SMS @ 1 paisa

News reports state that Reliance Communications Ltd has taken the lead and slashed SMS rates to 1 paisa per SMS. The first salvo in a new tariff war in telecom circles has begun. It will certainly put pressure on other telecom operators to follow suit.

The new SMS rates are in the form of add-on plans and are for all Reliance CDMA and GSM customers. By loading a voucher of Rs. 11/- the 1 paisa per SMS plan will be activated. My friends in Reliance say that a fee of Rs. 11/- will be automatically deducted every month from the balance of the prepaid subscriber. Should the subcriber not have sufficient balance on that day, he/she will revert back to 50 paise per SMS. So that's one catch.

Customers also have an option of going in for an unlimited daily SMS plan by having Re 1/- deducted from their balance. (Bad idea because Re 1 = 100 paise = 100 SMS' a day!)

A Third option given to prepaid subscribers is to load a Rs. 14/- voucher. This voucer will give a balance of Rs. 10.50 + odd and will also give daily 500 national SMS's free. Subsequent SMS will be charged at 1 paisa. A Re. 1/- daily fee will be deducted from the balance.

I, myself, have subscribed to the Rs. 11/- per month SMS pack on my post-paid billing Reliance Connection and I should be enjoying SMS @ 1 paisa within a day or two, WOW!!

My tired fingers don't seem to be rejoicing at this news, are they! ;)

Mobile @ 1 paisa per sec

Almost all the mobile operators in Mumbai, following the footsteps of Tata DoCoMo have announced a 1 paisa per second plan, but the moot question is, is it a rip off? Let's analyse.

The 1 paisa per second is good for those who make very short calls and like finish off the call after getting maybe a simple yes or no as a reply.

E.g. "Aaj raat ko ghar pe aa rahe hai na" – "Ha" – "Ok see you then, bye". Duration, 15 secs…

But all these years of cheap calling (@ Re. 1/min) have accustomed us to making long long calls on the mobile phones. Especially on our daily long commutes to and from home and work. Just look around any bus stop, railway station, inside the buses or trains and you will see people yapping away incessantly on their phones. Also note that STD calls are always for a longer duration than local calls, as we usually make that STD call, again out of habit, only once in a day to a particular person). Point made that we Indians now, as always, love to talk for long.

So is 1 paisa per second a good plan compared to the other available option of 50 paise per minute? Lets see a comparison between 1 paisa per second and 50 paise per minute

Calls under 1 minute: 60 p v/s 50 p (break even point 50 secs)

Calls under 2 minutes: Rs. 1.20 v/s 1.00 (break even point: 1 min 40 secs)

Calls under 3 minutes: Rs. 1.80 v/s 1.50 (break even point: 2 mins 30 secs)

Calls under 4 minutes: Rs. 2.40 v/s 2.00 (break even point: 3 mins 20 secs)

Calls under 5 minutes Rs. 3.00 v/s 2.50 (break even point: 4 mins 10 secs)

Calls under 6 minutes Rs. 3.60 v/s 3.00 (break even point - 4 mins 10 secs!!)

[ break even point is still 4 mins 10 secs :(& not 5 min 1 sec since at 5 minutes I pay Rs 3.00 & Rs. 2.50, & at 5 m 1 sec I pay Rs. 3.01 & Rs. 3.00 respctively]

Thus we see from this working, a person on the 1 paisa per sec plan enjoys an advantage of total cost for calls lasting only below 4 minutes and 10 seconds, that too with the advantage in costs decreasing with every increasing second.

So if you are making longer calls, it definitely makes sense to be on the 50p/min plan (Idea has a 40p/min plan, and Reliance also gives an additional option of Rs.1 per 3 mins) instead of the 1p/sec plan.

An afterthought. My mobile bill has not come down in Rupee terms for the last so many years, wvwn when tariffs were Rs. 4/- per minute (2003-04) and incoming was charged, and I'm sure that it won't come down by much, because the reduction in rate will most definitely be made up by an increase in talk time consumed ;)

50 Paise STD

Hritik Roshan, the pied piper of "Telelyn"stands out in his fancy clothes, pulling in all the telecom "rats" or should I say, (calling) rates, and dumping them down the hill.

At 50 paise a minute, it is actually cheaper to call, then to send a post-card!

And its not only Reliance. Airtel, Idea and Vodafone too have reduced rates to similar levels* conditions apply!

Why have these rates unraveled so quickly and to such low levels.

I don't reckon that volume growth will in any way make up for the 50% reduction. I feel that there are 2 factors behind this reduction in rates.

1) The first: New Entrants:

Etilsalat DB (of Dubai) and UniNor (a JV of Unitech and Telenor of Norway) have received licences to roll out service at national level. Maybe this is a Grand Welcome being planned by our existing players for the new kids on their block. It should definitely push back the break even point by a few years.

2) The Second: Spectrum Allocation:
The one rarity in the telecom space - Spectrum. Spectrum is nothing but the frequency (in lay mans terms) allocated to the telecom operators. Think of it as the width of the road that cars drive on. The wider the road, the lesser the jams. Similarly the more the spectrum with the operators, the lesser the network congestion. And one way of justifying the use of more spectrum is by showing more subscribers.

All I can say is that it only gets interesting from here onwards. Bills will fall in real terms as rates for voice and SMS fall to 50 paise.

Now its upto the operators to make up for fall in revenue from other value added services such as dialler tunes, internet usage etc.