The Telecom Regulatory Authority of India on Tuesday slashed mobile termination charges (MTC) by 57% to 6 paise per minute with effect from October 1, in a move that is likely to lead to a reduction in call rates.
The regulator added that these charges would be completely done away with January 1, 2020 onwards.
‘Prolonged battle’
Mobile Termination Charges (MTC), currently 14 paise, are payable by the operator whose subscriber makes a call to the operator whose subscriber receives the call, and directly impact the tariff.
The development comes on the back of a prolonged battle between the Mukesh Ambani-led Reliance Jio and the top three telcos — Airtel, Vodafone and Idea, over the issue. While the top operators had pitched for doubling the MTC “to recover their cost,” the newer rival had suggested zero charges and shifting to the bill-and-keep regime, under which operators bill their own subscribers for outgoing calls and retain revenue received.
“The reduction in the mobile termination charge is likely to yield consumer benefits,” TRAI said, pointing out that the average outgo per outgoing voice minute declined from 50 paise/minute in January-March 2015 to 31 paise/minute in January-March 2017, after the MTC was cut to 14 paise/minute from 20 paise/minute March 1, 2015, onwards.
TRAI said these charges worked as disincentive for deployment of new technology such as VoLTE and migration to IP networks by operators, where there are no interconnection charges.
Pointing at the rapid increase in use of OTT applications, the regulator said that cost of voice turns out to be fraction of a paisa/ minute on these applications and it will be virtually impossible for a telecom service provider to compete against these if additional cost in the form of MTC is imposed.
The BAK regime, it said, would encourage operators to invest in new technology and bring down the cost of voice services close to nil.
Industry sources said the operators are likely to challenge the regulation in court.
Bharti Enterprises Chairman Sunil Mittal, Chairman and Vodafone CEO Vittorio Colao in separate letters to the government and the regulator had said that any reduction in MTC will “destabilize the sector” as the current is already way below cost.
Reliance Jio had dismissed as “myth” the claim that incumbent telecom operators are incurring losses due to reduction in these charges and alleged that two of established operators had made “excess recovery” to the tune of nearly ₹1.2 lakh crore.