Cheap talk

If SAARC is to succeed, it must lead to something that citizens can really experience. Much of what SAARC has done thus far is little more than talk at the level of leaders; but what about extending the people of the region the same privilege? The citizens of Southasia should be allowed to speak to each other at the low prices that they take for granted in domestic telephony. It must be easier to do some things within a regional-cooperation area than without. If one is a citizen of a country that belongs to the EU, going to another EU country is easier than going to a non-EU country; doing business with another EU country is easier than with a non-EU country, and so on. From a citizen's perspective, regional cooperation would feel real only if it was easier to go to a SAARC country than to a non-SAARC country. But given our political problems, no short-term pan-SAARC solution seems likely. SAARC has, however, looked into the problems of intra-SAARC communications.

It even has an Action Plan, but as usual, the results disappoint. Let's take a quick look at what it costs to make a call today from a few countries around the region. The cheapest prices from Pakistan are USD 0.03 (for fixed and mobile phones), offered to non-SAARC destinations such as the US and Hong Kong. The lowest SAARC prices are to Bangladesh, for USD 0.12 (mobile), and to India, for USD 0.12 (fixed). The cheapest intra-SAARC price is quadruple that of the cheapest extra-SAARC price. From Sri Lanka, the cheapest prices are USD 0.10 (mobile) and USD 0.21 (fixed). The lowest SAARC prices are USD 0.14 (mobile to India) and USD 0.32 (fixed to most of SAARC).

Meanwhile, calling the neighbouring SAARC countries generally costs 40-50 percent more than to the distant US. BSNL, the dominant fixed operator in India, makes an exception for one SAARC country. It offers a rate of USD 0.17 to the US, UK and Canada, as well as to Sri Lanka. All other SAARC countries are charged USD 0.28, which is considerably higher than prices even to Southeast Asia. On the mobile side, the lowest prices to non-SAARC countries are USD 0.15, while SAARC pays a 50 percent surcharge (USD 0.22). In Afghanistan, pricing information is only readily available for mobile phones. Here, the major mobile operator appears to treat Asia uniformly, offering a price of USD 0.49 to SAARC and to other Asian countries. This is lower than what it offers to more distant destinations.

The Maldives and Bhutan have mobile duopolies and fixed monopolies. The former offers the lowest rates to places such as Singapore and China (USD 0.23), while the lowest rates to SAARC countries are USD 0.30, a significant surcharge. Bhutan offers a lowest price of USD 0.31 to the country's most important trade and political partner, India, while charging the rest of SAARC USD 0.59, almost double. The 'SAARC-less-India' price is higher than what is charged for Thailand (USD 0.48). Bangladesh has many mobile and fixed operators, but maintains a de-jure international monopoly that is being changed to a joint, regulator-managed monopoly. Various factors make published rates problematic, but these state that SAARC and Southeast Asian countries enjoy the lowest prices.

In Nepal, where the fewest number of reforms have taken place, the absolute lowest published prices are offered to India; the next best prices are offered to SAARC countries, and much higher prices to non-SAARC destinations. In the countries where reforms have gone the farthest – Pakistan, India and Sri Lanka – prices for international calls are generally lower, and are determined by the termination charges (or the wholesale charges from the operator in the terminating country) imposed by the foreign operators who receive the calls. Domestic competition then determines whether the lower costs are passed on to customers. Prices to the US and Hong Kong, which are highly competitive markets and where the governments do not attempt to maintain high termination prices, are extremely low. Pakistan offers a fixed/mobile minute to the US and Hong Kong, among others, at the extraordinarily low price of USD 0.03. Sri Lanka comes next at USD 0.10 (mobile only), followed by India at USD 0.15 (also mobile only). Operators in the US and Hong Kong may not be charging higher prices from the other SAARC countries. Most likely, these SAARC operators are simply not passing on the low costs to their customers, due to a lack of competition. The fact that Indian and Sri Lankan mobile operators offer lower retail prices to the cheap
destinations than do their fixed counterparts supports such an explanation.

How to do it
In order to ameliorate this situation, the SAARC Summit in Colombo must direct its regulatory authorities to lower termination charges for SAARC-originated international traffic, ideally to domestic levels. This would mean, for example, that Bharti Airtel must pay Sri Lanka Telecom only around USD 0.015 to terminate a minute on its network. This would also mean that the government of Sri Lanka must exempt SAARC-originated traffic from the universal-service levy. This recommendation has one particular flaw: by limiting the lower termination prices and the exemption from levies to SAARC countries, it violates the international General Agreement on Trade in Services, agreed to at the World Trade Organisation in 1995.

There are two ways around this problem. First, levy domestic termination charges from all incoming international calls, and exempt international calls from all levies. This would eliminate the bypass business with one stroke, and end the corrosive effects of the black money it generates. Second, if that is too radical a move, regulators could at least insist that operators from SAARC countries be offered the lowest termination charges on offer. This would not bring down intra-SAARC call charges to domestic levels, but it would at least eliminate the current SAARC surcharges. Low termination charges alone are not enough to bring down retail prices. In the countries lacking adequate domestic competition (all in Southasia except Pakistan, India, Sri Lanka and possibly Afghanistan), it would also be necessary to compel the operators to pass on the savings to their customers. Once the people start talking, interacting and doing business, who knows what could follow?

~ Rohan Samarajiva is Executive Director of LIRNEasia, a regional ICT policy-and-regulation think tank in Colombo. He has served as director-general of Telecommunications of Sri Lanka.