Will TRAI’s Carrot On Interconnect Charge And Stick On Call Failures Work?

In the ongoing tussle between incumbent telecom operators (telcos) and new entrant Reliance Jio (RJio) over supremacy in the cut-throat Indian market, the first round seems to have gone in favour of the latter.

The Telecom Regulatory Authority of India (TRAI) has said that it will send show cause notices to incumbents on call failures of RJio customers, since the number of calls failing breach the prescribed limit of 0.5 per cent. License conditions under which telcos operate in India specify the upper limit for call failures; if call failures exceed this ceiling, the errant companies have to explain why. Going forward, it is possible that TRAI may also impose a penalty on incumbents for not facilitating calls to connect on their networks.

While taking on incumbents, TRAI chairman R.S. Sharma has also said that he would not hurry the process of consultation on interconnect usage charge (IUC), the second big battle ground between the incumbents and RJio. IUC is right now fixed at 14 paise per minute, payable by the operator from whose network the call is originating. Incumbent telcos want this fee increased whereas RJio has been in favour of abolishing it all together. A long consultation process could spell some relief for incumbents, who are already worried about RJio’s impact on tariffs besides the looming expenses on the upcoming spectrum auctions, as this article pointed out. Going by what Sharma said on the twin issues of points of interconnection (PoIs) and IUC, it seems TRAI is looking to adopt a carrot and stick policy.

Take the PoI issue, where TRAI is brandishing the stick. The incumbent telcos - market leader Bharti Airtel, Vodafone and Idea Cellular - have been shrugging off RJio’s incessant complaints of massive call failures ever since it began operations this month, saying they had provided enough PoIs initially and have subsequently increased these. RJio has been routinely debunking these claims. The matter reached TRAI after complaints from RJio did not die down, prompting the regulator to seek call details from all parties concerned.

Now, after analysing call details for the period between September 15 and 19, Sharma has made it clear that call failure was well beyond the accepted limit during these five days. Put simply, this means the calls originating from the RJio network and being made to the networks of any of the three incumbent operators were failing because of inadequate PoIs being provided by the incumbents.

In this interview to CNBC-TV18, Sharma says call failure is not really an issue between the operators as much as it is for customers: “Ultimately for us, for the TRAI, customers are the most important stakeholders and I don’t really distinguish between customers of operator A or operator B. For me every customer has equal right and therefore I would request and urge first and then of course as I said it doesn’t mean that we will not take any appropriate steps, legal steps required, but my hope is that this whole issue of failure of calls on the point of interconnect gets resolved as soon as possible in the interest of the customers.”

This article in Business Standard says of the 61.3 million call attempts made to the Airtel network by RJio customers on 22 September, 48 million or 78.4 per cent failed. The failure on the Vodafone network was higher at 84.1 per cent with 39.5 million out of 46.9 million calls failing, while 33.6 million out of 43.9 million calls made to Idea users failed. The problem got exacerbated during peak hours. RJio has alleged that 81.5 per cent of the 4.3 million calls made to the Airtel network during peak hours failed while 87.8 per cent out of 2.6 million calls to Vodafone dropped. Of the 2.8 million calls made to Idea network during peak hours, 82.2 per cent failed.

But on IUC, TRAI appears to be holding out a carrot. In the CNBC-TV18 interview quoted earlier, Sharma also assuaged fears of the incumbents over IUC. Already, the date for comments on the consultation paper where TRAI has proposed abolition of IUC has been extended. The TRAI chairman indicated why this process won’t be over in a hurry and could take up to six months to be completed. Time enough for incumbents to build their case.

“Please understand that TRAI is one of the few institutions in the country whose processes are completely transparent and completely consultative. Short-circuiting any of these processes will not be doing justice with the subject. So, I am not one of those people who say let us do it yesterday. We will do it in a proper way, consult every stakeholder, get their comments, publish their comments on the web, get the counter comments, have an open house discussion, maybe have more than one open house discussion because this is for example, if there are important issues. And then come out with the result.”

The IUC is a major revenue source for incumbent telcos, which still charge for voice calls. This article suggests that abolishing IUC could bring down mobile tariffs by a third. Now that RJio has said it will not charge for voice calls ever, continuing with IUC (at any rate) could mean that it would have to subsidise each such call. As for incumbents, an estimated Rs 25,000 crore revenue could be at stake if IUC is abolished.

Many telecom support RJio’s contention that IUC should be abolished. India is now a mature telecom market and in several other such markets across the world, there is no IUC anymore. Abolishing these charges will help consumers who could possibly enjoy lower tariffs, whatever be the outcome for telcos’ revenues.

In the end, the incumbent telcos need to counter changes in the market and the arrival of a significant competitor through smart business strategies. Bharti Airtel and Vodafone have already begun offering data packs at prices lower than RJio and more such initiatives are expected in the future. Not providing PoIs to RJio customers and lobbying for a raise in IUC when the sensible thing to do would be lowering it or abolishing it - these are petty issues to fight over.