Telcos Are Concerned About More Financial Strain As TRAI Proposes To Eliminate Tariffs For USSD-Based Services

Private telecom operators have requested the sector regulator to implement a graduated reduction in charges for unstructured supplementary service data or USSD-based mobile banking and payment services, noting that making such services free overnight would put the debt-ridden industry under more financial strain.

They have requested that the Telecom Regulatory Authority of India (TRAI) create a suitable mechanism to compensate telcos by allowing them to recover costs and removing existing quality of service (QoS) obligations if the tariff for such USSD-based services is suddenly reduced to zero from the current 50 paise per session.

Bharti Airtel said in its submission to TRAI: “Charges of USSD service for mobile banking should be brought down in phases from current 50 paise to 5-10 paise, but in case the Authority plans to reduce it to zero, it may then create a suitable mechanism for fair compensation of telcos by concerned stakeholders.”

According to Bharati Airtel, it recognises the need for financial inclusion and keeping USSD service rates reasonable, but that tariffs must ensure that telcos "can recover the cost of providing such services to customers," failing which the move will add to the telecom sector's burden.

The USSD service is a transaction or inquiry service that uses a short code. Many feature phone users use the service to check their bank account balances, peer-to-peer money transfers, cash withdrawals and deposits from banking correspondents in small towns and rural areas because the service does not require a data connection.

TRAI recommended eliminating fees for USSD-based mobile banking and payment services in its proposed Telecommunication Tariff (sixty-sixth Amendment) order in late November, in an effort to defend the interests of feature phone users and enhance digital financial inclusion.

In the draft, TRAI said: “Following a request from the Department of Financial Services to the Department of Telecommunications in this regard, the Authority analysed the issue from various aspects and is of the view that in order to protect the interests of the USSD users and to promote digital financial inclusion, rationalisation of USSD charges is required.”

Vodafone Idea stated that USSD services incur both capital and operational costs in terms of network resources, IT/billing platforms, human resources, manual activities, and upkeep in accordance with regulatory and licencing standards, adding that "costs per unit would be substantial" if the volume is taken into account.

Since USSD-based mobile banking is offered by banks, the expense of providing such services should ideally "be borne by banks" rather than telecom service providers, according to the telecom joint venture between Britain's Vodafone Plc and India's Aditya Birla Group. Vodafone Idea stated in its response to TRAI that setting a precedent for mandating a service free of charge for the other sector would be a “precarious trend” with substantial financial ramifications.

However, if TRAI eliminates the USSD session charge, the company claims that all existing QoS responsibilities, as well as any other regulatory and licencing concerns, should be eliminated.

Meanwhile, the Cellular Operators Association of India, which represents Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea, said that if TRAI intends to make USSD-based services free, telcos should be compensated by the pertinent sector stakeholders for the service given, with no cross-sector subsidisation.

In addition, it said: “Since the objective is to encourage the banking sector and financial inclusion, TSPs (telecom service providers) should receive reimbursement from banks.”

But as reported, TRAI's call for USSD-based costs to be rationalised is based on the fact that the current rate of 50 paise each session is several times higher than the average price for a one-minute outbound voice call or an outgoing SMS. Despite significant improvements in success rates, it stated this was proving to be a barrier to growing the volume of transactions.

Given the prevalence of USSD-based mobile banking among rural, poor, and low-income groups, TRAI claimed in its proposed tariff revision order that consumers were being charged for both successful and failed transactions, which added to their financial burden.