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IUC tussle: It's incumbents versus Reliance Jio; key takeaways

As per TRAI's data, Jio's outgoing calls are higher than its incoming calls, which essentially mean that the telco is going to lose money if TRAI continues with IUC charges beyond January 1, 2020.

twitter-logo Manu Kaushik        Last Updated: October 23, 2019  | 20:00 IST
IUC tussle: It's incumbents versus Reliance Jio; key takeaways
In its previous order in September 2017, TRAI had brought down the IUC charges from 14 paise per minute (on mobile-to-mobile calls) to 6 paise per minute.

More than a month ago, the telecom regulator TRAI (Telecom Regulatory Authority of India) came out with a consultation paper on the controversial IUC (interconnect usage charge) asking for suggestions that whether it should be scrapped or not. In its previous order in September 2017, TRAI had brought down the IUC charges from 14 paise per minute (on mobile-to-mobile calls) to 6 paise per minute.

The regulator had further prescribed zero IUC charges to be effective from January 1, 2020. IUC charges are paid between operators for facilitating calls on their networks.

In a calling-party-pays regime, the telecom network from which the calls originate pay IUC to the called network. For instance, if a Jio subscriber calls to an Airtel subscriber, Jio pays Airtel 6 paise. TRAI's consultation paper is perhaps a turning point for the sector.

Also Read: Reliance Jio launches new 'All-in-One' plan with more data, voice calls: check out price, other details

Whether it's the shortening of ringing time across operators or increase in tariffs by Jio, the operators that brought down the industry-wide tariffs three years ago, a series of events over the course of past month points out that the sector is ready to undergo changes. TRAI's consultation process was closed last week and received replies from 61 respondents, including all telcos. Here are the key takeaways from the responses of key stakeholders:

Bharti Airtel

Airtel is going to be a beneficiary if TRAI decides to extend the IUC charges. That's because the incoming calls on Airtel's network from other telcos are higher than outgoing calls from its network to other telcos. So it is a net gainer. The New Delhi-based operator has submitted an 11-page response to TRAI. It has recommended that IUC charges must be extended for at least three years.

Why? The telco has said that its capex-to-revenue ratio is significantly high at about 42 per cent. To simplify, for every Rs 100 earned by the telco, around Rs 42 have been invested as capex. How does it matter? It means that the Airtel is investing heavily in its network, and IUC earned (from higher incoming calls) is a kind of reward for the company on its capex investments.

Moreover, Airtel has said that there are over 400 million customers across all operators who continue to use the 2G network, and 49 per cent of its customers are still using 2G handsets. "The projections by GSMA for India also predict that 12-13 per cent of customers will continue to be on 2G handsets till 2025," Airtel said.

But how is 2G linked to IUC? TRAI believes that the idea of moving towards zero IUC charges would propel telcos to invest in new technologies (4G/5G) but since a large number of 2G users still exist, this might not be the right time to scrap IUC.

Also Read: Reliance Jio calls TRAI's IUC review anti-poor; says it sabotages PM Modi's Digital India mission

Vodafone Idea

The largest telecom operator in the country feels that there's a need to revise the applicable date (January 1, 2020) for zero termination charges. Vodafone Idea said that despite large 4G VoLTE (voice over LTE) coverage, at the industry level, 90 per cent of the total industry minutes (excluding Jio which is the 4G-only operator) are carried on 2G/3G network, including major cities such as Delhi and Mumbai where the voice traffic is predominantly 2G/3G. "This shows that factors such as consumer behaviour, service choice, and device ecosystem are playing a pivotal role in consumer choice regarding the migration to new technologies...Even after extensive 4G VoLTE rollouts, there is a huge demand for 2G devices (8 to 10 million being sold every month)..." Vodafone Idea said in a reply. This particular issue has also been raised by Airtel.

Reliance Jio

As per TRAI's data, Jio's outgoing calls are higher than its incoming calls, which essentially mean that the telco is going to lose money if TRAI continues with IUC charges beyond January 1, 2020. Recently, the fastest-growing telecom network has passed on the IUC burden (of 6 paise per minute) to its subscribers by asking them to do top-up recharges on their existing plans or buy all-in-one packs which have 1,000 minutes of off-net (Jio to other networks) calls bundled in them.

Jio's response to TRAI, therefore, is for the scrapping of IUC charges. The telco has said that the need to revise the applicable date is not only "wholly arbitrary, bad in law, unwarranted, and anti-poor, but it also adversely affects the credibility of the authority and investors' confidence. It undermines, frustrates and sabotages Prime Minister's ambitious vision for the Digital India mission."

Jio has accused incumbents of malicious intent to keep a large number of their subscribers on the per-minute calling plans by forcing them to use 2G voice technology and ensuring they make missed calls to Jio's network. Jio further said the incumbents are fraudulently masquerading wire-line numbers as mobile numbers to skew traffic asymmetry.

The operator also said that the global trends support lower termination rates, and mobile termination rates have fallen rapidly over the last 15 years, especially in Europe.

Also Read: Reliance Jio breaks its promise; to charge for calls to rival networks

BSNL

The state-run BSNL operates on just 2G/3G technologies and is yet to enter the 4G era. The government is making efforts to give an administrative allocation of 4G spectrum to BSNL so that it can compete with bigger private rivals. At present, BSNL has just about 116.23 million wireless subscribers. In a short note, BSNL's views are in line with other incumbents. It said that the applicable date for zero mobile termination charge should not only be revised but kept in abeyance for the time being.

"The domestic mobile termination charges (MTC or IUC) should continue to be applicable eternally. The parameter for revising MTC should be based on the actual termination cost incurring to the respective company to enable the company to recover the cost of termination. The MTC should be revised at regular interval of one year or more, eternally," BSNL replied.

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