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    Telecom companies wary of Trai move to review IUC charges

    Synopsis

    Trai’s planned review comes as telcos increasingly switch over to internet protocol-based networks using optic fibre from systems that were built with copper cables.

    ET Bureau
    NEW DELHI: India’s top telcos are wary about the telecom regulator’s move to review charges carriers pay to each other for calls made from one network to another, fearing it may lead to a further reduction in those fees, hurting the bigger players, while benefiting newer and smaller operators.

    The Telecom Regulatory Authority of India is likely to float a consultation paper shortly to review these fees, known as inter-connect charges (IUC), taking into account the “current cost structures,” a person familiar with the matter said.

    “If the telecom regulator will only look at the change in incremental costs of transmitting a call and not take into account the historical costs which incumbent telecom operators have been paying over time, then it will benefit operators who have not had to bear historical and regulatory burden,” Rajan Mathews, director general of the Cellular Operators Association of India, a GSM industry grouping, told ET.

    Trai’s planned review comes as telcos increasingly switch over to internet protocol-based networks using optic fibre from systems that were built with copper cables. IP-based networks typically require lower capital and operating costs and are more efficient, experts said.

    While Trai’s current IUC rules factor in the interconnection between older networks, the review will aim to bring IP networks into its fold. Earlier this year, the Department of Telecommunications amended telecom permits to allow interconnection of IP-based networks.

    COAI said established companies still have huge legacy costs, which the regulator must factor into its calculations while reviewing inter-connect charges.

    Mathews said a telecom operator earns about 43 paise per minute from a call and 14 paise is paid as termination charges.

    More than a year ago, Trai had slashed IUC for mobile-to-mobile calls by 30% to 14 paise and scrapped such fees for all calls made from and to landlines. The decision was challenged in court by India’s top three telcos, Bharti Airtel, Vodafone India and Idea Cellular.

    The three operators stand to lose the maximum revenue as they have the most number of subscribers and would garner a major share of the termination charges as most calls end on their networks. Smaller or new entrants would benefit as their costs from calls to other networks would come down.

    The bigger telcos are wary that the upcoming review may further hurt their revenue, especially as they could enter into a tariff war with the imminent entry of Reliance Jio Infocomm.

    The IUC paper could well be the next battleground between the new and established carriers, with the former likely to back a further cut and the latter against it. Airtel has asked the court to direct Trai to fix termination charges by applying the cost-based and work-done principle on a non-discriminatory basis.

    Vodafone has claimed that the regulations are illegal, arbitrary and in gross violation of the principles of natural justice, which is beyond the functions of the regulator.

    Vodafone argued that termination charges cannot be fixed at zero when costs are incurred by the terminating operator and therefore, the regulation fixing the charge as zero is ultra vires the provisions of TRAI Act.


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