TRAI’s Decision To Cut Call Connect Charge Based On Flawed Logic, Says Sanjeev Aga
Telecom industry experts debate the TRAI’s decision to slash IUC charges.
The Telecom Regulation Authority of India’s decision to abolish interconnection usage charges by 2020 based on the logic that newer technology will lead to a reduction in call charges is flawed, industry veteran Sajeev Aga told BloombergQuint.
The technology used by the incumbents – Bharti Airtel Ltd., Vodafone India, and Idea Cellular Ltd. – has nothing to do with IUC charges, he explained in an interview, adding that the charges instead depend on the handset being used by customers.
If the customers are carrying 2G and 3G technology handsets, or haven’t activated the Voice Over LTE (VoLTE) feature on their handsets, then the cost benefit of the newer Voice Over LTE technology does not come through to the operator.
“This is a propaganda which has been used successfully to make it appear as though operators are hanging on to legacy equipment. That it is entirely a function of serving the poorer or laggard customers who are using older handsets. And that involves a cost which is very high and you are not paying that cost,” Aga said.
“Our regime is technology neutral. You cannot be pushing regulation in one direction because you don’t know in which way science is going to go, it is unwise,” he added, strongly disagreeing with the regulator’s decision.
In response to an emailed query from BloombergQuint, the telecom regulator said “there is no question of favouring any network".
The TRAI has given all the cost sheets with the calculations. If we wanted, we couldn’t have fixed the IUC charges at 7 paise or 3 paise. The calculations have come to 5.9 paise which is the cost of carrying a call.RS Sharma, Chairman, TRAI
The TRAI’s move to slash interconnection charges by more than half to 6 paise per call has the industry’s established players crying foul.
The decision will benefit the new entrant Reliance Jio Infocomm Ltd. at the expense of the incumbent players. Interconnect usage charges are payable for cross-operator calls. This means that Reliance Jio will have to pay a fee for every call its subscriber makes to a Bharti Airtel user, and vice versa. Older operators with more subscribers and bigger networks tend to receive more calls and thus make money from the charge. A smaller rival like Reliance Jio that offers free calls becomes a net payer.
Lower interconnection charges will help Reliance Jio reach a breakeven point, said Nitin Soni, director of Asian corporates at Fitch. For the industry as a whole though, the move will prove to be credit negative, he added.
Companies like Vodafone, Idea and Bharti Airtel which get 15-18 percent of their revenues from IUC will see a hit on their margins, several brokerages said.
Also Read: It’s Advantage Reliance Jio As Regulator Cuts Call Connect Fee
In Defence Of The Decision
Jaydeep Ghosh, partner and telecom expert at KPMG, however, argues that lower interconnection charges will result in a decline in call tariffs for customers.
“As a regulator, TRAI’s objective is social welfare. Competition in the industry is already intense while prices are also on the lower side which left IUC as the only issue that had to be sorted out,” Ghosh told BloombergQuint.
The timing of the decision, however, is debatable he added. With incumbent players already financially stressed due to the disruption caused by Reliance Jio’s free voice and messaging tariffs, this will act as an added blow. The assumption that all players will have leveled technology in the next two years may also be misplaced, he said.
Also Read: TRAI’s Call Connect Decision May Trigger Another Legal Wrangle