What is the issue?
The recent decision of TRAI is seen as an extensive action rather than a practical one.
What is the recent decision of TRAI?
- The Telecom Regulatory Authority of India slashed the interconnection usage charge (IUC).
- Charges for calls terminating on another network is 6 paise per minute from October 1.
- It planned to abolish it for all local calls from 2020.
What is the reason for this move?
- TRAI has argued without this move Economic benefits associated with market expansion and liberalisation will be limited.
- Since the cost of terminating a 4G call is relatively small compared to the cost of terminating a call using 2G.
- TRAI is right in arguing that its mandate also is to promote technologies with lesser costs.
- The technology used for carrying calls has changed or is changing rapidly from circuit switching (2G) to packet switching (4G).
- The timing of the TRAI move could have surely been better in view of the severe financial stress that the telecom industry is facing.
How this new decision impacts industries?
- Reduction in the IUC may have resulted in declining profitability for leading telecom companies which is still using 2G calling.
- Reliance Jio, has been able to bring down cost by using the latest technology, thus it is in a safer zone.
- Even though RJiois asking for abolition of the IUC right away.
- If all telecom operators were more or less of equal size, net revenue from termination charges anyway would have been zero.
- But that is surely not the case, TRAI could have perhaps exercised more caution before doing what it did.
Source: Business Standard
