India rate hike risks return to arbitrage days

The Indian telecom market risks the return to the days of arbitrage and gray-market calls after hiking international termination rates, an operator industry group has warned.

Regulator TRAI announced Monday it would increase the international termination charge by a third.

"Increasing the termination rates of international calls defies the time tested and proven principle of cost based interconnection charge[s]," Satyen Gupta, president of the new body ACTO, told telecomasia.net.

"This differential charging for two categories of calls will lead to asymmetry between the termination charges, and bring back the arbitrage opportunity which was got rid of last year through abolition of the access deficit charge (ADC) on international incoming calls."

Until it was abolished last year, the ADC required international operators to pay 1 rupee ($0.01) per minute from ILD calls to go towards funding state-owned BSNL's expansion into unprofitable rural areas.

This led to an influx of gray market operators paying domestic termination rates for incoming international calls.

The decision to lower termination rates for domestic calls has only increased the potential for arbitration, Gupta said.

"This move will also be seen as discriminatory and unfair outside the country," he said, adding that there was no guarantee that domestic operators would comply with TRAI's expectation that they take advantage of the added revenue by cutting rates for consumers.

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