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Supreme Court set to deliver judgment on termination charges

A long standing and bitterly fought battle over ‘call termination charges’ between big operators on the one side and smaller operators on the other is drawing to a close. The end of the legal battle may also bring down call rates for consumers to the 10-15 paise per minute range from the current 28-40 paise.

After nearly three years of controversies, including legal hearings for nearly two, the Supreme Court of India is poised to deliver a judgment that will have far-reaching consequences on the Indian mobile sector.

All sides, including the operators, the Telecom Regulatory Authority of India (TRAI) and the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) have finished their arguments in the crucial case filed by the TRAI in 2011.

The Supreme Court is expected to give its final judgment on the matter in the coming days.

If the court rules in favor of the TRAI, call rates will plunge further from the current 30-to-60-paise-per-minute levels to about 15-30 paise per minute or so.

At the heart of the matter is the question of how much it costs to connect a mobile (or landline) subscriber to a call. While the cost was estimated at 20 paise per minute in 2009, the TRAI wanted to abolish the so-called ‘termination charge’ altogether in 2011.

However, alarmed at the move, some operators approached the telecom disputes redressal body TDSAT, which quashed the regulator’s decision. In response, the TRAI approached the Supreme Court, arguing, among other things, that it was fully within its right to determine how much, or whether, termination charges should be levied by operators from each other.

To support its argument against the TDSAT ruling, the TRAI argued that the TRAI Act gives it the power to “regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunications services.”

It asked whether the TDSAT has the “power, competence and jurisdiction” to exercise powers of judicial review over the regulations framed under the TRAI Act.

The TRAI has already faced a setback in the case. Exactly a year ago, it filed an application with the Supreme Court, seeking permission to notify the regulation relating to revised termination charges, also called Interconnection Usage Charges or IUC.

However, the Court refused to grant permission in an order dated 13.04.2012.

The TRAI originally wanted to halve termination charges to 10 paise per minute by January 2012, and abolish them altogether by 2014.

Abolishing termination charges are good for low-tariff operators, as most of their customers tend to use their connections primarily to make calls. It is, however, bad for big, incumbent operators like Bharti Airtel, Vodafone and Idea Cellular as, on a net basis, their customers tend to receive more calls than they make.

In other words, termination charges result in a net inflow for the older operators, and a net outflow for the low-tariff operators.

Not surprisingly, among the most scathing critics of TRAI’s plans to abolish the charge were operators like Bharti Airtel, Vodafone and Idea.

Strongly supporting TRAI were Uninor, which accused bigger operators of conducting restrictive trade practices, Mukesh Ambani’s Reliance Industries, which also vehemently opposed the incumbents, and even the CDMA operators, who too favored a cut in termination charges.

The main reason for opposing termination charges is that they are currently the biggest impediment to truly reducing call charges. Call rates have fallen from several rupees per minute ten years ago to about 30-60 paise per minute at present.

However, even the cheapest operators today, such as Videocon, cannot bring the tariff below 25 paise per minute because it has to pay 20 paise to the network on which the called subscriber resides. In other words, if a Videocon subscriber in Jammu calls an Airtel customer in Kerala, Videocon will have to carry the call all the way from the subscriber’s phone to Kerala for 5 paise, but pay 20 paise to Airtel for providing connectivity in the last leg.

Operators like Uninor pointed out that the same companies who claimed that it costs 20 paise to provide the last leg were themselves offering national long distance calls for as little as 10 paise if that call was made end-to-end on their network. They argue that the actual cost of originating, carrying and terminating a call, therefore, is only about 10-15 paise, as evidenced by such special on-net schemes.

In other words, if termination charges are done away with, mobile tariffs can fall as low as 10 paise per minute for national long distance (STD) calls, they argue.

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