1. forum
What are the key issues regarding intercon-
nection faced by the incumbents as well as
new operators?
Inderpreet Kaur
The interconnection issues being faced by
the industry stem from competition/regu-
latory and technical challenges. The regu-
lator has taken a light-handed approach to
tackling competition issues, while opera-
tors have been mandated to use reference
interconnection offers (RIOs) as a stan-
dard tool for arriving at fair and reason-
able interconnection agreements. The
terms of interconnections are left open for
the parties involved. The interconnection
seeker can either accept the conditions in
the RIO or negotiate more favourable
terms. The regulator will only intervene in
case of a complaint. Interconnection
between service providers is also subject to
the technical feasibility and integrity of the
networks involved. For instance, inter-
networking between circuit-switched and
IP-based networks requires parties to
install additional equipment.
Brijendra K. Syngal
Interconnection forms an integral part of a
telecom licensee’s business and is at the
heart of telecom services. It entails the
linking of two or more networks for mutu-
al exchange of traffic. The unified licence
agreement mandates every licensee to
grant interconnection, if and when any
request is made by another service provi-
der. As per the latest regulations governing
interconnection, a termination charge of
Re 0.14 per minute is levied on wireless to
wireless calls based on the calling party
pays (CPP) principle. On the other hand,
no termination charges are levied on calls
made from one landline to another, or
from a mobile to a landline.
TRAI wants to abolish termination
charges to encourage the deployment of
newer technologies like VoLTE and inter-
net telephony. Further, TRAI believes that
termination charges work as a disincentive
to the deployment of IP-based telecom
networks by new operators as termination
charges comprise a significant amount of
revenue for incumbent operators.
In our view, it may be difficult to com-
pletely do away with termination fees.
However, these could be reduced and bro-
ught in line with international standards.
Dr Mahesh Uppal
A consumer on a service provider’s net-
work cannot connect with consumers on a
different operator’s network if the two ser-
vice providers do not interconnect their
networks. The problem is even more
severe for a new service provider. While it
has a strong need to connect its network to
that of the incumbents, the latter have lit-
tle incentive to connect to a new network
with few customers. Indeed, they typically
resist competition by withholding inter-
connection or not providing sufficient
capacity or charging too much to do so.
So, the issues in interconnection are lack
of transparency, fair access, time taken to
provide the allocated capacity, the price
charged and the location of the intercon-
nection points.
How can TRAI ensure fair and speedy inter-
connection arrangements between service
providers? What modifications should be
made in the existing framework?
Point of Contention
Industry debates key interconnection issues
Over the past few months, interconnection-related issues have emerged as a new area of debate in the telecom industry. Recent entrant
Reliance Jio Infocomm Limited has accused the incumbents of stifling competition by delaying the release of interconnection points.
Meanwhile, the Telecom Regulatory Authority of India (TRAI) has proposed to do away with termination charges. While the regulator
believes that such a move will encourage the proliferation of new technologies like voice over long term evolution (VoLTE), the incum-
bents are opposing the idea as they derive a significant amount of revenue from such arrangements. Industry experts share their views
on the key issues and concerns related to interconnection, the existing interconnection usage charge (IUC) framework and the inter-
connection models prevalent globally...
Analyst, Asia Pacific,
Ovum
Inderpreet Kaur
Senior Principal,
Dua Consulting
Brijendra K. Syngal
Director,
ComFirst
Dr Mahesh Uppal
38 tele.net | November 2016

2. forum
39tele.net | November 2016
Inderpreet Kaur
TRAI has put in place quality of service
(QoS) requirements for ensuring that cus-
tomers do not face frequent call drops. In
terms of ex-post requirements, TRAI can
impose stiff penalties on operators failing
to meet the QoS requirements. In case of
interconnection disputes, wherein service
disruptions directly impact consumers,
regulators are expected to act in a timely
manner and aid in identifying more effi-
cient means of resolving disputes.
Brijendra K. Syngal
Cost-based termination charges should be
adopted for domestic termination charges.
One of the reasons for suggesting cost-
based termination charges is to compen-
sate operators, who have invested heavily
in capital expenditure, to complete calls
originating from smaller networks for
maintaining a consistent quality standard.
Dr Mahesh Uppal
TRAI has already put in place an unam-
biguous pricing regime by fixing the IUC.
It has also done well in creating a frame-
work for all operators with significant
market power to publicity display RIOs
that lay down the technical and other
terms for operators to interconnect with
them. However, TRAI must do a better
job at monitoring the other aspects, espe-
cially whether the incumbents are compet-
ing fairly and offering adequate capacity
within a reasonable time frame.
What are your views on revising the IUC?
Brijendra K. Syngal
IUC is payable by one operator to another
for using each other’s networks, especially
for receiving calls terminating on their net-
work. TRAI issued its first telecomm tariff
order in 2003, spelling out the IUC. The
IUC was first revised in 2004 when TRAI
recommended flat charges of Re 0.30 per
minute, irrespective of the distance. The
rates were again revised in 2009, when they
were pushed down further to Re 0.20 per
minute. But this was challenged by some
telecom players in the Supreme Court. The
matter was subsequently settled and in
2015, the IUC was again revised to its cur-
rent level of Re 0.14 per minute.
In our view, the entire IUC review
exercise is superfluous and unnecessary
since the existing charges were put into
place on March 1, 2015 and the next
review is scheduled for 2017. This exercise
appears to have been done for the benefit
of some new telecom players, ostensibly
because of VoLTE/IP technology.
Dr Mahesh Uppal
IUCs need more careful consideration
than they are receiving currently. While
there may be a good case to ensure that
interconnection is not delayed or provided
in insufficient capacity, there is little evi-
dence that IUCs in India are a barrier to
competition. Lowering these charges will
not necessarily increase consumer welfare.
It may discourage expansion of networks
in rural areas since that would reduce
incentives for those investing there.
What are the international practices with
regard to interconnection? What are the key
learnings for India?
Brijendra K. Syngal
The US has adopted a bill-and-keep (BAK)
framework for all telecom traffic exchanged
with local exchange carriers as part of an
effort to reduce arbitrage practices such as
traffic pumping and phantom traffic,
encourage the deployment of IP-based net-
works, and reduce artificial competitive dis-
tortions between wireline and wireless car-
riers. Under the BAK framework, also
called the net payment zero framework,
telecom service providers (call originators)
do not have to pay any termination charges
to the receiving interconnecting service
provider. Hence, there is no share of rev-
enue from the call originating company to
the called destination company. The origi-
nator bills, keeps the entire money and
shares nothing with other operators.
Meanwhile, in the European mobile
telecommunications sector, the wholesale
markets have traditionally applied the CPP
principle, in which an originating network
pays the terminating network a charge
called the mobile termination rate (MTR)
or fixed termination rate (FTR) for calls to
the terminating network. The MTR paid
under the CPP model, therefore, acts as a
cost floor to retail pricing, preventing a lo-
wering of prices. The CPP model leads to a
high level of regulatory activity aimed at
capping the MTR at a competitive level,
which inevitably acts to reinforce the cost
floor rather than being pro-competitive.
The present consultation paper floated
by TRAI looks at the possibility of moving
to the BAK regime. The paper argues that
fixing termination charges in VoLTE/IP is
complex and hence debatable. In addition,
TRAI believes that termination charges
work as a disincentive for telecom operators
to deploy IP-based networks – which is the
future of telecom. In our view, this under-
standing/belief of TRAI is a very superficial
argument and does not hold much water.
Dr Mahesh Uppal
Regulators across the world recognise the
importance of interconnection. There is a
concern about high IUCs, a problem that
India has handled rather well. Their focus
is now on IP interconnection. Overall,
there is a greater reliance on markets and
on ensuring that players with market
power do not abuse their position. ▲
“The interconnection issues
being faced by the industry
stem from competition/regula-
tory and technical challenges.”
Inderpreet Kaur
“It may be difficult to com-
pletely do away with termina-
tion fees. However, these could
be reduced and brought in line
with international standards.”
Brijendra K. Syngal
“TRAI must do a better job at
monitoring whether the incum-
bents are competing fairly.”
Dr Mahesh Uppal