Beware of low mobile call rates

Mobile phone users have never had it so good. Call rates fell in the last few months. However, in the last month or so, it appears that call rates are in free fall, as cellphone operators are offering rates as low as one paisa per two second on calls, which works out to 30 paise per minute.

However, there is a flip side. Offering rates which are ridiculously low and sometimes not meeting even the basic cost of a service is called ‘predatory pricing’ in marketing and is often resorted to by a supplier of goods or services as a method of getting a toehold in the market.

With over 50% of the country now having access to mobile phones and over 85% of people living in cities having access to such services, new entrants into the field are finding that though they have spent crores in infrastructure and manpower, there are not enough consumers. In such circumstances,grabbing whatever comes their way at prices which are basically un-remunerative otherwise, is a way to cut losses and get some share of the market.

All this is music to the ears of the consumer. In retaliation to this drifting of business, existing service providers will also lower rates to prevent an exodus of customers, thus leaving consumers with a surfeit of choice in billing and services.

However, there are going to be fallouts of this predatory warfare between telecom giants which may not be good news in the long run to consumers. Once competition is wiped out or limited by mergers and acquisitions, the consumer can expect a stiff hike in prices. Such an effect is already in existence in the airline industry where air fares have almost doubled within three months.

The Telecom Regulatory Authority of India has announced an inquiry into the predatory pricing in mobile services last week. Its findings and decisions will be of great interest to the consumers around the country.