The Telecom Regulatory Authority of India (TRAI) has initiated its first comprehensive review of domestic leased circuits (DLCs) pricing in over a decade, potentially impacting costs for banks, IT firms, and data centres that rely on these dedicated high-speed broadband connections for critical operations.

Regulatory Review After Decade-Long Gap

TRAI released a consultation paper on Friday, seeking stakeholder comments by February 22 on the review of DLC tariffs. The regulator cited multiple factors driving this review, including market evolution and technological progress. According to TRAI, service providers currently offer tariffs well below prescribed ceilings on dense routes, suggesting that existing ceiling tariffs may not reflect prevailing market rates. However, remote and hilly regions continue facing high tariffs due to limited competition.

Domestic leased circuits are dedicated broadband lines that telecom operators provide to enterprise clients for secure, high-speed communication between offices, data centres, and operational hubs. These circuits operate at bandwidths ranging from 2 Mbps to 10 Gbps and sometimes higher, forming the backbone of enterprise connectivity.

Current Tariff Structure and Market Dynamics

TRAI currently prescribes tariff ceilings for four specific bandwidth capacities: 2 Mbps, 45 Mbps, 155 Mbps, and 622 Mbps. The most recent review in August 2014 resulted in significant tariff reductions of up to 60%. The current pricing structure shows substantial gaps between ceiling rates and actual market prices:

Currently, service providers offer discounts ranging from 30% to 99% below these ceilings, indicating that the 2014 limits are significantly higher than actual market rates.

Technological Advancements Drive Cost Reductions

TRAI highlighted that bandwidth costs have declined significantly due to advancements in transmission technologies. Fiber optics, dense wavelength division multiplexing (DWDM), and software-defined wide area network (SD-WAN) have reduced the unit cost of long-haul bandwidth. However, ceiling tariffs have not been revised to reflect these technological improvements and cost reductions.

Expanding Market Access for ISPs

The regulator is also seeking feedback on permitting internet service providers (ISPs) to provide domestic leased circuits directly. With upcoming Telecom Act rules, ISPs may be allowed to establish their own infrastructure or lease dark fiber from infrastructure providers and digital connectivity infrastructure providers to offer managed DLC services.

This expansion would enable ISPs to compete directly with national long distance operators in the DLC market, allowing more efficient monetization of existing network infrastructure and enhancing competition in the sector. Currently, smaller ISPs rely on circuits leased from larger operators to provide internet services.

VPN Services Under Regulatory Scrutiny

Another significant focus involves evaluating whether to bring virtual private network (VPN) services under the tariff regulation framework, ending their current unregulated status. Under 2014 rules, the government does not regulate VPN-based domestic leased circuits pricing. However, VPN market share has grown substantially from 30% in 2014 to 47% by 2023-24.

Industry players indicate that VPN-based circuits are likely to become the standard due to better scalability, flexibility, and cost-efficiency compared to traditional dedicated lines.

Industry Perspectives

The Cellular Operators Association of India (COAI), representing private telecom operators, argued in May submissions that the DLC market operates efficiently under competitive dynamics with tariffs already substantially below ceiling rates. COAI stated that further regulatory intervention is unnecessary given the absence of market failures and robust competition.

Conversely, the Broadband India Forum, representing big tech companies, wants TRAI to rationalize the current tariff structure. The forum emphasized that bandwidth provision costs have significantly decreased with the shift from legacy leased circuits to IP-based shared bandwidth, which should be considered in the current review exercise.

Artificial Intelligence and telecom infrastructure have developed a vital interdependence, but concerns persist regarding the impact of AI-based systems on millions of users, according to Telecom Regulatory Authority of India Chairman Anil Kumar Lahoti. Speaking at the Trai-STPI Pre-Summit Event on 'AI in Telecommunications', Lahoti outlined both the opportunities and challenges facing the sector.

Mutual Dependence of AI and Telecom

Lahoti explained that telecom networks serve as the primary carriers of AI, while AI provides an intelligent layer for telecom operations. Telecom service providers are increasingly leveraging AI across multiple functions to enhance their operations and customer experience.

Current AI Implementation Scale

The scale of AI deployment in India's telecom sector has reached significant proportions. AI systems deployed by telecom service providers are currently detecting and blocking nearly 400 million voice calls or messages per day using AI detection combined with blockchain technology.

Lahoti noted that with 5G rollout, rapid data consumption growth, IoT expansion, and early 6G developments, telecom networks have evolved into highly complex and dynamic systems. Managing this complexity through conventional approaches has become increasingly challenging, making AI a foundational capability rather than merely an efficiency tool.

Industry Challenges and Requirements

Cellular Operators Association of India Director General S P Kochhar highlighted several critical challenges facing AI implementation in telecommunications. He emphasized the need to develop AI at scale to benefit masses, particularly rural populations through voice-based services.

Kochhar stressed that discussions around data ownership, privacy, bias, transparency, and accountability have moved from marginal sidelines to center stage. He noted that while frameworks are being discussed, ground-level implementation requires extensive brainstorming and clear policy direction to attract investments and innovation.

Skill Development Concerns

Addressing the skilled manpower challenge, Kochhar made pointed observations about India's current skill development ecosystem. He noted that while numbers may indicate leadership in skilled manpower, the reality differs significantly. The current focus on blue-collar worker skilling often fails to align with industry requirements, necessitating a comprehensive system revamp encompassing skilling, re-skilling, and up-skilling initiatives.

IndiaAI Impact Summit Preparations

IndiaAI COO Kavita Bhatia provided updates on the upcoming IndiaAI Impact Summit scheduled for February 19-20 in Delhi. Working groups are incorporating inputs from pre-summit events to form the basis of declaration documents for the main summit.

The extensive pre-summit engagement reflects the global significance of AI's impact on telecommunications and the broader digital ecosystem. These preparatory events are designed to ensure comprehensive stakeholder input into policy frameworks and implementation strategies that will shape the future of AI in telecommunications.