Data Usage Charges Reduction

The Great Cut . . .

It started with Vodafone slashing 2G data charges by a sharp 80% (on 18th June 2013). 2G data usage rates were slashed from 10 Paisa/10 KB to 2 Paisa/10 KB. Thereafter one after other telecom companies rushed to announce similar cuts. Airtel and Idea slashed rates by 90% to 2P/10KB from 20P/10KB earlier and others are expected to follow suit. Should the consumers start rejoicing and dance to the beat of Zumi Zumi? Well, not quite yet.

Let us understand which rates have been slashed by the telecom companies. For that we need to first understand how data usage is charged for different consumers. Postpaid subscribers can opt for data plans by paying fixed monthly charge. Such data plan would give specific usage quota per month. Thus a 1 GB monthly data plan for charge of Rs 125 would provide data usage quota of 1 GB on monthly basis and any data usage over and above this limit would be charged on pay-as-you-go rates. Postpaid subscribers who have not opted for data plans are charged at pay-as-you-go rates for any data usage.

Prepaid subscribers can also opt for 2G data recharge, which provides specific data usage quota for particular time period. For example Rs 125 bonus/special recharge would provide 1 GB data usage for 30 days. Any usage beyond data limit or validity period is charged on pay-as-you-go rates. Prepaid subscribers who have not opted for data plans are also charged at pay-as-you-go rates for any data usage.

. . . Isn’t really deep enough!!

Only 2G data charges for pay-as-you-go have been slashed by the telecom companies. 2G data charges for postpaid or prepaid subscribers who have opted for data plans have not been changed. If anything, charges for consumers opting for data plans were raised by almost 30% in January 2013.

2G data charges for pay-as-you-go users has been unbelievably high. At erstwhile rates of 10P/10KB rates, usage of 1 GB would have cost Rs 10,485 (as per calculation below). For Airtel and Idea, which were charging at rates of 20P/10KB, 1 GB usage would have cost Rs 20,970!

Calculation for data usage cost under erstwhile tariff of 10P/10KB
1 GB = 1024 MB
1 MB = 1024 KB
Thus, 1 GB = (1024*1024) KB = 1,048,576 KB
Charges for 1 GB usage = 1,048,576/100 = Rs 10,485

Even after the steep 80% reduction, data usage charges for 1 GB at 2P/10KB would be Rs 2,097. Interesting to note that data charges for consumers opting for data packs is about Rs 125 for 1 GB usage over 30 days period (might vary slightly depending on the company). Thus the data usage charges for pay-as-you-go users was ~84 times and even after the recent reduction is ~17 times the data usage charges for consumers opting for data plans.

Think of it, Airtel and Idea were charging ~168 times the normal rate (Rs 20,970 per GB vs Rs 125 per GB) for users not subscribed to data plan. Simply unimaginable how TRAI even allowed and is still allowing such tariff structure!

Simple consumer friendly steps TRAI should take:

1. TRAI should make it mandatory for telecom companies to quote data usage charges on per MB basis. Telecom companies are making the pay-as-you-go data usage rates appear optically attractive by quoting the same in Paisa. Tariff of 10P/10KB appears attractive as compared to Rs 10.24 per MB, although both are exactly the same.
2. Consumers should be encouraged to subscribe to data packs as they are far too economical. Even after 80% reduction in data usage charges for pay-as-you-go basis from Rs 10.24 per MB to Rs 2.05 per MB, it is still 17 times more costly than effective data usage charge 12 Paisa per MB for 1 GB data pack.
3. Pay-as-you-go should be regarded as separate data plan and not the default option. Only consumers who have expressly opted for pay-as-you-go plan should be charged at pay-as-you-go rates. Currently unsuspecting users who have not opted for any data plan get charged at pay-as-you-go rates without positive confirmation for the same.
4. For subscribers who have opted for data usage plan, data connection should get terminated once the data limit as per subscribed plan has been reached, rather than automatically put the user on pay-as-you-go rates. Thus a 1 GB data pack subscriber with effective cost of 12 paisa per MB (assuming Rs 125 charges), should not automatically be charged 17 times more at Rs 2.05 per MB (84 times more at Rs 10.24 per MB, before the recent reduction) once data usage limit of 1 GB is reached. Similarly for prepaid subscribers, data connection should be cut off either when usage limit is reached or validity period of the pack expires. Thus a user who has subscribed to 30 day pack with effective cost of 12 paisa per MB shouldn’t automatically be made to pay 17 times more at Rs 2.05 per MB from 31st day onward.

Data usage, both 2G and 3G, is bound to explode given the increasing penetration of smartphones. While the article has been written from 2G data usage charges perspective, underlying theme is common for 3G date usage tariffs as well. It will require regulator’s intervention and competitive pressures for the truest data revolution that will make the consumers jive to Zumi Zumi beat!