Incumbent Telcos versus Reliance Jio: Why so furious?

In a recent letter written by the Cellular Operators Association Of India (COAI) to the Department of Telecommunications (DoT), it has been alleged that Reliance Jio Infocomm Limited (RJIL) has been providing full-fledged services under the garb of ‘tests’, thus causing a financial blow to the incumbent operators..Why is COAI aggrieved?.The COAI, which is a lobby group for the telecom industry, in its letter dated August 10, 2016 to the DoT, has accused RJIL for, inter alia, bypassing regulations, gaming the interconnection usage charges (IUC) regime, predatory pricing and disrupting fair competition..The letter states that with a customer base of 1.5 million in its trial phase, over 85-90% of the total calls are now being originated from RJIL’s network, without any compensation by the IUC, in addition to choking the network of the existing operators..This also has a lot to do with the constant tussle between COAI and the Telecom Regulatory Authority of India (TRAI), this time in particular, in relation to its consultation paper dated August 5, 2016 [pdf] which seeks to change the IUC regime in India, to allegedly favour ‘newer entrants’..RJIL, has however refuted all allegations in its reply dated August 10, 2016..The existing regulatory landscape .To get to the heart of this controversy, it is important to understand the existing regulatory landscape with respect to the IUC regime in India..1. Telecommunication services are charged in two ways: To the customers (retail charge) and to the operators (wholesale charge). Customers may be further charged in two ways: Under the Calling Party Pays (CPP) Regime and the Receiving Party Pays (RPP) Regime. The CPP regime has been in force in India since 2003, following which the mobile tele-density leapfrogged from 1.01 in December 2002 to 81.18 in May, 2016.Wholesale charging too, can broadly be categorised into the following two regimes:.Calling-Party-Network-Pays (CPNP) Regime wherein, the originating Telecom Service Provider (TSP) pays termination charge for calls in the networks of the other TSPs. For example, if a Vodafone subscriber calls an Airtel subscriber, the calling party will pay call charges to Vodafone and Vodafone will in turn pay Airtel a termination charge for using its network.Bill-and-Keep (BAK) regime wherein a TSP does not have to pay any termination charge to its interconnecting TSP..India has, ever since the IUC Regulations came into force, been following the CPNP regime for wireless services. One of the components of IUC i.e. the termination charges, when first introduced, were between 15 paise to 50 paise per minute (depending on the distance), which were subsequently dropped to a flat rate of 30 paise per minute in 2004, and through a series of revisions were brought down to 14 paise per minute in 2015 through the Telecommunications IUC (Eleventh Amendment) Regulations, 2015 (2015 Regulations) which has been a matter of dispute by itself..2. Secondly, voice calls have traditionally been carried over public switched telephone networks using circuit switched networks (which is used in 2G and 3G), wherein communication takes place over a dedicated circuit. However, in recent times, some TSPs have built packet-switched circuits (which is used in 4G) which are routed independently of their respective destinations without any single dedicated networks..The TSPs have however abstained from used packet-switched circuits to provide VoIP services, mostly because they get to earn much more from the traditional route of circuit switched networks..TRAI’s Consultation paper .In the consultation paper, TRAI has suggested a departure from the existing CPNP regime to the BAK regime owing to difficulties with the IUP system when calls originate over public switched networks (CS networks) but terminate in IP-based network (VoLTE), where traditionally there has been no custom of levying termination charges. This of course is of particular significance now with RJIL’s VoLTE and BSNL’s FMT. Also, as noted in the paper, termination charges act as a disincentive to the deployment of IP based telecom networks by TSPs..The TSPs have, however, always opposed this move of reducing termination charges. TRAI’s 2015 Regulations were first challenged in the Supreme Court by the dominant incumbent operators, with no relief granted for the stay of the said regulations. After a lapse of eight months from the effective date of the regulations, three of the dominant incumbent operators have challenged TRAI’s 2015 regulations before the Delhi High Court (Vodafone and Bharti Airtel) and the Gujarat High Court (Idea)..Apart from RJIL, other operators including RCom, RTL, BSNL, Tata Teleservices and Telenor have impleaded themselves in the proceedings before the Delhi and Gujarat High Courts, opposing the said challenge of TRAI’s 2015 regulations.. Way forward.Given that the Supreme Court recently struck down TRAI’s call drop regulations on grounds of inconsistency and manifest arbitrariness in the procedure followed, TRAI might want to tread cautiously with the final amendments to the IUC regulations if and when TRAI does decide to go ahead with it. Therefore, TRAI mustn’t err the way it did while passing the call drops penalty in respect of the consultative procedure..In this regard, it may be noted that while the TRAI Act provides that the regulator must ensure transparency while discharging its functions, there is nothing in the Act that suggests how its consultation processes will be carried out. Rajeev Chandrasekhar has time and again pointed out the need to amend the TRAI Act to empower TRAI as a regulator and make it accountable to the Parliament..While the suggestion made in the paper to move towards internet telephony is one which is geared towards deployment of more efficient technologies and is innovative and customer friendly, Indian telcos enjoy a considerable power and are unlikely to do something they don’t want to do..The questions that remain are: Are the assertions raised by COAI in the letter to DoT bona fide? Or are they just a reaction to the threat RJIL poses to their operations in India given its magnitude? Or are they simply leveraging on RJIL’s entry into the market as a means to bully TRAI into having it their way?.Only time will tell.