Published: Wed, September 20, 2017
Hi-Tech | By Ellis Neal

TRAI Says IUC Maths Is Scientific, No Question of Favouring Anyone

TRAI Says IUC Maths Is Scientific, No Question of Favouring Anyone

Fitch Ratings and CyberMedia Research said the latest recommendation from TRAI to bring down IUC from existing 14 paisa to 6 paisa will negative impact the telecom sector in India. The regulator said that interconnect fees will go down to zero from Jan 1, 2020.

The termination charge or the IUC is a fee that a mobile service provider pays to another to link a call to the latter's network.

The cellular operators association of India (COAI) has called the interconnect regulation disastrous and has chose to go to the court. "This is yet another retrograde regulatory measure that, unless mitigated, will have serious consequences for investment in rural coverage, undermining the Government's vision of Digital India".

Bharti Enterprises chairman Sunil Mittal had earlier written a letter to Trai chairman RS Sharma, saying, "The current IUC regime is already well below cost", and asked the regulator to set the rate at "costs discovered through a fair and transparent mechanism". Reliance Jio, which started its commercial operation a year ago, has been offering customers voice calls at no charge from day one.

Reliance Jio had said in a presentation to Trai recently that telecom operators gained to the tune of Rs 1 lakh crore from IUC.

This is a big win for Reliance Jio as it is estimated that Jio's net spend on account of IUC to be in the region of Rs7,000-7,500 crore annually.

Markets where market forces, and not the regulator, determine interconnection charges, would lead to telecom operators trying to create a major disincentive for calling people on another network, and discriminatory charges against call-recipients of another network.

TRAI deliberated the latest cut for nearly a year and during its various consultations with industry, the leading players, including Jio, an arm of Reliance Industries, all lobbied their positions, according to reports. At the same time, Vodafone and Idea and other telecom operators will find themselves stuck between a rock and a very hard place.

To recall, incumbents have demanded to increase the IUC rates to 28- 35 paise per minute from the present level of 14 paise a minute. In a statement issued after TRAI's move, Airtel said that the decision was "extremely disappointing" for the industry. Reports say telecom operators may move court against the decision.

The termination charges were first introduced in 2003. "This move is likely to keep the competitive intensity for the industry high and prolong the restoration of pricing power, a must for all operators to generate adequate return on investments". Trai believes that reduction of these charges would benefit the customers a lot. The tariffs of telecom operators are based on data usage.

With the commercial plans already announced, one cannot expect this to normalize anytime soon and the incumbent operators can also not afford to make voice completely free.

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