Trai asks telcos to cut voice costs to level of OTT applications

After having cut call termination charges to six paise a minute, the Telecom Regulatory Authority of India (Trai) wants mobile telephone operators to reduce their voice call costs to the level of over-the-top (OTT) applications.

The latter's voice call costs are a fraction of a paisa a minute, as against 30-35p a minute in traditional second-generation technology (2G) networks. Trai says this shift is possible if all service providers implement advanced IP-based networks. This would also result in mobile termination charges (MTCs) becoming redundant.

Mukesh Ambani-owned Reliance Jio has an all IP-based network, due to which its voice costs are much lower.

OTT applications like WhatsApp, Skype, Hike, etc, are able to deliver voice communications at a fraction of a paisa per minute. And, these are expected to continue to decline, as data rates reduce with implementation of new technologies.

"In this backdrop, it would be virtually impossible for a telecom service provider to compete against the cost effectiveness of OTT applications, if an additional cost in the form of MTC is imposed," Trai said in its latest regulations on termination charges.

With the rapid rise of OTT applications for voice services, telecom operators have approached Trai in recent times regarding the impact on their voice and SMS revenues. The operators had earlier also wanted to bring OTT applications under the regulatory framework.

Trai said another issue with proposing any MTC at a time when OTT applications were becoming more popular is that any customer able to use the latter would switch from the networks of the mobile operators. "Thus, the cost of the service providers would now need to be borne by feature phone users who do not have the ability to use OTT applications," it said.

This would lead to a situation where the cost of services for low-cost feature phone users would end up being higher than those for smartphone users.

The regulator feels reduction in termination rates would benefit consumers and enhance competition. "Going the full distance i.e. reducing terminating rates to zero by introduction of a BAK (bill and keep) regime would help in immediately realising these benefits," Trai said.

MTC, which an operator pays to another for completing a call to the latter's network, has been a bone of contention between incumbent operators and Jio over many months. Airtel, Vodafone and Idea wanted the charges to be increased to around 30p a minute or retained at the current level; Jio had proposed that these be brought to zero.

Termination charges have followed a downward trend in India since their introduction in 2003. The steady decline in consumer retail rates coincided with that in termination rates during the period.