TNN

New Delhi, Mar 10: Telecom Regulatory Authority of India (TRAI) on Monday reduced the termination charge for all types of domestic calls, a move that has the potential of further reducing local call rates and STD tariffs. This can reduce tariffs for calls made from any type of phone, fixed or mobile, to any other phone within India.

With the exception of some special packages, the average local call tariff is in the range of 80 to 90 paise/minute with an average STD tariff of Rs 1.25/minute. Now these average rates could come down by 10 paise/minute as TRAI has reduced the existing termination charge of 30 paise/minute to 20 paise.

Termination charge is a charge payable by your operator to a rival service provider when you call a subscriber on that network. Termination charge currently represents nearly 30% of local call tariffs. The new rates are effective from April 1, onwards and are also applicable for 3G voice calls.

Even though there is a linkage between lower termination charge and lower tariffs the result is not as obvious or immediate. Lower termination charges do not mandate operators to lower tariffs though it provides a strong incentive to do so. TRAI chairman N Misra told TOI, "Tariffs are a function of market forces. It is not mandatory upon operators to reduce the tariffs".

Apart from the consumers, the main beneficiaries of a lower termination charge are new entrants in the telecom business or those who have entered the GSM business recently. Incumbents such as Bharti, Vodafone, Idea and BSNL have the most to lose since a reduction in termination charges reduces one of their most profitable and guaranteed streams of revenue. This move is also likely to split the already fragmented industry down the middle yet again.

The COAI has reacted sharply to the downward revision of termination charges, suggesting that TRAI did not appear to have factored in all costs. According to them mobile termination is closer to 35 paise per minute and could worsen the already widening urban-rural divide.

TRAI has also increased the termination charge for calls to Indian phones from international callers from 30 paise to 40 paise/minute. This has no impact on Indian consumers. While this might mean a mild 2% increase in call rates to India, the implications are far more severe with respect to the illegal grey market.

TRAI in its various consultation papers and orders since 2003 has repeatedly recognized that any artificial difference between international and local termination charges leads to a grey market which in turn means a loss to the exchequer and an increased risk to national security. Agrees Mahesh Uppal, Director, Com First Ltd and independent telecom consultant, "Creating an artificial difference in termination rates for domestic and international incoming calls is not very smart as this offers an arbitrage opportunity that invites clever ways of avoiding this cost", he says.

The mobile industry, which will gain from higher international termination charges on the other hand, has welcomed the move, calling it a small step in the right direction.