Trai mulls fixing SMS termination charges

In the next few months new operators offering a large number of free short messaging service (SMS) deals to attract mobile subscribers might soon find it difficult to do so. Telecom operators that have contracted bulk deals with companies to send unsolicited messages to operators in other networks might also find it more expensive.

That is because the Telecom Regulatory Authority of India (Trai) is planning to regulate and fix termination charges on SMS calls being sent from one operator to another. At the moment termination charges are "under forbearance" (which means Trai does not regulate them) and till recently most operators did not impose any termination charge at all.

The regulator is also re-examining SMS tariffs, which have not fallen as steeply as voice calls. SMS tariffs are around 50 paisa, virtually the same as a one-minute voice call, suggesting there is scope for reduction.

Trai is expected to come out with a consultation paper on SMS tariffs as well as on fixing termination charges on them ahead of final recommendations.

The move to impose termination charges has arisen because many telecom companies took advantage of their absence to sign bulk SMS deals with companies that were sent to customers of other telecom operators, a practice that resulted in choking the system.

New operators offering free monthly SMSs to new subscribers were also choking the system since the bulk of the 500 million customers lay with incumbent operators.

To combat the problem of choking networks Bharti Airtel, India's largest telecom company by number of subscribers, recently started charging 10 paisa for each SMS as termination charges and is tying up deals with operators. Many other service providers may do the same.

"We are seeing a new trend of companies offering huge amounts of SMSs free to customers or picking up bulk SMSs, which is merely choking our networks. We think there has to be some termination charge to discourage such offers," says the CEO of a large telecom operator.

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Argues a senior executive of one of the top three mobile operators: "Earlier the logic was that if you send an SMS the other side would also send an SMS to you so the business was evenly balanced. But now that balance has been broken with the bulk offers."

Value added services account for 10 per cent of mobile service revenues, most of it from SMSs. For GSM operators half their value added revenues come from SMSs; for CDMA it is over 60 per cent.

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