Vodafone India has challenged the Telecom Regulatory Authority of India’s (TRAI) decision to reduce interconnect usage charge (IUC) for mobile-to-mobile calls from 14 paise per minute to 6 paise per minute in the Bombay High Court, reports ET. Vodafone’s stance is that TRAI’s decision is unconstitutional and beyond its jurisdiction. Apparently, this and previous similar cases filed by Bharti Airtel and Idea Cellular will heard together on November 15.
Note that when the IUC had been reduced from 20 paise per minute to 14 paise per minute in February 2015, that decision had also been challenged and is currently still pending in courts.
Earlier, the Delhi HC had struck down a petition filed by Vodafone challenging TRAI’s consultation on revising IUC. The company had filed the petition early this year challenging multiple consultation papers issued by TRAI which looked at changing the current IUC rates (here and here).
Last month, TRAI reduced IUC to 6 paise per minute, which came into effect from October 1, 2017. It also said that from January 1, 2020 this charge will be done away with completely. IUC charges are paid by the telecom operator of the calling party to the telecom operator of the recipient of the call. This is called the “calling party pays” regime, and is meant to incentivise interconnection between telecom operators, and ensure that users of different telecom operators can call each other.
At the time, Vodafone had said:
“We are disappointed with this decision and are now considering our options in response to it. The Indian telecom industry is already experiencing the greatest period of financial stress in its history. 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.”
Rajan Mathews, Director General of the COAI, had also said that telecom operators have no choice but to go to court on this issue and seek an injunction.
How does reduced IUC affect telcos?
Let’s take the example of Airtel: Airtel said that the cost of a call for them is 35 paise, which is why Airtel suggested that each external call which terminates on its network is a loss-making proposition, when they get paid only 14 paise for it. With IUC gone, profitability for Airtel will be dented.