Presence of interconnect charges give telcos little incentive to upgrade their networks and improve customer service

Since the old TSPs have not done much on this in the last two years, how can we expect them to do in next even two to four years?

TRAI floated a Consultation Paper on Review of Interconnection Usage Charges (IUC) on 18 September this year, with a focus on the need for review of the date of applicability of Bill & Keep (BAK) Regime in respect of wireless to wireless terminating calls (BAK is to be implemented from 1 January 2020 as per the current IUC Regulation) and any related issues on domestic IUC.

It is a bit difficult to understand as to why, at this stage when there is no trigger or compelling reason, the Authority has started having qualms about its own well-thought of IUC Regulation, 2017 brought out after exhaustive, extensive consultation with all possible stakeholders and comprehensive consideration of all factors. The underlying basis of the Regulation was the maximisation of consumer welfare (i.e. adequate choice, affordable tariff and good quality of services) in a sustained manner and adoption of more efficient technologies are vital for orderly growth of telecom services sector in the country. The Authority had then rightly stated ‘if cost-based domestic termination charge is continued for long, it would hamper the movement of sector towards (1) deployment of more efficient technologies; (2) more innovative and customer friendly tariff offerings; and in turn, it would be detrimental to the growth of telecom services sector.

Ideally, BAK was very much due for implementation in September 2017 itself as TRAI was nurturing such intent from 2012 onwards. However, TRAI opted for its introduction in a time-bound manner by giving over two year period to telecom service providers (TSPs) with a view that TSPs would upgrade their network to 4G, although it was not necessary. For the meantime up to 31 December 2019, IUC was fixed at Rs 0.06 per min for off-net termination.

Presence of interconnect charges give telcos little incentive to upgrade their networks and improve customer service

Telecom tower. Representational Image

In the present perspective with all TSPs having large comparable networks as well as market share, there is no case of IUC termination charge as such. Keeping IUC termination charge inherently amounts to giving undeserved incentive/subsidy to old TSPs who are still not modernised and upgraded their networks (using 2G/3G) for encouraging them to use outdated 2G/3G networks whose capital cost is already almost fully depreciated and for avoiding investment in new efficient IP technologies. Moreover, the IUC charge virtually becomes the minimum floor price for an off-net voice call which in turn gives old TSPs an alibi to charge unreasonably high tariff from their customers (calls charged as high as Rs 1.50 per min), whereas TSP who adopt 4G technologies gives free calls to their customers.

The continuance of such large tariff differential between 4G operator and old operators causes more traffic from free/low tariff operator to high tariff operator leading to traffic imbalance in inter-operator off-net terminating calls, as traffic is sensitive to tariff. In fact, it is almost impossible to have exactly symmetric traffic in a stable manner. Traffic asymmetry will almost always exist , varying in degree dynamically. In a way, traffic asymmetry is a sign of vibrant competition in the sector. On the other hand, total traffic being symmetrical in a sustained manner may be indicative of market saturation or even cartelisation!

TRAI had observed that BAK regime will reduce the imbalance of inter-operator off-net call traffic and thus could help in convergence to an equilibrium position.

The near term outlook on the adoption of new efficient technologies like 4G by all old TSPs appears bleak in case of Voda-Idea and BSNL/ MTNL and tardy for Airtel. TRAI data shows that during last six months from December 2018 to June 2019, the addition of 4G BTS (eNodeB) by Voda-Idea was only 1.35 percent, by Airtel at 44 percent, by Reliance Jio at 54.65 percent and by MTNL/BSNL was nil (no 4G) of total additions by all TSPs.

Therefore, it will be appropriate to conclude that due to existence of IUC charge benefits, the old TSPs were neither very serious about the modernisation of their networks nor about TRAI deadline, so to say, of 31 December 2019. Since the old TSPs have not done much on this in the last two years, how can we expect them to do in next even two to four years? Therefore, the domestic IUC should be made zero to terminate incentive to old TSPs and spur them into fast pace action on the modernisation of their networks.

On the other side, if we look at the telecom sector as a whole, by June 2019, 45 percent of overall mobile customers base of 1170 million are on 4G and growing rapidly. With the current rate of growth majority (> 50 percent) of mobile customers in the country will be on 4G by 31 December 2019. Around 83 percent of devices 4G customers are using support VoLTE voice too. To woo them and migrate them to IP voice is the sole responsibility of TSPs only. They have to invest in aggressive marketing.

In the view of the above, in my opinion, it's the need of the hour that Bill&Keep (BAK) regime is implemented as scheduled with effect from 1 January 2020 as per TRAI IUC Regulation, Sep 2017.

Any tinkering or deferment will sadly defeat the very purpose of regulation that is Consumer Welfare and orderly growth of the telecom services sector in line with global trends. In fact, it may not help any stakeholder — Consumer: greatest loser; Old TSPs: negligible gain, that too temporary; Regulator: dent in credibility; Investors: adverse impact on their confidence.

I would elaborate that such a move if undertaken, has the real potential to adversely affect the image and credibility of TRAI, which is so assiduously built in recent years, as well as the investor sentiment due to creation of an atmosphere of policy uncertainty and regulatory unpredictability. Consumers may term it as anti-consumer, anti-competition and retrograde.

The author is a former member (Technology), Telecom Commission, Department of Telecommunications

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

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