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TRAI shouldn’t force 4G adoption through regulation

The Telecom Regulatory Authority of India’s move to review its earlier decision to end the Interconnect Usage Charge by January 2020 is a tacit admission that it has erred in setting a realistic roadmap to bring the interoperator fee to zero. The regulator’s approach on this front from 2017 onward has been flawed on many counts. Two years ago, the regulator dropped the IUC charges by 55 per cent to 6 paise a minute and set January 2020 as the deadline to bring the fee down to zero. The basic assumption made by the TRAI then was that reduction in interconnect charges will encourage mobile users to shift from legacy technologies like 2G and 3G to more efficient 4G services. Until then, competitive market forces acted as a barometer to gauge the needs of consumers, not only in terms of services offered but also for technological evolution. Based on this principle, incumbent operators had been gradually shifting from a voice-only network to a voice plus data network, combining 2G, 3G and 4G technologies in a way that best suits a customer’s needs. By reducing the termination rates from 14 paise to 6 paise, TRAI wanted to use the interconnection regulation to force the entire industry to shift to just 4G-based networks. The regulator also expected that such a move would make telecom networks symmetrical in terms of an equal number of incoming and outgoing calls on every operator’s network, thus making it ideal to move to a zero interconnect fee regime.

It is now clear that the estimates made by TRAI were incorrect; neither have users shifted completely to the 4G platform nor have the networks become symmetrical. Even though 4G usage has picked up considerably in the country, 65 per cent of subscribers on incumbent operators’ network are still using 2G/3G services, as mobile handsets are more affordable compared to 4G smartphones. While Reliance Jio, the only operator with an all-4G network, has gained 32 per cent share of the overall telecom market, its share of the outgoing to incoming calls is still at 65 per cent, compared to 85 per cent in 2017. Zero interconnect fee can be introduced only when this goes down to 50 per cent. For that to happen, the number of 2G/3G subscribers on incumbent operators’ network has to come down further. But a large section of Indian users still consumes basic 2G voice services. To cater to this category of users, mobile operators have had to invest heavily in rolling out GSM networks to the remotest part of the country. This investment was being partially recovered through the interconnect charges. This can be removed only when incoming and outgoing calls for all operators become equal.

The consolidation in the Indian telecom sector has ensured that only three large operators remain in business. As 4G adoption increases, the networks will achieve symmetry. This should not be forced through regulation. TRAI should review its earlier assumptions.

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