Lower termination charges to soften telecom tariffs

Written by Anandita Singh Mankotia | New Delhi | Updated: Dec 30 2008, 05:47am hrs
Telecom tariffs are set to decline further as termination charges are set to come down in the days to come. The Telecom Regulatory Authority of India (Trai) will set the ball rolling on Tuesday by starting a consultation process to review the termination and the carriage charges, which form part of interconnect usage charge regime. While lower termination charges would lower local call rates, a downward revision of the ceiling on carriage charge would further bring down the STD tariffs.

The department of telecommunications (DoT) had earlier written to the regulator that termination charges be brought down to Rs 0.10 per minute and gave the declining costs and consistently increasing traffic as the basic reasons for the same. Currently termination charge stands at Rs 0.30 per minute.

The service provider from whose network a call originates pays termination charges to the service provider on whose network the call ends. For instance, a user if dials any other service providers number from a Vodafone number then Vodafone would have to pay a termination charge to the latter.

The move would prove beneficial to the new operators such as Loop Telecom, Swan Telecom and Datacom since the bulk of traffic originating on their subscriber base would be terminating on the incumbent operators such as Airtel and Vodafones network since the former would have lesser network than the latter.

DoT had also asked the regulator to review the reduction in the termination charges on a priority basis. Stating that the termination charges are a function of traffic hence high increase must necessarily result in declining termination charges the DoT had sought to make the termination charges more cost-based and in tandem with the current market conditions. In fact the state- run, BSNL had represented to the DoT that less cost and increase in the traffic justify a downward revision of the mobile termination charges and had suggested the reduction of ceiling to Rs 0.10.

The regulator had fixed termination charges for both fixed and mobile services at the same rate of Rs 0.30 in 2003 on the basis of the cost data of a couple of years submitted by various service providers then. The DoT felt that much had changed since then; competition had increased, traffic had multiplied several times and investments in infrastructure were also being ramped up. Which coupled together made a strong case for reduction in the ceiling.

However, while initiating a pre-consultation process with the operators, Trai had said that the entire exercise is a complex, time consuming one requiring a total review of the IUC regime.