Telecom call

Telecom call

India's telecom regulator, Trai, on Tuesday ordered interconnection usage charges (IUC) to be cut beginning next month, from 14 paise to 6 paise a minute. Trai also said that IUC for all domestic calls should be removed from January 2020. In all probability this step will trigger a downward revision in tariffs and benefit all consumers. However, Trai's direction on IUC has been met with resistance from a section of the telecom industry which has asked the regulator to provide details on the manner it arrived at the new IUC.

IUC is a charge paid by the telecom service company of a caller to the receiver's service provider. It is meant to cover costs related to network usage. Introduced 13 years ago at 30 paise a minute, IUC has been lowered in phases. Even internationally, IUC has been trending downwards in key telecom markets such as UK. In this context, Trai's decision is welcome and should benefit consumers. However, the current decision has split the telecom industry with older players displeased with it. Financially, they will be temporarily affected as they carry costs associated with older technology. Despite this factor, Trai's decision makes sense for a couple of reasons.

India's telecom networks are in a stage of transition, gradually migrating to 4G which makes IUC redundant. In this backdrop, sticking to a static IUC regime discourages companies from hastening the transition as it removes a powerful incentive. Also, the current IUC regime design favours market leaders and thereby creates intrinsic rigidities in downward tariff revisions. Having said that, government must heed complaints of older operators who have had to pay the price of policy induced uncertainty. There is a case for government to help them tide over the current challenges as a competitive telecom market is in consumer interest.