Opinion | IUC backpedaling another instance of regulatory instability

Often consumers end up paying for regulators’s failed promises. We have seen how depositors of cooperative banks have to pay for the central bank’s imperfect supervision of such lenders. Similarly, mobile telephony consumers will have to bear higher tariffs because the Telecom Regulatory Authority of India failed to keep its promise of scrapping interconnect usage charges (IUC) from January 2020.

IUC is the cost paid by one mobile telecom operator to another, when its customers make outgoing mobile calls to the other operator’s customers. These calls between two different networks are known as mobile off-net calls.

In a statement earlier today (9 October 2019), Reliance Jio Infocomm said that its customers will have 6 paisa per minute if a call is made to a non-Jio mobile network. This IUC was borne by Reliance Jio thus far. In the past three years, the company has spent Rs 13,500 crore on net IUC charges paid to other operators.

But now the company has been forced to pass on this burden to customers after TRAI floated a fresh consultation paper on September 18, 2019 with a view to possibly defer its earlier decision of scrapping IUC starting January 1, 2020.

It’s a shame that TRAI has gone back on its earlier decision (gazette on September 19, 2017)  which had brought down IUC to 6 paisa from 14 paisa earlier and was scheduled to be brought down to zero from January 1, 2020.

Needless to say, IUC is a controversial issue. But TRAI had issued its decision after a detailed consultation and hearing representatives both in favour of and against IUC. It was a progressive and forward looking decision because newer technologies such as IP-based networks bring down the cost of voice calls to a bare minimum.

Keeping the technology evolutions in mind, TRAI had noted: “in case the present regime of cost-based domestic termination charge is continued for long, it would hamper the movement of the sector towards deployment of more efficient technologies; more innovative and customer friendly tariff offerings; and, in turn, it would be detrimental to the growth of telecommunication services sector.”

The IUC policy of 2017 was thus aimed at incentivising service providers to “migrate towards a more efficient network technology (such as 4G).”

Secondly, at that time TRAI said: “Establishment of a clear outlook for IUC would provide regulatory predictability and enable service providers to plan their networks and businesses accordingly.”

The operative part in that segment is “regulatory predictability.” This is a key factor in the ease of doing business. It is a key assumption that businessmen make before investing money to build factories and set up capacity to serve their customers. If a regulator keeps vacillating on policy, it puts money already sunk in projects in danger and doesn’t bode well for future investments.

Telecom in India has always been a sector that attracted controversy. It’s time, the regulator takes a stand to move forward.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.