Reliance Jio today announced that it is ending interconnect usage charges (IUC) for all domestic voice calls, which is in line with the Telecom Regulatory Authority of India's (TRAI) directions to move towards Bill and Keep (BAK) regime which is coming into force from January 2021. In short, it means that Jio will make its voice calls free for all types of calls.
In 2019-end, when TRAI had extended the deadline to abolish IUC charges, Jio had started charging its subscribers at 6 paise per minute if they were making mobile calls to the customers of other telcos such as Airtel, Vodafone Idea, etc. Initially, Jio asked its subs to buy top-up plans - valued between Rs 10 and Rs 100 - to pay for IUC charges, but later, these charges were merged in the recharge plans. Though Jio compensated its subs with giving out data of the equivalent value.
In October 2019, when Jio had introduced IUC charges, it was witnessing more outgoing calls on its network than incoming calls. For instance, in June 2019, Jio's off-net outgoing calls were 64.25 per cent of the total off-net calls. That's because it was a relatively new telco in the market, and hence it was a net loser when TRAI decided to extend the IUC charges for one year till December 2020. What does that mean? To simplify, if a Jio user would make a call to an Airtel customer, Jio was paying Airtel 6 paise per minute for every off-net call. Not just Jio, this rule applied to every telco in the country.
Airtel and Vodafone Idea were against the idea of the abolition of IUC charges until the traffic between telecom operators reaches symmetry (which means incoming calls are nearly equal to outgoing calls between each telco) since they argued that it would have been unfair because of the kind of investments they have made over the years on network infrastructure and customer acquisition.
"In a way, Jio could have brought down tariffs given it's no longer paying Airtel and Vodafone Idea for the off-net calls, but the ARPUs (average revenue per user) in the sector are already low," says a telecom expert.
But things have changed pretty dramatically over the past one year. Telecom sources say that Airtel would likely to gain upwards of Rs 300 crore every year as the IUC charges come to an end. The gains in the case of Vodafone Idea are likely to be even more. How? By the virtue of being the largest telco with 406.35 million subs, Jio has reached a point where its customers are now receiving more calls on their mobile phones (than making outgoing calls). Remember, more incoming calls translate into more IUC revenues, and Jio is going to be net loser in the no-IUC regime. Airtel and Vodafone Idea, on the other hand, would not have to pay IUC charges for the amount of calls their users are making to Jio users.
To recap the issue, the IUC or termination charges on voice calls were first introduced by TRAI in 2004. Under the calling-party-pays system, these charges - 30 paise per minute - applied on all types of calls and irrespective of the distance. The charges were revised downwards to 20 paise per minute in 2008/09, and subsequently to 14 paise per minute for mobile-to-mobile calls and 0 paisa for other call types (mobile-to-landline, landline-to-mobile, landline-to-landline). In the recent years, TRAI had started advocating for BAK regime.