, etc., shows that it is trying to protect its lucrative franchise - voice calls revenue - by artificially making it more expensive to make the same calls using a technology which is otherwise much cheaper. That voice calls can be made over VoIP for a fraction of what Airtel, etc., currently charge for regular voice calls is example enough that the true cost of these calls is actually much lower than what is being charged to us, the users. Alternatively, it is [strongly] possible that currently there is cross-subsidization taking place [expensive voice calls revenue is subsidizing cheap data rates, with the latter's true cost actually higher than what is being charged to us]. If the alternative scenario is true [that is, data should actually be costlier and regular voice calls should be cheaper], then any loss of revenue from a shift of voice calls to VoIP will result in reduced revenues/profits for telecom firms [assuming unchanged data rates]. Eventually, over the medium/long term, telecom firms will automatically be forced to raise data rates in order to sustain their businesses, thus correcting the cross-subsidization and bringing prices of both regular voice calls and data closer to how the market dictates.

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