Trai cuts interconnect usage charges, telcos to follow legal path

Telecom operators to seek legal help against TRAI's IUC slashing

An earlier report claimed, Reliance Jio, Reliance Communications, Aircel, MTNL demanded scrapping of the IUC regime and moving to the Bill and Keep (BAK) regime under which no operator raises such demand.

However, from January 1, 2020, there will not be any IUC.

With around 92 per cent of calls from Reliance Jio network terminating on incumbent networks and only the remaining 8 per cent terminating on Jio's network, the Trai move is expected to cause a big dent in revenues of incumbent telcos while giving a Rs4,000-crore boost to Reliance Jio.

When a user on one telecom network makes a phone call to a user on another telecom operator's network, the caller's network provider makes a payment - "interconnection usage charge" - to the operator that receives each calls.

However companies were still not happy.

Vodafone has announced it is "disappointed" with TRAI's decision and is now considering its options in response to it.

Vodafone described it as yet another retrograde regulatory measure "that will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole". He also stated that the decision would have serious consequences for investment in rural coverage, undermining the Government's vision of Digital India. Moreover, overall voice revenue will continue to drop as a result of Jio free voice call offerings and the rising popularity of data-led "over the top" (OTT) operators.

But Reliance Jio and Aircel, which are a little behind in the race will benefit from the new rates as now they'll be paying a lot less to other networks, which have more subscribers, for outbound calls from their networks. The new regulation may see the company report even more hard numbers, analysts said. VoLTE (Voice over Long-Term Evolution) is high-end and latest version of calls that are made on Internet-based networks. Airtel, the country's biggest telecom company, collected Rs 10,279 crore a year ago on ICU charges, which contributes about 14 percent to 18 percent of their operating profits.

The operator has long argued that existing interconnect charges were not fit to companies like itself that use state of the art technology to process voice calls at negligible cost.

"Operators with large subscriber bases tend to be net recipients of these interconnection fees".

The government introduced IUC charges in 2003 on objective to ensure continuous investments from telecom operators in network expansion and upgradation.

Jio and the incumbents telcos including Airtel, Vodafone and Idea Cellular have been at loggerheads with TRAI on the IUC charges very since Jio launched its operations.

While ICRA estimated that the decline in EBITDA for the larger incumbents would be in the range of 5-12%. Jio is also a member of COAI, though it has mostly been at loggerheads with the views represented by Mathews or the industry body. Calling is shifting to data, and there are no interconnection charges in data. "The incumbent operators have a history of opposing all the IUC regulations over the last eight years, but have not been successful in thwarting passing of the benefits of lower IUC to customers".

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