Trai cuts cross-network connection charge, calls could get cheaper
Analysts had estimated earlier that a reduction in IUC from 14 paise to 6 paise would mean a gain of around Rs 3,800 crore for Reliance Jio and a corresponding loss for older telcos.business Updated: Sep 19, 2017 23:16 IST
India’s telecom regulator on Tuesday more than halved the so-called interconnection usage charge (IUC) to six paise with effect from October 1 and abolished it all together for all local calls starting January 1, 2020, dealing a big blow to older telcos and a potential boost to newcomer Reliance Jio Infocomm Ltd.
Analysts had estimated earlier that a reduction in IUC from 14 paise to 6 paise would mean a gain of around Rs 3,800 crore for Reliance Jio and a corresponding loss for older telcos.
Telecom Regulatory Authority of India (Trai) believes that the reduction of the charge, levied by a telecom operator for terminating a call from another telco (the second telco pays) will benefit consumers and boost competition.
On its website, the regulator said that the move to the so-called Bill And Keep regime (where no interconnect charge is paid by a telco to another) would “encourage flat rate billing and time differentiated charges, both of which will improve capacity utilisation and will be in the interest of consumers”.
For months now, rival telcos have lobbied hard to have their way with IUC. Older telecom firms wanted it to be raised to at least 30 paise, while new entrant Reliance Jio wanted it cut to zero. Jio claimed in July that India’s top three telcos generated Rs 1.04 trillion in the past five years because of non-implementation of a 2011 regulatory road map to cut IUC to zero. The Mukesh Ambani-controlled Jio was pressing for the BAK model.
Bharti Airtel’s chairman Sunil Mittal and Idea Cellular’s chairman Kumar Mangalam Birla wrote to Trai seeking continuation of the IUC regime. Vodafone Group Plc’s Group CEO Vittorio Colao and Singtel’s Group CEO Chua Sock Koong wrote to telecom minister Manoj Sinha seeking the same.
The older telcos argued that because traffic between them and Reliance was asymmetric (more calls from Jio’s network end on theirs than the other way around), a shift to a BAK model did not make sense now.
Trai’s decision may be challenged in a court.
Rajan Mathews, director general of lobby group Cellular Operators Association of India said Trai’s move “is disappointing for the majority of our membership” and that the telcos would want “details ... used to arrive at “the 6 paise figure. He added that most affected telcos would “seek redressal from the courts in order to reverse the order”, which would be decided on Wednesday.
Spokespersons for Airtel, Vodafone India, and Idea Cellular declined to comment. A spokesperson for Jio did not immediately respond to an e-mail seeking comment.
Contrary to the perception that scrapping IUC will benefit one company, the move will benefit everybody since users are moving “to more and more data based communication and telecom as industry works on inter-working of the various participants,” said Amresh Nandan, research director (communications), Gartner.
On its website, Trai termed as “anti-competitive” the practice of older telcos offering very low tariffs for calls made within their own network and higher rates for calls made from a different network to their network.
To promote newer technologies, the regulator is expected to base its regulations (and tariff regime) on the most efficient technology, Trai added.
“The Authority examined that when clear demonstrable large difference exists in the cost of providing same services, why TSPs (telcos) are not migrating to newer technologies such as VoLTE.”
According to Idea Cellular Ltd, time division multiplier-based networks using 2G, 3G, 4G technology currently account for 95% of voice traffic; and the newer VoLTE-based 4G network, less than 5% of voice traffic. VoLTE is largely used by Jio; Airtel started the service in Mumbai last week.