The IUC regime is an incentive for incumbents to keep providing outdated 2G services and avoid shifting to full VoLTE 4G networks
The telecom sector is entangled in a corporate war and the casualty is the consumer. The new and incumbent telecom service providers are at loggerheads over various regulatory issues: interconnect charges (IUC) being the latest one.
Interconnect Usage Charge (IUC) is the price that a telecom operator (from where the call originates) pays another to terminate a call. Currently, IUC is 6 paise per minute.
Instead of protecting consumer interests, the Telecom Regulatory Authority of India (TRAI) is punishing poor subscribers by reviewing its IUC regulation. It seems that the regulator’s interest is to increase the revenues of telecom service providers by increasing tariffs.
No wonder then, when TRAI announced a review of its 2017 telecom regulations, Reliance Jio increased tariffs for its subscribers. Jio announced that its subscribers will have to pay for voice calls made to subscribers of Airtel, Vodafone and BSNL. Jio will pass on the IUC of 6 paise per minute to its subscribers.
This means that poor subscribers who are mainly consumers of voice will have to pay a higher price, while the rich will continue enjoying 4G data services at a low tariff. “I am surprised by the TRAI decision that widens the digital gap between the haves and the have nots,” said a former CEO of the largest telecom service provider. “Poor consumers were already paying very high prices for 2G services. Now they will have to pay high price for 4G services.”
On September 19, 2017, TRAI had announced new IUC regulations. It said that the IUC would be reduced to zero in two phases. First, it reduced IUC to 6 paise from the earlier 14 paise per minute. Then, from January 2020, it would be reduced to zero paise and effectively abolished.
This decision was in accordance with well-established principles followed throughout the world. However, last month, TRAI decided to review it with a logic that it wanted to study the symmetry of traffic between new and incumbent operators.
In any case, TRAI’s approach of abolishing IUC in two phases didn’t result in bringing any symmetry in the traffic. It was simply because of the fact that for incumbent operators, the IUC regime is an incentive to keep providing outdated 2G services and avoid shifting to full VoLTE 4G networks.
Instead of investing on upgrading their networks, it makes business sense for incumbent operators to keep tariffs high for lower-income subscribers so that they give a missed call whenever they want to talk to someone. On receiving a missed call, a subscriber at competitor’s network would call them back, thus generating revenue for the incumbent operator.
Incumbent operators charge up to Rs 1.80 per minute for a ‘2G telephone call’, while the average tariff for a one-minute call was less than 3 paise per minute for a 4G subscriber (before Jio increased tariff), with free broadband internet access. In fact, at Rs 49, Jio was giving unlimited calls and 1GB of data download. It thus makes sense for subscribers in the networks of incumbent operators to give missed calls to subscribers of Jio.
Thus, incumbent operators generate revenue at the rate of 6 paise per minute on calls terminating on their depreciated 2G networks. This strategy seems to be paying for the incumbent operators.
As of June 2019, 63 percent of Airtel customers were non-broadband customers, while 71 percent of Vodafone customers were non-broadband. These are the customers that pay on the basis of per minute call. They are the source of incoming calls.
As a result, there is still a traffic imbalance between incumbent operators and new operators.
Instead of removing this traffic imbalance by abolishing any incentive for telecom operators to keep tariff high for poor subscribers, TRAI has created uncertainty by reviewing its earlier decision to make IUC zero.
This is simply anti-consumer and in the long run it will be a deterrent to making India a digital society.
(The writer is Editor, TelecomTiger. Views are personal.)Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.