The Supreme Court’s recent judgment upholding the definition of AGR (adjusted gross revenue) and asking telecom firms to pay around `92,000 crore to the government has placed the sector in further financial crisis. The AGR definition has been controversial for about two decades now. As per telcos, AGR should include only the core telecom revenue, while the Department of Telecommunications (DoT) wants all revenues earned by telcos, including interest from bank deposits and foreign exchange gains, asset sale gains, etc. The telcos are appealing to the government to clarify or review the SC judgment.
This SC verdict has come when telcos like Airtel and Vodafone Idea are in a dilemma over Reliance Jio’s move asking its subscribers to pay 6 paise per minute as Interconnect Usage Charges (IUC) for calls made to other network providers. Will all telcos follow suit and is it time to bid goodbye to the ultra-low mobile tariff regime?
The IUC is a charge payable by network provider A, whose subscriber originates the call, to network provider B where the call terminates. An IUC of 6 paise per minute has to be paid by A to B. The telecom regulator TRAI had reduced IUC from 20 paise to 14 paise in March 2015 and further to 6 paise in September 2017. In 2017 TRAI had announced that the IUC would be made zero from January 2020. But it is likely that the IUC may continue for a longer time. In fact, a recent report indicates the government is not able to fix a floor price for mobile tariff and by retaining the IUC at 6 paisa for the next couple of years, the Centre may be indirectly influencing the floor price. It is a clear indication that other telcos would increase their tariff very soon.
Most advanced countries follow zero IUC or Bill and Keep (BAK) mode that allows for calls to be terminated at zero charge. The telcos recover the costs from their own customers instead of charging other operators. Where the voice call traffic amongst telcos is roughly similar, BAK would be appropriate. In India, asymmetricity of voice traffic was prominent five years ago as there were 8-10 telcos per circle and the top 2-3 enjoyed maximum market share. As it stands now, the top three have anywhere between 30-35 crore subscribers, but the asymmetricity continues. TRAI has issued a recent consultation to assess the need to continue the IUC or scrap the same due to the asymmetric voice traffic. Sample this: Jio has 64% outgoing calls to other networks and 35% incoming calls. Airtel has 45% outgoing calls and 54% incoming calls, while Vodafone Idea has 40% outgoing calls and 59% incoming calls.
The challenge in India is the ultra-low tariff that has resulted in an average revenue per user (ARPU) of `74 per month. That is 10 times lower than in most advanced countries. Indian mobile subscribers’ data consumption has gone up significantly over the past two years. The average data consumption is over 9.7 GB now, while it was about 2 GB in 2017. This is among the highest in the world. The average cost to subscriber per GB wireless data has gone down from `17.43 in 2017 to `7.7 in 2019.
The telcos have to constantly update their infrastructure. But in an industry with around `7 lakh crore debt, they are struggling to improve the infrastructure. This has led to extremely poor call quality, constant call drops and inconsistent data connectivity. The overall user experience is pathetic. Most of us have witnessed a drop in the quality of mobile experience in the past few years; this can be directly correlated with the reduced mobile tariff. This artificial low tariff is killing the industry. Many telcos have closed their operations.
For India to benefit from the strong mobile connectivity, high-quality network infrastructure is required. The tariff war that telcos are indulging in must end. The focus must be on providing better quality of experience for subscribers. According to a report, if the top three operators start charging 6 paise IUC to their subscribers, the telecom sector revenue is likely to go up by `15,000 crore. This is welcome money for a sector reeling under severe financial constraints.
The government on its part should take a relook at the regulatory fees imposed on the telcos. The regulatory levies and taxes (license fees, GST, etc.) in India are the highest in the world, with telcos having to pay 25-30% of the gross revenue as tax. A recent news report indicates that the government is working towards reducing the universal service obligation from 5% to 3%. The revenue share license fee is likely to be brought down to 6% of the adjusted gross revenue of the telco. The government has recently set up a panel to suggest steps for providing much desired relief to telcos.
The government action on reducing taxes and providing longer timeframe for deferred payment of spectrum fees will provide respite to the telcos. Along with this, the inevitable increased tariff (quality over cheap tariff) will enable the telcos to improve their infrastructure to meet the ever-growing demand from the mobile subscribers.
But the government should mandate the telcos to provide the right quality of service. There were discussions on the government imposing penalties for poor quality voice and internet connection. The government should certainly bring some tight controls.
With Digital India ambitions from the present government still intact and with several services planned to go digital in the country, a robust telecom sector is the need of this hour. Telcos must move away from the tariff war. The government must take a soft approach on taxes and yet insist on high-quality experience for the end users. Quality should win over low tariff.
G Krishna Kumar
ICT professional and columnist based in Bengaluru. Views are personal
Email: krishnak1@outlook.com