Policy | Deferring zero IUC is a lose-lose situation for all telecom stakeholders

SS Sirohi

The Telecom Regulatory Authority of India (TRAI) floated a consultation paper to review interconnect usage charges (IUC) on September 18. It wants to review the date of applicability for the Bill & Keep (BAK) regime for wireless to wireless terminating calls. BAK is supposed to start January 1, 2020, as per current regulations.

It is a bit difficult to understand why TRAI has started having qualms about its own well-thought IUC regulations of 2017 when there is no trigger or compelling reason. Those regulations were issued after an 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 in a sustained manner and adoption of more efficient technologies that are vital for orderly growth of the telecom services sector in India. In other words, customers should have adequate choice, affordable tariffs, and avail good quality of services.

TRAI 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 should have been implemented in September 2017 itself as TRAI was nurturing such an intent from 2012 onward. However, TRAI opted for its introduction in a time-bound manner by giving service providers over two years to upgrade their network to 4G, although it was not necessary. It also fixed the IUC at 6 paise per minute for the interim till BAK starts.

Currently, when all telecom service providers (TSPs) are having large comparable networks as well as market share, there is no case of IUC termination charge as such. Retaining IUC termination charges inherently amounts to giving an undeserved incentive/subsidy to old TSPs who have still not modernised and upgraded their networks (using 2G/3G). It encourages them to use outdated 2G/3G networks whose capital cost is already almost fully depreciated and avoid investments in new efficient IP technologies.

Moreover, the IUC charge virtually becomes the 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 1.5 per minute) while a TSP which adopts 4G technologies gives free calls to customers.

The continuance of such large tariff differentials between 4G operators and old operators causes more outgoing traffic from the free/low tariff operator to high-tariff operators. It leads to traffic imbalance in inter-operator off-net terminating calls as traffic is sensitive to tariff. TRAI had observed that the BAK regime will reduce imbalances in inter-operator off-net call traffic and thus could help in convergence to equilibrium position.

The near-term outlook on adoption of new efficient technologies such as 4G by all old TSPs appears bleak in case of Vodafone Idea and BSNL/MTNL and tardy for Airtel. Look at the TRAI data on the addition of 4G BTS (eNodeB) for December 2018 to June 2019. Of the total additions, Vodafone Idea’s share was only 1.35 per cent, Airtel 44 per cent, Reliance Jio 54.65 per cent and zero by MTNL/BSNL (no4G).

Therefore, it will be appropriate to conclude that due to the existence of IUC charge benefits the old TSPs are not very serious about the modernisation of their networks and nor about the TRAI deadline. Since the old TSPs have not done much on this in the last 2 years, how can we expect them to do so even in the next 2-4 years? Therefore, domestic IUC should be made zero to spur old TSPs to quickly modernise their networks.

If we look from the customer’s side, for the telecom sector as a whole, by June 2019, 45 per cent of the 1,170 million mobile customers are on 4G. This segment is growing rapidly. With the current rate of growth, majority of mobile customers will be on 4G by the end of this year. Around 83 per cent of devices 4G customers use support VOLTE voice too. To woo them and migrate them to IP voice is the sole responsibility of TSPs.

Thus, it’s the need of the hour that BAK billing is implemented as scheduled on January 1, 2020. Any tinkering or deferment will sadly defeat the very purpose of regulation: Consumer welfare and orderly growth of the telecom services sector in line with global trends.

In fact, it may not help any stakeholder at all. While consumers will be the greatest losers, the gains for old TSPs will be negligible and temporary. For the regulator it is dent in its credibility and for investors this will have an adverse impact on their confidence due to the creation of an atmosphere of policy uncertainty and regulatory unpredictability.

SS Sirohi is a former Member (Technology), Telecom Commission (now Digital Communications Commission). Views are personal.

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