By Bloomberg

By Bloomberg

Trai proposal may result in free calls

Trai proposal may result in free calls

New Delhi: India’s telecom regulator has suggested that the charge telcos pay for transferring calls to each other’s network be gradually removed, a move that may lead to voice calls becoming free in a few years.

The Telecom Regulatory Authority of India, or Trai, has recommended that the so-called interconnection tariff be reduced to 0.10 per minute next year and 0.05 in 2013, a Trai official said.

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“Then from 2014, we have suggested that the sector move to a bill-and-keep system, where telcos keep what they would have ordinarily billed as interconnection charges," said the official, who declined to be identified.

By Bloomberg

“This meant that tariffs had to be more than 0.20 per minute," the Trai official said. If this basic cost is removed, telcos may eventually make voice calls free, earning all their revenue from data services, the official said.

Trai made the suggestion on Monday in a submission to the Supreme Court, which had asked it to carry out a cost-based study of interconnection tariffs following a dispute with telcos.

Most telcos did not agree with Trai’s stipulation of 0.20 per minute as interconnection charge in 2009. While state-owned Bharat Sanchar Nigam Ltd (BSNL) and established private telcos Bharti Airtel Ltd and Vodafone Essar Ltd wanted the levy to be higher, newer telcos wanted the charge to be just 0.01-0.10.

The telcos complained to the telecom disputes settlement and appellate tribunal, or TDSAT, which ruled in their favour and annulled Trai’s decision The regulator appealed in the apex court, which set TDSAT’s decision aside, but asked Trai to review the interconnection charge.

“We looked at four to five different models to figure out how much the interconnection charge should be," a second Trai official said, requesting anonymity.

According to the regulator’s calculations, the cost for interconnection is about 0.18 per minute, including capital expenditure, and around 0.15 per minute without it.

The regulator, however, decided that as telcos build the same network for both outgoing and incoming calls, “there is no additional cost involved", the first Trai official said.

“The move is being vehemently opposed by incumbent telcos like Bharti Airtel and Vodafone Essar as they net around 300-400 crore a year due to this charge. They use this money to subsidize on-net calls on their network as well as a leverage tool against newer, smaller operators," this person said.

A spokesperson for Bharti declined comment. A spokesperson for Vodafone couldn’t be reached. Rajan S. Mathews of the lobby group Cellular Operators Association of India, which represents the interests of first-generation telcos such as Bharti and Vodafone said the methodology used by Trai was faulty.

The first Trai official claimed that newer telcos, who have a smaller subscriber base, end up paying a significant portion of their revenues as interconnection charges. If the charge is removed, they are expected to drop their tariffs further, adding to the revenue pressure for older, larger telcos, he said.

The view is not shared by everyone.

“Tariffs have bottomed out at present and it is unlikely that they will go any lower," said Prashant Singhal, telecom industry leader at audit and consulting firm Ernst and Young. “Data revenues are not even 20% of the total revenues at present."