Telecom firms up in arms against call drop penalty

India's telecom operators are up in arms against the new rule requiring them to compensate customers for dropped calls, beginning next year, saying the order of the Telecom Regulatory Authority of India was ''coercive and grossly unjust'' and would have a ''catastrophic'' impact on the sector.

The two rival telecom bodies, Cellular Operators Association of India and Association of Unified Telecom Service Providers of India (AUSPI), have written a joint letter to TRAI on Tuesday saying that the order would lead to a 3-5 per cent erosion of the $36 billion industry revenue.

The telcos also indicated that Trai did not have jurisdiction to levy penalties.

"It is respectfully submitted that such a regulation (call drops compensation) is not pursuant to the provisions of the TRAI Act. There is no violation of license conditions by the service providers, compensation being a matter not covered under TRAI Act and this regulation is not in regard to ensuring quality of service," the letter read.

The associations, representing the GSM and CDMA operators including Bharti Airtel, Vodafone India and Reliance Communications, added that the rule would lead to increase in tariffs besides pointless litigation.

On 15 October, Trai mandated telcos to pay subscribers Rs1 for every dropped call on their network, subject to a cap of three call drops a day, starting from 1 January 2016.

As per the new rules, telcos must intimate prepaid customers through SMS or USSD within four hours after a call drop, and the details of amount credited. For post-paid customers, the details of the credit should be provided in the next bill.

"We've written to Trai to withdraw the ruling," Rajan Mathews, director general of Cellular Operators Association (COAI) said. "We're hoping that Trai will consider the points that we have raised, and take a close look at the true resolution to the problem. The present ruling only creates more problems. It provides an opportunity to game the system and thus, have the operators incur heavy financial losses," he added.

The letter comes a day before executives from top telcos are scheduled to meet the Trai chairman, to discuss the regulation and issues on it. Telecom companies have red flagged the financial impact of a minimum of Rs10,000 crore, which can go up to a staggering Rs54,000 crore annually, in the worst case scenario.

The letter points out the regulator's assumption that every call drop means deficiency of service is flawed and zero call drops are scientifically impossible. Globally, 2 per cent call drops are accepted.

The telcos added that the regulation will dramatically increase the number of call drops, as some may willingly cause calls to drop to gain Rs3 per day as compensation.

Given that the average revenue per user in India is not more than Rs125, a Rs90 outgo for call drop reversal a month will hit companies' earnings before interest, tax, depreciation and amortization (Ebidta) by 7-8 per cent and add to taxes to be given to the government.

"To recover this cost, operators will have to increase tariffs," the associations said.