Interconnection charges should be based on costs, Sunil Mittal tells TRAI

Sunil Bharti Mittal, Founder and Chairman of Bharti Airtel, has urged the telecom regulator to continue with the existing interconnection regime and reject the ‘Bill and Keep’ formula proposed by Reliance Jio.

In a rare letter to TRAI, Mittal said, “The current interconnect usage charge (IUC) of 14 paisa is already below cost and it will be in fitness of things that while taking a final decision the Authority upholds the principle of compensation of work done by each operator and the IUC is set at costs discovered through a fair and transparent mechanism. ‘Bill and Keep’ should be rejected and India should not be subjected to a regime which is alien to the mobile industry the world over.”

Mittal’s letter comes amid a debate within the industry, initiated by TRAI, on the future of interconnection charges. Under the current regime, the operator on whose network the call originates pays 14 paisa to the operators on whose network the call terminates. This money is paid because the operator, on whose network the call ends, carries the call on its network from an exchange to the end user. This requires the operator to invest in setting up infrastructure.

Mittal said that payment of interconnect charges does not come in the way of cheaper consumer tariffs and it ensures that operators continue to make investments in networks to ensure voice calls are completed satisfactorily.

However, newer operators such as Reliance Jio has been pushing for a ‘Bill and Keep’ model wherein the interconnection charge is reduced to zero. RJio has a greenfield 4G network that allows it to offer voice calls practically at zero cost.

If this model is adopted, incumbent operators stand to lose on the termination fee they collect. That’s because the incoming calls into an incumbent operator’s network is always higher than the incoming calls into a new operator’s network.

As a result a new operator ends up being a net payer of termination fee.

Mittal justified this fee on grounds that it was globally accepted norm, “I am at a loss as to why TRAI should be considering a ‘Bill and Keep’ regime in India as one of the options and break away from the globally well-established practice,” Mittal wrote in the letter adding that on one hand the regulator was exploring the option of reducing the termination rates for domestic calls to zero and on the other it had not even mentioned about similar charges on international calls. Currently, in the international calling segment, operators pay between 1 and 30 cents for calls going out of India and international operators pay 53 paisa for calls coming into India.

“The TRAI is not even debating the issue (IUC on international calls), therefore, confirms the Authority’s acceptance to the principle that IUC is indeed a settled global practice built on fair and equitable settlements for work done by each operator for carrying each other’s calls,” Mittal said.

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