In Business Model, Internet Access, Mobile, News, Spectrum Futures Conference

Money paid by one carrier to another now is a big issue in India. Simply, the Telecommunications Regulatory Authority of India (TRAI) wants to change the fees mobile networks charge each other to terminate calls.

Today, an interconnection charge for terminating a mobile call generates 14 paise about two-tenths of a U.S. cent) per minute (some call this “calling party pays”).

But TRAI wants to eliminate the charge, entirely.

That would reflect the way termination charges are levied on calls made from one landline to another, or from a smartphone to a landline number, using the “bill-and-keep” method for interconnection.

So why the proposed change? TRAI believes a shift to bill and keep would make IP telephony services more competitive.

Incumbent mobile service providers would lose revenue under the proposed new  framework, which is why they accuse TRAI of setting policy in ways that favor Reliance Jio, the big new challenger. 

Incumbents essentially argue the new approach is unfair, and favors some in the ecosystem at the expense of others. That is true. 

It also is true that telecom regulation often intentionally is “unfair.”

Most often, such “unequal treatment” is designed to provide universal service (subsidies to some providers, but not all); encourage competition (low wholesale rates and network access to an incumbent network are required); or provide help for an industry segment (lighter regulation for new apps and services; new providers or technologies).

Such rules always are contentious because they directly affect business models.

The ways service provider networks interconnect always has business implications, for the simple reason that revenue often is earned when interconnection traffic is unequal.

That is why long haul networks have used both “settlement free” interconnection when traffic exchanged is roughly equal, but “transit” deals when traffic exchange is highly unequal.

Net zero payments or “settlement-free interconnection” are better ways to describe interconnection agreements between two carriers than “bill and keep.”

That has big implications. In the U.S. market, “bill and keep” was viewed as favorable to upstarts and attackers, for reasons related to traffic flows.

Simply, small challengers tend to terminate more traffic on other networks than the big legacy networks terminate on the small networks. Using one methodology, the network that terminates a call gets paid for doing so.

Using “bill and keep,” carriers are not paid for terminating calls. That helps attackers and penalizes incumbents.

As always, arcane network interconnection rules have real-world business effects. Also, as always, “unfair and unequal” policies deliberately are put into place. 

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