According to TRAI, as of 1 October, any operator from whose network a call originates will have to pay the network provider a fee of 0.06 rupee ($0.0009), with a view of abolishing the charge altogether by the year 2020.
The older telecom players are expected to move court to challenge Trai’s decision as it threatens to suck out a massive chunk of their revenues.
Moreover TRAI has proposed to remove IUC completely from 2020, placing emphasis on the growing redundancy of charging for voice calls.
It’s a regime that typically benefits the largest telecom operators.
This move had however been opposed by Bharti Airtel, Vodafone and Idea Cellular and these companies had fought for a rise in IUS rates.
‘There is no question of any advantage from the new IUC regulation to Jio as it has already passed on all the benefits to customers.
Fitch said that Jio is likely to roll out other offers to increase its subscriber base over the next two years, and the incumbents are likely to continue to respond with price cuts, discounts and promotions of their own.
Telecommunication Regulatory Authority of India halved the inter usage charges yesterday. Back-of-the-envelope calculation suggests that TRAI’s latest decision to cut IUC to 6 paise could result in savings of over Rs 5,000 crore for Reliance Jio which uses VoLTE technology for its entire phone call service.
Leading telecom operators Bharti Airtel and Vodafone has slammed the regulator Trai’s decision to reduce call connect charges, saying that the move will benefit only one operator and worsen the financial health of stressed industry. The incumbents including Airtel and Vodafone-Idea are already bleeding with the aggressive offerings by Jio.
Earlier, operators needed to pay 14 paise per minute for domestic calls.
The argument of incumbents is there a huge traffic asymmetry between incoming and outgoing calls from Jio’s network.
Interconnection Usage Charge or IUC is paid by the call initiating network to the network where the call is made. TRAI’s direction will help Reliance Jio substantially lower its operating cost, analysts said.
Markets where market forces, and not the regulator, determine interconnection charges, would lead to telecom operators trying to create a major disincentive for calling people on another network, and discriminatory charges against call-recipients of another network.
A cut in IUC means Airtel, Vodafone and Idea will now need to recover a greater share of their costs from their customers, but leave alone being able to raise tariffs, they would most likely be forced to drop tariffs to counter Reliance Jio.