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International Long Distance Termination Charges reduced by TRAI

The Telecom Regulatory Authority of India has reduced international long distance termination charges to Rs 0.30 per minute, from Rs 0.53 per minute. International termination charges (ITC) are the charges payable by an International Long Distance Operator (ILDO), which is carrying calls from outside the country, to the access provider in the country in whose network the call terminates. Thus, this will impact the telecom operators in India which receive the most number of international calls.

In effect, this is a reversal of a trend of increasing the International termination charges: first from Rs 0.30 per minute to 0.40 in 2009, then Rs 0.53 in 2015. Interestingly, the TRAI has highlighted the comments in received in this regard. Those arguing for an upwards revision of interconnection charges (to Rs 1 instead of Rs 0.53) said:

  • That low Interconnection charges are not good for consumers: that given that the interconnection charges in other countries are around Rs 3-3.5, an interconnection charge of Rs 0.53 is too low in India, and skews the ability of telecom operators to negotiate interconnection charges, owing to higher incoming traffic than outgoing.
  • Higher ITC will help increase India’s forex income: the Indian telecom industry currently gets Rs. 4,500 crore per annum of Forex for terminating international calls into India; paying License Fee etc. of about Rs. 450 crore.

Those arguing for lowering of ITC said:

  • Higher interconnection charges reduce incoming international traffic, as more users will migrate to online calling services
  • “In view of the significant arbitrage opportunity between ITC and domestic rates, high level of ITC will also give rise to growth of the grey market at the cost of  national security and revenues of Indian operators.”

It is the grey market (Illegal VoIP exchanges) that worried TRAI, and it felt that reducing ITC would help reducing the arbitrage opportunity for grey market calling. It decided to not leave ITC under forbearance (and let the market determine the price), because the negotiating power lies with the receivers telecom operator, because in case of non-settlement, they can not complete the incoming call.

More in the regulation and explanatory memorandum here.

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