The Interconnect Row Is Really A Battle For The Future 

Incumbent telecom operators are in a war of words with Reliance Jio (RJio) over providing an adequate number of points of interconnect. This would ensure that every customer making a call from the RJio network to others gets the call through.

RJio has accused incumbents of not providing enough such points of interconnect affecting as many as two crore calls being made from its network every day. This is a charge the incumbents have denied. As per license conditions, telecom companies are mandated to provide adequate points of interconnect for calls coming in from other networks for a fee which has already been determined by the Telecom Regulatory Authority of India (TRAI).

Failure to do so is equated with non-fulfillment of license conditions and the incumbents could attract penal action from TRAI. On 18 September, RJio had said in a statement that an “alarming” level of two crore calls are failing everyday between the RJio and Bharti Airtel networks. The comments came a day after Airtel said it would work towards releasing the points of interconnect “well ahead” of the contractual obligation. Based on the current traffic flow between the two networks, the proposed augmentation by Airtel would still only suffice for less than one-fourth of the required interconnection capacity, RJio said.

So why are incumbent operators, who are getting paid for each call at the standard prescribed rate, not providing adequate points of interconnect to RJio? As the situation stands now, the number of incoming calls to the RJio network would be far less than calls made from the RJio network to incumbents’ networks since RJio is a new entrant with far less number of subscribers than the incumbents. Put simply, this means the money that incumbents will earn by providing adequate number of points of interconnect will be far higher than what they would be paying to RJio.

So, on the face of it, it seems the incumbents are not really losing out in the current scenario monetarily. But the incumbents do not agree. Since the interconnect charge is a mere 14 paise per minute, the massive number of calls coming into the incumbents’ networks from RJio clogs their networks—as a result, throwing up the possibility of a reduction in traffic from their own customers. All this is happening for revenue which the incumbents find inadequate anyway.

Earlier this month, incumbent telecom operators had, in fact, petitioned to TRAI for a hike in the interconnect charge to provide adequate points of interconnect to RJio but their plea was not considered. As a consequence, incumbents such as market leader Bharti Airtel, Vodafone and Idea have been procrastinating on providing adequate points of interconnect to RJio customers. Now, TRAI has asked for call details from 15-20 September to sort out the mess. A Times of India report says that the regulator will take swift action for call failures in the RJio network.

Telecom analysts point out that the reluctance of incumbents to provide adequate points of interconnect is a smokescreen— what they are really worried about is not just inadequate revenue from the ‘tsunami’ of calls originating on the RJio network but also about the future when traffic from RJio is expected to grow manifold. An industry veteran notes: “This is not a fight for the present, this is escalation of an issue which the incumbents see developing after some time, when call asymmetry becomes the norm in favour of RJio. I see this matter reaching the courts, just as the call drop issue landed up there”.

Also, a proposal by TRAI to abolish the 14 paise per minute interconnect rate is also raising hackles. Incumbent telecom operators believe the the TRAI proposal (still at a consultation stage) could affect their revenues significantly. One would think this abolition makes sense since this will mean all operators will have more flexibility in reducing tariffs and this will ultimately benefit the consumer.

However, another analyst explained that RJIo has employed a network which has the “least cost” for carrying voice, but since the networks of incumbent telcos are older, they require significant incremental investments to provide adequate points of interconnect for calls from the RJio network. In a scenario where the interconnect charge could actually fall in the future (and not increase as incumbents want), it is likely that calls from incumbent telecom operators’ network to RJio’s will be higher. The incumbents don’t see the need to make incremental investments in their networks to offer points of interconnect, as of now.

Incumbents argue that they have invested for years in their networks and newcomers like RJio will be the only ones benefitting from an abolition of interconnect charges. This article in India Today explains why incumbents fear the abolition of the interconnect charge.

A telecom industry veteran pointed out that if TRAI does abolish interconnect charges, it would be a sensible move. “India is now a mature market, a problem would have arisen if the size of telecom operators were vastly different (when calls terminating on one network would be far more than on others).”

Predictably, Telecom Secretary J.S. Deepak seems unperturbed by all this. In this interview, he referred to how the tables were turned on the current incumbents when there were new entrants into the mobile services market.

“When BSNL was the incumbent and with new players coming in, there was this issue of these very players complaining that BSNL was not giving them PoIs (points of interconnection). Today, they are on the other side of the table. So, this is a normal pattern…..I expect this to settle down as well”.

Deepak did not comment on whether the interconnect charges should be lowered further— placing the ball in TRAI’s court.

Director at telecom consultancy ComFirst, Dr Mahesh Uppal, also said that the issue will be resolved eventually. “Both sides have an incentive to exaggerate their misfortunes. While brinkmanship cannot be ruled out, I do not see the dispute continuing indefinitely.”

Whether the dispute is settled soon through TRAI’s intervention or lands up in the courts will be known in a few days. If TRAI had acted decisively, when RJio was merely “testing” its networks these last few month, perhaps the issues surfacing now would have been addressed much earlier. Anyhow, this entire fracas also brings to fore the lack of preparedness of the incumbents in dealing with stiff competition on the the tariffs—especially data— that RJio promises to unleash into the market. It has promised free voice calls forever, deployed an advanced network where carrying voice calls is cheaper and is offering data at competitive prices.

Incumbents need to gird up their loins to fight competition by keeping their guns trained on consumer interests. As for interconnect charges, making them zero may hurt incumbents but would surely help consumers through lower tariffs.