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While the government has indicated its reservation on lifting the curbs on internet telephony, it has cleared the way for cheaper long distance calls by allowing subscribers to choose their long distance operator, regardless of which service provider they use.

The Telecom Commission, the policymaking arm of the Department of Telecommunications (DoT), has recently given its approval to long distance operators to offer calling cards directly to users. Users can thus select their operator to make long distance calls from both basic and mobile phones using these cards. Until now, subscribers were subject to the STD and ISD tariffs offered by their service providers.

The Telecom Commission's move follows the Telecom Regulatory Authority of India's (TRAI) recommendations that private players should be allowed to provide calling cards for domestic and international calls.

The move is significant as it will open up the field to private players and will encourage competition in the long distance segment. Operators carrying long distance calls, including RailTel, Power Grid, Tulip IT services, British Telecom, AT&T, Verizon, France Telecom and Cable & Wireless, can now directly sell their services to the consumer without having to go through a conduit (another access provider).

DoT states that about 23 domestic long distance and 18 international long distance service providers in the country will stand to benefit. This will spur competition in a big way and bring down tariffs. Global experience shows that long distance tariffs fell by 20-53 per cent after customers were allowed to choose their operator.

According to DoT, calling cards offered by long distance operators will enable users to make calls from any access network while having the call routed through the operator of their choice. This is important as carrier access code (CAC) –­ the mechanism that allows subscribers to choose their long distance operator irrespective of the service provider –­ has been something that DoT has kept on the backburner for years. This was mainly because the costs involved in introducing CAC were too high and unjustified when compared to the monetary benefits likely to accrue to the customer.

TRAI had a different view, however. In its recommendations, the regulator had reasoned that competition triggered by carrier selection would bring in operational efficiencies in the long distance segment and also offer choice, quality and affordable prices to consumers.

DoT then set up an internal committee to review the issue. The committee observed that calling cards issued by access service providers did not give users any choice in selecting tariff plans. It also observed that of the three possible modes of carrier selection –­ call-by-call selection (CS), carrier pre-selection (CPS) and calling cards –­ the first option offered the maximum flexibility and convenience to the consumer. It therefore recommended introducing call-by-call carrier selection. However, in light of the costs involved in deploying this system, DoT opted for the calling card model.

Naturally, access providers are none too happy. According to a senior official at Tulip, "Introducing calling cards will hurt the financials of some existing telecom companies. It will trigger a price war and bulk and large users, who happen to be the high-revenue-generating customers, may choose the calling card option, thereby weaning business away from existing operators providing long distance services."

Access providers are also not happy about giving a free hand to internet telephony. Even though TRAI had, in 2008, recommended the removal of restrictions on internet telephony in the domestic space as it would lead to a substantial fall in STD tariffs, cellular mobile operators had been lobbying for a rejection of the regulator's recommendations as implementation would make long distance calls extremely cheap and eventually affect their business models.

Internet service providers (ISPs) would, however, benefit if the government allowed internet telephony. At present, ISPs are not permitted to make calls to fixed line and mobile subscribers, since they cannot interconnect with these networks to terminate internet telephony calls within the country. "Internet telephony would allow users to make calls from PCs or laptops to fixed line and mobile phones in India. They can also make calls to personal computers from their mobile handsets. When permitted, rural India would perhaps be the biggest beneficiary as users would be able to make ultra-cheap calls from PCOs using this technology. Besides, broadband growth would get a boost," says a market analyst. The Telecom Commission has referred the internet telephony issue back to TRAI, seeking more clarity on how it would function. "As there are a lot of issues to be sorted out before internet telephony can get the go-ahead, we are referring the matter back to TRAI," says Siddhartha Behura, telecom secretary.