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Some telcos want interconnect charges to be increased; Jio wants it scrapped

Telecom companies and the industry regulator TRAI have been discussing the issue of Interconnect Usage Charges levied on operators and how it can be redefined, at a time when voice calls are being handed out in bulk for free. Given that incoming calls are free in India, Interconnect Usage Charges refer to what one telecom operator pays another when a call is received on anothers network. When a subscriber initiates a voice call, their telco pays IUC charges in form of ‘termination charges’ to the telco on whose network the call is received. TRAI currently charges IUC on the basis of the type of network the call originates or terminates on:

Telcos are divided on the issue. Airtel, Idea and Vodafone (existing telcos), have demanded that the IUC charges be increased to 30-40 paise per minute, while Reliance Jio wants it fully scrapped, according to an Economic Times report. This is up from the current charge of 14 pasia per minute. These telcos were speaking at a TRAI meeting with industry stakeholders over the past week. Below is a lowdown of what telcos are saying to support their stance.

Arguments in favor of IUC to be increased

  • Asymmetrical call traffic post Jio launch: As per the same ET report, Airtel argued in the TRAI meeting that Jio’s free calls are creating an asymmetrical traffic flow to other networks and that the current 14 paise per minute charge isn’t enough to cover it. For e.g. Airtel pays 0.14 paise per minute to Jio, every time an Airtel user makes a call to another user on the Jio network. But since telcos have started providing free calls, Airtel expects a rise in voice usage, leading to more IUC payouts to other telcos, and not necessarily the same amount of return. Note RCOM also had supported this stance earlier.
  • Rural areas will get affected the most: Airtel and Vodafone said that telecom infrastructure (used for transmitting voice) installed in rural areas are primarily backed by revenues generated from incoming calls and that lowering or removing charges would choke services, the report added. They added that the amount recovered in form of IUC in rural areas is not a subsidy, but it’s needed since incoming calls are not charged from the user’s end.
  • Zero IUC costs will lead to monopoly:  Airtel said in a statement that by proposing a zero interconnect charges, “Reliance Jio wants to simply transfer its cost to Airtel and other operators. As per current estimates, this cost would be to the tune of Rs 15,000 – 20,000 crores per year for the industry and will only increase going forward. Such cost transfer will allow Reliance Jio to use its muscle power and price its services in a predatory manner to kill the rest of the industry and create a monopoly…In effect, Jio aims to build its business by getting a free ride on the highways built by Airtel and other operators. 

Arguments in favour of scrapping IUC charges

Jio had also alleged that telcos are reluctant to bring down data and call rates and pass benefits of IUC charges to consumers. The telco said that the current IUC rates would lead to the ‘poor subsidizing’ in non-rural areas since Airtel and other operators have already recovered Rs 1 lakh crore that they invested in 2G networks. By scrapping charges, operators will be forced to make new investments in rural areas.

However, Airtel countered this stating that “the allegations made by Jio regarding Airtel earning excess revenue from MTC (termination charges) are not only false but laughable…14 paisa is well below the cost of producing a minute, which is currently at 35 paisa. In fact, with the tsunami of calls originating from Reliance Jio’s network, Airtel loses 21 paisa for every minute that is carried on its network. This has resulted in a loss of Rs 550 crore per quarter for Airtel alone.”

Telcos have been criticizing TRAI’s IUC regime for a while now

Note that the debate around TRAI’s IUC charges has been around for a while, well before Jio’s commercial entry into the market.

  • Landline to wireless calls charges: Airtel and Vodafone had approached the Delhi HC last year, to tweak TRAI’s IUC charges on landline. Airtel and Vodafone had specifically challenged fixing of termination charges for landline to wireless as 0 paise and wireless to wireless at 14 paise per minute. Note that Jio and Tata Docomo had counter challenged Airtel and Vodafone’s petition in the court as well.
  • VoIP providers vs telcos on IUC charges: TRAI had issued a consultation paper in June 2016 asking if VoIP apps like Ringo, Nanu, etc need to be regulated under an IUC regime. Responding to the paper, telecom COAI said VoIP apps like Ringo benefit from a regime where interconnection charges are nil or zero. This allows Ringo to offer talk time at much cheaper rates than the rates offered by telecom operators, COAI added. Ringo had earlier alleged that top three telcos in the country (Airtel, Vodafone, Idea) have been derailing its plans to launch Internet Telephony in the country.

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