TRAI Mandates Shift to IP-Based Telecom Interconnection Within Three Years

The Telecom Regulatory Authority of India (TRAI) has directed telecom operators to migrate their existing network interconnections to Internet Protocol (IP)-based systems within three years, beginning January 1, 2027. The transition will replace older Time Division Multiplexing (TDM) technology with IP-based connections, modernising the infrastructure through which telecom networks exchange voice and other traffic.

The changes are part of the Telecommunication Interconnection (Third Amendment) Regulations, 2026. Alongside the technology upgrade, TRAI has introduced a phased migration schedule, financial penalties for non-compliance and changes to interconnection payments. The reforms are intended to improve call quality, network efficiency and reliability while simplifying the way telecom operators connect with one another.

TRAI Sets January 2030 Deadline for IP Migration

Under the new regulations, all new interconnections established after January 1, 2027, must use IP-based technology. Existing points of interconnection (POIs) operating on legacy E1 and TDM-based systems must also be migrated to IP-based infrastructure within three years.

The migration will take place in phases rather than requiring operators to replace their entire infrastructure immediately.

According to the schedule reported by Financial Express, telecom companies must migrate:

Migration timeline	Required transition
First year	20% of existing traffic
Second year	55% of existing traffic
Third year	100% of existing traffic

The transition will be measured using the volume of voice traffic carried through legacy interconnections.

The deadline effectively gives operators until January 1, 2030, to complete the migration, provided the three-year period is calculated from the regulations’ commencement date.

The new framework applies to telecom service providers involved in exchanging traffic between networks. This includes the infrastructure that allows customers of different operators to communicate with one another.

What Is IP-Based Interconnection?

Telecom interconnection refers to the technical and commercial arrangements that allow different service providers to exchange voice and other telecommunications traffic.

For example, when a Jio customer calls an Airtel customer, the two networks must communicate through interconnection infrastructure to complete the call.

Traditional telecom networks have relied on Time Division Multiplexing, or TDM, technology. It allocates fixed time slots for transmitting voice traffic across network connections.

IP-based interconnection uses Internet Protocol to carry communication traffic through packet-based networks. Instead of relying on fixed time slots, information is transmitted as data packets across IP infrastructure.

This technology is more aligned with modern telecom networks, which increasingly use internet-based infrastructure to manage voice, video and other services.

The transition is expected to improve bandwidth efficiency, call quality and end-to-end call performance. It can also simplify network management and support more flexible capacity expansion.

Importantly, the regulation concerns how telecom operators connect their networks. It does not mean that mobile users will need to change their SIM cards or purchase new smartphones.

TRAI Moves Interconnection From LDCA and SDCA to LSA Level

Another major change involves the geographic structure used for telecom interconnection.

The existing framework allows interconnection at Long Distance Charging Area (LDCA) and Short Distance Charging Area (SDCA) levels. TRAI’s amendment enables operators to mutually agree on interconnection locations at the Licensed Service Area (LSA), or service-area, level.

The regulator has also directed that existing traffic exchanged through LDCA- and SDCA-level points of interconnection must migrate to LSA-level points within three years.

This change is expected to simplify routing arrangements and reduce the complexity associated with maintaining multiple interconnection locations.

According to TRAI, moving towards service-area-level interconnection can also help improve the management of scarce numbering resources, reduce latency and strengthen service reliability.

For telecom operators, the transition could reduce the operational complexity of managing legacy interconnection arrangements across multiple geographic areas.

Financial Penalties for Telecom Operators

To ensure that operators meet the migration deadlines, TRAI has introduced a graded financial disincentive framework.

For violations involving delays in providing interconnection, migration obligations and other specified requirements, the regulator has prescribed penalties of:

• ₹1 lakh per day for the first 15 days of a violation.
• ₹2 lakh per day for each subsequent day.
• A maximum penalty of ₹1 crore per service area for each instance of contravention.

Separate penalties apply to violations of reporting requirements. These can reach ₹50,000 per day for the first 15 days and ₹1 lakh per day thereafter, subject to a maximum of ₹25 lakh per service area for each instance.

The graded structure is intended to distinguish between short delays and prolonged non-compliance.

The new penalty framework will apply from January 1, 2027, when the amended regulations take effect.

New Rules for Interconnection Capacity

The amendment also introduces a framework for determining capacity requirements at IP-based points of interconnection.

Under the new system, the maximum call-handling capacity of a POI will be assessed using two key factors:

• The number of concurrent sessions the interconnection can handle.
• The bandwidth available on the network link.

The capacity must also maintain the required quality of service under TRAI’s applicable regulations.

This is important because IP-based networks handle traffic differently from traditional TDM systems. Capacity planning must account for simultaneous communication sessions and the available bandwidth rather than relying only on older circuit-based measurements.

The revised framework is expected to provide greater clarity when operators request additional interconnection capacity.

Changes to Bank Guarantees and Delayed Payments

TRAI has also revised certain financial provisions governing interconnection agreements.

The existing bank guarantee framework has largely been retained. However, the validity period of bank guarantees furnished after reassessment and the interval for reassessment have been extended from six months to 12 months.

The regulator has also introduced a revised methodology for calculating the ceiling on bank guarantees, including those associated with IP-based interconnections.

Another important change concerns delayed payments of interconnection-related charges.

Under the amendment, telecom operators that fail to make payments within the period specified in their agreements may be required to pay interest. The interest rate will be mutually agreed between the service providers, subject to a maximum of the State Bank of India’s one-year Marginal Cost of Funds-based Lending Rate (MCLR) plus two percentage points.

The provision is intended to provide a clearer mechanism for addressing payment delays between telecom companies.

New Framework for Surrendering Points of Interconnection

The amendment introduces a separate process for the voluntary surrender of points of interconnection.

Previously, the regulations primarily addressed the disconnection of a POI, which generally involves stopping traffic exchange because of exceptional circumstances or disputes between service providers.

The new framework distinguishes disconnection from voluntary surrender.

An operator may choose to surrender a POI because of reduced traffic, withdrawal of services from a particular area or changes in network routing.

This distinction could help telecom companies manage their infrastructure more efficiently by removing interconnection points that are no longer operationally necessary.

The Bigger Picture

TRAI’s decision represents another step in India’s transition towards modern, IP-based telecommunications infrastructure. As operators expand 4G and 5G services, legacy interconnection systems are becoming less aligned with the architecture of contemporary networks.

Moving towards IP-based connections could improve bandwidth utilisation, simplify network operations and support more efficient handling of telecom traffic.

The reform also creates a more standardised framework for interconnection capacity, payments, reporting and enforcement. However, completing the transition will require investment, technical coordination and careful migration planning by telecom operators.

For companies such as Reliance Jio, Bharti Airtel and Vodafone Idea, the transition will be an infrastructure-modernisation exercise involving both technology upgrades and coordination with other network providers.

Looking Ahead

The first phase of migration will begin on January 1, 2027, with telecom operators expected to move 20% of their existing traffic to IP-based interconnection during the first year. The second-year target rises to 55%, followed by complete migration within three years. TRAI will monitor progress through prescribed reporting requirements and can impose financial disincentives for violations.

For Indian telecom users, the changes are expected to support more efficient network operations, improved call performance and greater reliability over time. The immediate transition will largely take place behind the scenes, but its successful implementation will be important as operators prepare their networks for growing data traffic, advanced digital services and future telecom technologies.