Interconnection usage charges – Risk assessment

Telecom Regulatory Authority of India (TRAI) is reviewing the interconnection usage charges for telecom operators. As part of the ongoing consultation process, key telecom players recently presented their views to TRAI. We outline the contrarian stands of major telcos on key issues of termination and interconnect.

Incumbent GSM operators [Airtel, Vodafone, Idea] have argued for no change in the existing termination charge, have argued that cost based methodologies for arriving at termination charge are most efficient and are an international best practice. We note that the current termination charge of Rs0.30 per minute was arrived at in February 2004, using forward looking cost methodology.

Reliance Communications has favoured reducing termination charge to zero. RCOM believes that the termination charge is the biggest hurdle to further tariff declines. RCOM has favoured the “Bill and Keep” (BAK) interconnection regime. Under BAK, the originating carrier bills its customers for calls and keeps the corresponding revenue. The originating carrier does not compensate the terminating carrier for call termination expenses.

New entrants want the regulator to introduce asymmetric termination charges to help them counter the scale advantages of the incumbents. They argue that it will be difficult for them to match or undercut the incumbent operator’s “Onnet” call charges.

Author: Webmaster