New stamp, phone charges will hit heavy users The Viet Nam General Department of Post and Telecommunication's (GDPT) plan to adjust prices for postage stamps and monthly telephone subscriptions has sparked fears that services will soon be more expensive for frequent users. Under the price adjustment scheme, which is awaiting final Government approval, the price of stamps for letters up to 20g in weight will more than double, from VND400 to VND 1,000. The monthly telephone line rental charge will be slashed from an average of VND45,000 to a uniform VND27,000, but subscribers will no longer get 450 free minutes of local calls. Such calls will now be billed at a flat rate of VND 120 per minute. The GDPT's new pricing policy also includes modifications of mobile phone connection fees, rates for inter- national calls and Internet access fees phased in earlier this year. Officials from the GDPT said that the changes reflect the actual business health of each sector of the country's postal and telecommunications industry, putting an end to the current practise of using profitable services to cover losses incurred by poor- performing departments. Increased price to reduce losses It is for this reason that 20g postage Stamp rites will rise dramatically. Even with the VND600 increase, the new price will just cover 76 per cent of the actual cost of delivering a letter (estimated at about VND1,400). GDPT said that the price adjustment is really needed to cover high costs of delivering to remote, moutainous and islands areas despite the existing Government's subsidy policy. Further price hikes are planned through 2003 to balance costs. According to GDPT statistics, the average annual use of the mail service in Viet Nam is about 2.3 letters per capita. The State sector, including State-owned enterprises and government offices, accounts for up to 40 per cent of the total mail sent from the four biggest cities of Ha Noi, HCM City, Hai Phong and Da Nang (which in turn account for 20 per cent of the country's population). GDPT said that for this reason, the stamp price adjustment will reduce the department's VND300 billion annual losses by one-third without putting an unacceptable burden on he incomes of the nation's residents. However, farmers and low-income people in the rural, remote and mountainous areas who are the postal- service's biggest customers will obviously still be affected by the new price. For rural residents, who often calculate the value of any expenditure in terms of agricultural product volume, sending a letter will soon cost them nearly a kg of unhusked rice or 7kg of salt. Observers called the new stamp price irrationally high in light of the profits still realised from more expensive premium GDPT services such as the mobile phone sector. Phoning in changes While the stamp adjustments will bit the poor hardest, the new telephone rates will wallop the wallets of the country's biggest volume users. According to the GDPT, the cost for installing a fixed telephone line in an urban area is around US$1,200. Because city residents used to pay VND1.8 million for the connection plus a monthly subscription fee of VND68,000 for 450 on-line minutes, it takes the government an average of 17 years to realise the cost of the installation. The high installation costs are due in part to the expense of ongoing efforts to bring telephone service to mountainous and island areas. An official from the GDPT ,said: "Connecting a telephone line in those areas costs more than VND50 million but we can charge only VND23,000-VND50,000 a month for it according to State regulations." He further said that the planned subscription adjust- merit was based on the value- added principle and would. restore fairness to consumers now penalised for a low-volume of calls. "The more you occupy the line the more you will be charged," he said. "The current fee structure is irrational because irregular users have to pay the same monthly fee as the more frequent ones. This will encourage new subscriptions and the use of telephone. " According to the GDPT, about 50 per cent of telephone subscribers do not presently use up the existing allotment of 450 minutes of free local calls. Up to 30 per cent of subscribers use the phone less than 100 minutes per month. However, industry observers note that a large majority of subscribers will pay more under the new scheme. The average charge for an urban subscriber now charged VND68,000 per month who uses just 200 minutes per month will decrease by VND 12,000: VND27,000 (monthly subscription fee) + (200 minute x VND 120) + 1 0 per cent VAT = VND56,000 But for the 50 per cent of the users who use up free calls (and often incur considerable extra fees), they will at a minimum be charged VND27,000 more per month. VND27,000 (new flat fee) + (450 x VND120) + 10 per cent VAT = VND95,832. Observers say that GDPT has not only given preference to the 30 per cent of consumers who use the phone the least, but also now stands to increased its earning from businesses and other customers who use it the most. Internet surfers swamped As a final blow to the telecommunications sector, Viet Nam's still-small number of Internet users will also take a - bit under the new system. Vietnamese Net surfers now pay an online fee of VND290 per minute during peak business hours since prices were slashed from an average of VND400 per minute earlier this year. However, if the VND120 per minute charge for local calls is factored into Internet pricing, the hard-won savings now disappear. A director of a local Internet Service Provider said: "We worked very, very hard to bring the Internet price down so as to lure more users. If the proposed changes are passed, all our efforts would be thrown into the sea." While the GDPT suggestions are still under consideration, industry observers are bemoaning the fact that the system seems to ignore the market mechanism of volume discounts. They said the new prices for telephone usage will benefit retired people, low-in- come earners and rural residents-precisely those who use the service the least. "GDPT will recognise that this policy is a measure which will decrease demand, as there will be fewer telephone calls," said one Ha Noi businessman. VASC - Mai 15, 2000.