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When TRAI came out with the Telecommunications Inter connection Usage Charge (IUC) Regulation 2003 in January, it was a fundamental break from the past as far as fixed–mobile interconnection in India was concerned. The new regime appeared particularly good for the private GSM mobile operators who have long been at the receiving end of the interconnection regime that favored the incumbents. For the first time, private operators were going to receive a charge for terminating local calls from fixed phones. It was precisely for this reason that the IUC regulation did not find favor with the fixed and limited mobility operators.

New IUC, New Tariffs
It is obvious that once the new regime comes into effect from 1 May, fixed operators (particularly the incumbents BSNL and MTNL) are likely to be major losers. As for the impact on BSNL, SD Saxena, director (finance), says "The impact will depend on the nature of traffic. We might lose in the short run, but there could be churn towards wireless."

This is simply because the incidence of fixed to mobile calls is much higher than that of mobile to fixed calls. This asymmetry in traffic would mean that fixed operators would end up paying more to mobile operators than what mobile operators would be paying to fixed operators for mobile calls terminating on fixed networks. And since fixed operators have not been paying anything to mobile operators earlier this would be a new burden on them.

Fixed operators had two options in this situation—either pass on the interconnection charge to the customer by rebalancing their tariff or chose to absorb the impact without burdening their subscribers with a new tariff. Incumbents appear to have preferred the latter. According to one of the alternative tariff plans introduced by BSNL, the existing rentals and local pulse rate have been retained at what they were earlier.

Other fixed operators are likely to follow BSNL and MTNL. An increase in basic tariff would have made fixed phone services look costlier than mobile services. This could have led to churn. However, as calling to fixed phones from mobile phones is going to be cheaper under the new regime, there would be an increase in mobile-to-fixed traffic. So fixed operators can look forward to making some money on this. However, since they were already making money earlier (Rs 1.20 on every three-minute call terminating on their network), the new termination charge may not make much difference to their existing revenues.

Users Are Biggest Beneficiaries
Despite some amount of acrimony among operators and the intervention of regulator, tribunal and even courts, it is the users who have come out with flying colors and benefited the most in terms of lower tariff, be it local or long distance.

Users are not bothered about technology, what they want is value for their money, and that’s what the new IUC and the accompanying tariff order seem to be ensuring. Now, whether it’s WLL or GSM, the end-benefits to users are not likely to be much different. And if that happens, the perceived ‘extra benefits’ of WLL will vanish in thin air.

And the Cellular Operators?
With the implementation of free incoming, cellular operators would certainly lose some revenue. The only other breather for them would be that the per-minute usage would go up. But there is also a feeling that the cost of operation would go up due to the inadequacy of the existing spectrum. The new IUC and the tariff order brings one big relief for cellular operators—the reduction in threat from WLL players. Now the fear of cellular operators of a large-scale churn from their network towards WLL may be unfounded, now that tariffs and benefits of both are at par.

Limited Mobility to be Costlier
The new IUC, even before it has been implemented, has started showing signs of its potential impact. Reliance Infocomm and Tata Teleservices are going to be the hardest hit once the new arrangement is implemented. The company is working overnight to find out ways to absorb the access charge that it is supposed to be passed on to cellular operators to terminate their calls on its network. It would be interesting to see if Reliance is able to deliver outgoing calls at 1.20 per 3 minutes once the new regime comes into play. As far as cellular operators are concerned, they stand to gain as the basic operators now will share part of their revenue for terminating their calls.

ISPs: Again Left Out?
IUC 2003 does not take into account one of the important contemporary realities—the growing usage of Internet (with dial-up being a popular connectivity option). The growth of the Internet has led to notable changes in the network usage habits. Most voice calls do not last beyond two minutes, but Internet sessions could last for hours. Time-based usage costs are not suitable for this kind of usage. This has resulted in increased demand for un-metered network usage charges in countries where traditionally network usage has been charged on time-based usage price structures, like in India. The demand for un-metered network usage charges has also been reflected in increasing pressure for capacity-based interconnection offers to replace the metered interconnection charges which are used in telephony in those countries with measured call prices. For example, UK requires incumbents to implement a flat rate interconnection offer for ISPs. Something of this sort is required in India also.

However, Internet does not seem to matter in the interconnect regime that TRAI wants to implement. Worse still, TRAI is still to decide as to whether ISPs are service providers (as such interconnection seekers) or customers (who must pay the interconnection charge).

Implementation Hurdles
The fact that settlement will be a major issue after the IUC comes into force is recognized even by TRAI. This stems from the inadequacy of service providers’ billing systems at the terminating end to identify the different distance categories of long distance calls to which an incoming call may belong.

It is a fact that there is no clearinghouse in place as of now. Operators are trying to work out an interim arrangement wherein settlement would be arrived at by mutual agreement, till the time a clearinghouse is put into place. Clearinghouses worldwide are third-party independent solution providers who keep track of calls made from one network to the other to facilitate the settlement of revenue. According to SD Saxena, director (finance), BSNL "We would want a third-party service provider to take up the job of arriving at the settlement."

What Next?
It is difficult to say what will happen after implementation of IUC regime. The new interconnect regime has for the first time tried to address the long standing demands of private operators on interconnection revenue sharing. Even though there are gaps in the new regulation and incumbents and private operators have not really welcomed it at least we can say that a beginning has been made. The new communication convergence bill which is pending in the parliament talks about the new Communication Commission of India formulating and determining interconnection based on equitable principles. It remains to be seen how the new bill impacts the current IUC regime.

New IUC and Tariff Order: Highlights
n New IUC regime and new tariff that has been announced are interdependent because the amount of ADC to be recovered through rentals and call charges depends on the tariff fixed for these.

n Tariff for domestic long distance above 50 km has been forborne subject to a ceiling of Rs 8.40 per minute. International long distance calls have also been forborne (no ceiling)

n All incoming calls on cellular phones would become free.

n If tariff do not cover average cost (including the cost of access deficit), it can be recovered from long distance tariff.

n Access deficit charge is payable only to the fixed line (for origination and termination).

n Access deficit charge is not applicable for WLL or cellular. This means that tariff for these calls could be reduced or ADC component contained in the long-distance call charges, which could be shared among these networks carrying the calls.

Sudesh Prasad and Ravi Shekhar Pandey