India more than halves interconnect charge, operators to appeal

India more than halves interconnect charge, operators to appeal”

The Trai said, "Lower termination charges are therefore likely to benefit consumers overall (both fixed and mobile) because operators will have greater retail pricing flexibility".

Analysts said that TRAI's move is likely to spur companies to embrace a more efficient and cheaper voice-over-LTE (VoLTE) network, which Reliance Jio now uses.

It would mean an estimated annual loss of Rs 1,500-2,000 crore for Airtel, Rs 1,500 crore for Vodafone and Rs 1,200 crore for Idea Cellular, they said.

On Tuesday, TRAI slashed the interconnect usage charge (IUC) from 14 paise minute to 6 paise per minute, which will become effective from October 1. "The operators won't be able to pass on the benefit to the consumers and one should not expect call charges to go down further", said Faisal Kawoosa, Principal Analyst Telecommunications and ESDM, CyberMedia Research.

Operators in India do not charge customers for incoming calls, but the carrier from whose network a call originates pays the network that receives the call. In 2012, Jagbir Singh, Director, Network Services Group, Bharti Airtel asked for interconnection charges for data, saying: "Today, Google, Yahoo! and others are enjoying at the cost of network operator".

Meanwhile, Bharti Airtel slammed the Trai's order and said that the company was disappointed with the regulation that comes at a time when the telecom sector is already going through times. Its entry plan at this moment begins at Rs 149, and sources said the company may revise this soon to factor in lower IUC that come in force from October. On the other hand, other operators like Bharti Airtel, Vodafone and Idea Cellular are likely to take a hit. He also stated that the decision would have serious consequences for investment in rural coverage, undermining the Government's vision of Digital India. There is a detailed explanatory memorandum running into 62 pages and Annexure giving the methodology of calculation of termination charge.

Mr. Harsh Jagnani, Sector Head and Vice President, Corporate Ratings, ICRA Limited elaborates: "At the industry level, IUC is largely a zero-sum but it impacts each operator differently, driven by the extent of traffic asymmetry between them". Earlier, in July Reliance Jio also claimed that older telecoms had earned about 1.04 trillion in IUC. Moving towards BAK will encourage adoption of latest technologies and the deployment of IP-based telecom networks. There is, therefore, a case for introduction of a Bill and Keep regime.

"The history of interconnect usage charge has always been contentious and ends up in courts". Moreover, overall voice revenue will continue to drop as a result of Jio free voice call offerings and the rising popularity of data-led "over the top" (OTT) operators.

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