Interconnect usage cost is levied by networks handling incoming calls from rival networks
Scrapping IUC or reducing it would help operators with more outgoing traffic than incoming calls
NEW DELHI :
The Telecom Regulatory Authority of India (Trai) is having a rethink two years after it decided to phase out interconnect usage charges (IUC) from January 2020.
The regulator on Wednesday floated a fresh consultation paper to see if there is a need to revise the applicable date for scrapping IUC, given the continuing imbalance in inter-operator traffic. The paper also seeks to discuss with stakeholders what parameters should be looked at to decide on an alternate date, if any.
IUC is levied by mobile networks handling incoming calls from rival networks. Scrapping the IUC or reducing it would benefit an operator with more outgoing traffic than incoming calls. The latest decision may come as a relief for Bharti Airtel Ltd and Vodafone Idea Ltd, which earn a portion of their revenue from IUC as their incoming traffic is higher than outgoing.
“At present, there is a net outgo of calls from Jio to incumbents. If this IUC of six paise is retained a bit longer, it will offer incumbents some relief. This relief is due to them (Bharti Airtel and Vodafone Idea) as these companies acquired customers at a very high cost earlier. To equate them with a new player is unreasonable and to scrap IUC is over-zealous," said Mahesh Uppal, director at communications consulting firm ComFirst India.
In September 2017, Trai had ordered a reduction in IUC to six paise per minute from 1 October 2017 from 14 paise earlier and an end to it from 1 January 2020. Telecom operators, already reeling from a fierce price war that started with the entry of Reliance Jio Infocomm Ltd in September 2016, were hit hard by the order. At the time Trai decided to scrap IUC, Airtel, Vodafone and Idea had resisted the change, while Jio was in favour.
Bharti Airtel’s quarterly profit plunged 39% to ₹306 crore in the three months ended 31 December 2017, while Idea Cellular’s quarterly loss more than tripled to ₹ 1,285.6 crore in the same quarter. Reliance Jio had at that time gained significantly from the cut in IUC to six paise a minute as it meant lower costs for it.
In September 2017, Trai said it would keep a close watch on developments in the sector, particularly with respect to the adoption of new technologies and their impact on termination costs.
“We are glad that Trai has chosen to review the date for scrapping IUC. The authority had in the 2017 order’s explanatory memorandum said that it would review this," said an Airtel executive, requesting anonymity.
“We welcome the consultation paper from Trai for it acknowledges the continuing traffic asymmetry between operators because of popular use of 2G devices. We look forward to participating in this consultation," a Vodafone Idea spokesperson said.
Email queries sent to Bharti Airtel and and Reliance Jio remained unanswered till press time.
Zero IUC means operators would make no money for receiving calls on their networks. If the traffic flow among operators is symmetrical, it will not have a negative impact on any operator as it is simply a charge paid from one operator to another.
“Though the imbalance in the inter-operator off-net traffic is reducing over a period, it still exists," Trai said in the paper.