When you make a call, Interconnection Usage Charges (IUC) is what your telecom operator must pay the operator that your friend uses. Telecom Regulatory Authority Act, 1997, gives TRAI the authority to fix this amount.
In 2003, IUC for local calls from mobile to mobile was 40 paise per minute. This became 20 paise since 2009 basis Fully Allocated Cost (FAC) In 2011, TRAI published a consultation paper. After public hearing it filed an affidavit in the Supreme Court, convinced that IUC be brought down to 10 paise in 2012 and zero in 2 years. Reduced to zero, it would be called ‘Bill and Keep.’
Advantages of lower IUC and ‘Bill and Keep’ are: improved capacity utilization and overarching consumer interest. Three years later, the recommendations languish inside a Government file. Instead, a new consultation paper has been floated in November 2014. (J.S. Sarma was TRAI Chairman between May 2009-May2012 and the present Chairman took over from him.)
Why the TRAI board approved another consultation paper on the same subject isn’t known. Also, how Mr Sarma’s recommendations were wrong or why they can’t be implemented. The ‘live’ consultation paper stops at saying that in November 2011, recommendations were submitted to the SC.
India already has a high ratio of IUC to retail price. We’re at 40 per cent, compared to <10 per cent in the UK and <1 per cent in China. High termination rates are anti-competitive, even harmful to public interest. Incumbent operators subsidize on-net (your network to your own network) traffic leading to discriminatory practices and non-level playing field for new entrants.
Why Bill and Keep:
An operator sets up a network for acquiring you to originate calls from her network. The business plan is basis income from tariff for calls you originate - not income from call terminations!
IUC punishes new investors. It is also a barrier to cut in tariffs. Vodafone in one of its plans offers a tariff of 30 paise per minute for Voda to Voda calls and 45 paise per minute for calls to any other operator. Tariff is 50 per cent more only because Vodafone has to pay IUC. Ironically, the company has reportedly asked for hiking IUC to 35 paise per minute. On net calls being priced less than off-net calls (calls originating in your network and terminating in your friend’s) is the effect of IUC.
There’s more. Data usage and traffic is up by leaps and bounds. There is no IUC for data traffic termination. Voice when carried in Internet Protocol (IP) mode is data. IP-based voice calls are up by leaps and bounds. So much that the day isn’t far off when voice will be carried entirely in IP. In that situation there can’t be any IUC.
IUC has fallen over the last 10 years wherever regulators are smart. Europe dropped at a compounded annual growth rate of 30.6 per cent (-ve) over 2009-2014. Many have moved to a pure long Run Incremental Cost (lRIC) model - an envisaged glide path being ‘Bill and Keep.’ Simply said, India’s FAC method looks dated save for Finland, Brazil, and very few others.
Tech evolutions / IP-based networks:
New technologies and diminishing boundaries dent the need for interconnect charges. Traditional distinctions between fixed and mobile voice services, and between voice and data services, are becoming irrelevant too. There’s a growing and universal trend towards IP-based networks.
This makes an interconnect regime irrelevant. Extending regulations from circuit-switched networks to IP networks is regressive. Cost drivers in these next-gen networks will be bits not minutes. Future IP-based networks will necessitate ‘Bill and Keep’. Voice will be delivered in the data packets on an IP Network. There can’t be any termination charges in a data network.
A relentless trend (read China) of lowering termination rates to near-zero isn’t hard to copy. ‘Bill and Keep’ is as essential for China as it is for ‘Digital India’ where every Indian will have a smartphone by 2019 and he/she shall use it as delivery mechanism for all governmental schemes – the key focus being broadband highways, mobile connectivity, e-governance and public internet access.
The unifying factor is holistic deployment and ubiquitous access of information and communication technologies (ICT). Worldwide, ICTs are reshaping the world’s economies, governments, and societies. The backbone is an all-pervasive broadband, both ubiquitous and affordable – affordable coming first.
IP-based networks will be the wings beneath broadband. They will help telcos converge network infrastructures, provide huge bandwidth, consolidate terminating traffic, and reduce costs. IP-based networks connect on the principle of free peering. These networks will necessarily be under a ‘Bill and Keep’ regime. To be serious about Digital India, the present TRAI can simply rewind to what it knows since 2011!
(The columnist is a former business editor and with RIl. Views are personal. Twitter: @therohitbansal. #DailyPioneer)