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TRAI slashes IUC; Airtel claims move tips scales in favour of Jio

20 Sep 2017

The Telecom Regulatory Authority of India (TRAI) has issued a new decision lowering the interconnection usage charge (IUC) for mobile to mobile communications from INR0.14 (USD0.0022) per minute to INR0.06 per minute from 1 October 2017, with the termination charge to be cancelled altogether from 1 January 2020. The matter has been the subject of fierce debate in recent months, with market leader Bharti Airtel and disruptive newcomer Reliance Jio Infocomm – the two players with the most to lose or gain from the regulator’s decision – exchanging accusations of distorting evidence to influence the TRAI. Jio was the only cellco to argue in favour of eliminating the IUC, claiming that the incumbent providers had profited from the current pricing regime, an allegation that was denied by Airtel. Jio would also benefit the most financially from the removal of the IUC as, due to its free unlimited voice offerings, it terminates a disproportionate amount of traffic onto other networks (incurring costs from the IUC) whilst its smaller user base means that less traffic terminates on its network. Airtel’s situation, on the other hand, is reversed: its larger subscriber base means that more calls terminate on its network, generating greater income from interconnection fees. For its part, however, Airtel has contended the revenue generated from the IUC has been insufficient to meet the costs of the handling the inbound traffic.

In a statement, Airtel expressed its dissatisfaction with the TRAI’s decision: ’We are extremely disappointed with the latest regulation on the IUC, especially at a time when the industry is facing severe financial stress. The suggested IUC rate, which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favour. The sharp drop in the IUC rate will only help transfer part of its cost to other operators, thereby further worsening the financial health of the industry.’ The Economic Times, meanwhile, cites a statement from Vodafone India as saying that the firm is considering its options on responding to the regulator’s decision.

The TRAI has defended the IUC reduction, stressing that the process was transparent, and that there were no assumptions in the decision. TRAI Chairman RS Sharma explained that the new pricing was based on operator costs, adding that the decision would benefit consumers and the industry as a whole.

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