TRAI announces drop in Interconnection Usage Charge (IUC)

TRAI revises IUC (Interconnect charges) to 6 paise/minute, effective Oct 1

Joy for Jio, jolt to Big 3

Jio is estimated to earn $500 million-600 million per year from incumbents.

As recently as 5 days ago, Idea Cellular had talked about IUC for VOLTE calls, and therein lies the issue.

So far, telcos were paying 14 paise/minute IUC which has now been reduced to 6 paise/minute.

Jio said references to financial stress in the industry or the need for IUC to promote rural coverage again shows the attitude of the incumbent operators wherein IUC is being treated as a subsidy that the Indian customers must pay to sustain these operators financially.

"We are disappointed with this decision and are now considering our options in response to it", the company said but did not specify its options.

Vodafone followed suit saying the new pricing "will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole".

It has been observed that reducing termination rates has benefitted consumers and enhanced competition.

TRAI said that the revised plans will effective from October 1, 2017, to December 31, 2019, and after that starting from January 1, 2020, the prices would scrap totally.

The TRAI said: "Further, the cost of termination of calls will drastically come down over a period of two years and very small residual value, if any, can be absorbed by the TSPs in their tariff offerings".

The IUC mainly consists of termination charges, originating charges and carriage/transit charges.Interconnection allows subscribers, services and networks of one service provider to be accessed by subscribers, services and networks of the other service providers. Other types of calls such as those made from landline telephones (wired connections) have always been not subjected to any interconnection charges. With a view to promote new and more efficient technologies, the Authority is expected to be forward looking and base its regulations on the most efficient technology. There is interconnection for voice then why not for data"..."They are completely bypassing the telecom operator.

The existing telecom companies were betting on an increase in the IUC since last few months. The top players with the highest number of subscribers tend to gain from the fees.

Operators in India still have revenues from voice amounting to 52% of the cumulative earnings and there is still asymmetry in the patterns of incoming and outgoing traffic over the operator networks. As per reports, this move by the TRAI is likely to impact the overall calling charge largely.

According to brokerage Motilal Oswal, the latest cut could hurt market leader Bharti Airtel's annual revenue by 6%-7%.

Bigger rivals Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd have blamed Jio's free services for their own declining growth. It also accelerated the consolidation rate in the industry and put a higher emphasis on charging for data.

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