The Telecom Regulatory Authority of India (TRAI) has decided to reduce the Interconnection Usage Charge (IUC) from 14 paisa per minute to 6 paisa per minute. This implies that some of the new entrants in the Telecom sector like Reliance Jio have to pay a lesser charge for connecting calls. Thus the customers may also get benefitted. TRAI has also planned to scrap this fee from the year 2020.
This new notification from the regulatory body hasn’t gone down well with the country’s biggest telecom operators Airtel, Vodafone & Idea Cellular, who plans to challenge the regulation at court. For Reliance Jio, Reliance Communications and Aircel this regulation seems to be a boon.
Now what is IUC actually?
In simple words, Interconnection Usage Charges (IUC) are wholesale charges payable by a Telecom Service Provider (TSP) to another telecom service provider (TSP), for terminating or carrying a call from its network to the network of the receiving TSP. There is also an arrangement of pay sharing under the IUC called the Calling Party Pays (CPP) regime. Under CPP if you originate a call, you pay your access provider, who in turn pays termination charges to the network you placed the call. Thus you are paying for both the outgoing and the incoming of the person you called.
This framework is in place since the regulation was enforced in 2003. The IUC charges were revised from 30 paisa per minute to 14 paisa per minute in 2004. From October 1, 2017, TRAI wants to cut down this charge to 6 paisa per minute. It also plans to scrap the CPP model. Instead it wants to implement the Bill and Keep (BAK) regime, where the carriers don’t pay anything to each other for carrying calls.
How would this affect the Telecom Service Providers?
The older players Airtel, Vodafone and Idea combined have 60% of the subscriber base. A part of is still on 2G for which network costs are higher. So they want a hike in IUC or a status quo. Whereas new entrant, Jio, prefers lower or even nil termination charges as the number of calls originated by it are more than the calls terminated. Keeping in mind the cost efficiency of 4G technology TRAI wants to slowly terminate these charges. But as of now, only Jio has the full-fledged 4G network, while the others are still operating on legacy networks.
The number game
It is estimated that lowering down the IUC would lead to the loss of ₹2,000 crore by No. 1 telco Bharti Airtel. Vodafone and Idea Cellular would incur a loss of ₹1,500 and ₹1,200 crore respectively. However, here Jio will save ₹5,000 crore while RCom and Aircel will gain a marginal of ₹250 crore each.
War of words
Bharti Airtel has expressed its strong dissent to this regulation. Vodafone in a statement said this was a ‘retrograde’ decision which will benefit only Jio and impact the telecom sector specially in the rural coverage. Reliance Jio Infocomm has denied of getting any benefits. They have termed it as a delayed regulation saying that the regulation should have been enforced in 2011 itself and in fact called the cut ‘six years too late’, highlighting that it should have happened as per regulator’s directive in 2011.
Will tariffs be lowered?
Now this is the question whose answer impacts the mass. TRAI regarded that the move to cut IUC has been justified. Rajan Mathews, Director General at lobby group Cellular Operators Association of India (COAI), said the move would not lead to lower call tariffs. Reliance Jio said the customers will gain from this order.