Game of phones: Interconnect charge emerges as new battleground among operators

Should interconnection charges -- or the payment made for mobile phone calls from the network of one operator to another -- be scrapped?

The industry watchdog and some players appear to be in its favour, even as some others feel it can impact future investments and quality of service. At stake is an estimated Rs 25,000 crore in annual revenues.

The Telecom Regulatory Authority of India (TRAI) floated a consultation paper titled "Review of Interconnection Usage Charges" last month, seeking the views of stakeholders on whether interconnection usage charges applied by service providers should stay or be removed. The responses, including counter-comments, have to be furnished by October 10.

At present, such charges for wireless to wireless calls stand at 14 paise per minute -- paid by the mobile operator on whose network the call originates. Bringing it down to zero could potentially cut mobile phone tariffs by a third -- or more.

The issue takes on significance in view of the announcement made by Reliance Jio Infocomm that it will not charge for voice calls. If it has to pay the interconnection charges, it would have to subsidise each such call. Reliance Jio already has some 1.5 million subscribers.

The watchdog also asked whether termination charges between different networks -- from fixed-line network to wireless and vice versa -- should be symmetric.

"It is true players who are already in the market would like to monetise their investment in infrastructure. They would want those who wish to access their network to pay for it. This is the norm internationally too," said Mahesh Uppal, Director of independent consultancy Com First.

"Abolishing interconnection usage charges in India will reduce the incentive to expand networks. It will especially hurt rural areas. Voice and data connectivity is still poor there and they need significant investment in infrastructure," Uppal told IANS.

The TRAI, in its paper, has asked stakeholders several questions. These include: What will be the impact of zero interconnection usage charges for calls from wireline networks on the growth of the telecom industry?

The regulator also asked: "Which approach should be used for prescribing international termination charge in the country? Should it be kept uniform for all terminating networks?"

According to a source in the regulatory authority, around Rs 25,000 crore of revenue is generated every year from interconnection usage charges.

Bharti Airtel is the biggest recipient of such charges.

"Companies with smaller networks, like Videocon, Aircel and now, Reliance Jio, have fewer subscribers. Hence, they have more calls terminating in other networks. So, their payments for interconnection are higher. They would benefit if the interconnection charge is reduced to zero," Uppal said.

"The watchdog's suggestion of zero interconnection usage charges seems irrational. It will hurt those who have invested in infrastructure at a time when we need to increase, not decrease, infrastructure investment," he asserted.

Nonetheless, several countries have drastically slashed interconnection usage charges over the past year keeping customer welfare in mind, including Australia, Norway, Portugal, South Africa, Saudi Arabia and the United Kingdom.

The Indian watchdog's consultation paper quotes the OECD Digital Economy Outlook as saying that mobile termination charges were on a constant decline. "The OECD average of mobile termination charges fell by 65 per cent in 3.5 years from $0.0561 per minute in May 2011 to $0.0197 per minute in November 2014."

According to Rajan S. Mathews, Director General, Cellular Operators' Association of India, zero interconnection usage charges can cost the industry Rs 8,000-Rs 10,000 crore annually.

"Industry will be impacted in several ways," Rajan said. "When the the revenue stream is curtailed, industry players will rethink on how much to bid for spectrum. Infrastructure spending will take a big hit. Rural roll out of network will get retarded," he said.

"Industry as a whole invests around $8 billion-$10 billion every year for infrastructure roll out, out of which 30-40 per cent goes to the rural sector. As of now, around 85 per cent of the country has coverage for voice. But more investment is required for fibre connectivity. If this flow of revenue stops then in the longer run it will impact quality of service," he said.

(Aparajita Gupta can be reached at aparajita.g@ians.in)

--IANS

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