Interconnect usage charges cannot become a profit vertical for telecom operators, TRAI Chairman RS Sharma said, while responding to whether a cut in the fee will eat into the income of operators which are already financially stressed.
“Not sure if IUC has any connection with stress in the sector”, Sharma told BloombergQuint in an interaction. “Reducing IUC does not contribute either positively or negatively to the sector's stress,” he said.
Earlier this month the Telecom Regulatory Authority of India reduced call connect charges from 14 paise to 6 paise and said the charge will stand eliminated by 2020. Sharma explained that according to the TRAI's calculations 6 paise is what it costs to terminate a call and hence the charge was fair compensation.
But incumbent telecom operators such as Idea Cellular Ltd., Bharti Airtel Ltd and Vodafone India Ltd. have opposed this cut on grounds that that it is much lower than the cost they incur to terminate calls. In an earlier interview with BloombergQuint Sanjeev Aga, director at Idea Cellular said the cost of receiving a call is 35 paise. And that is the nub of this fight that may very well end up in court.
The Authority's verdict to cut IUC to a paltry 6pper minute, determined on the basis of a new cost methodology (Pure LRIC model)which brazenly ignores the stupendously high prices paid for the spectrum, – akey raw material without which mobile telephony services cannot be delivered - compromisesthis principle, and will negatively impact the already stressed financialhealth of the sector.Idea Cellular Statement (September 21)
We areextremely disappointed with the latest regulation on the IUC, especially at atime when the industry is facing severe financial stress. The suggested IUCrate, which has been arrived at in a completely non-transparent fashion,benefits only one operator which enjoys a huge traffic asymmetry in its favour.Bharti Airtel Statement (September 20)
These companies have argued that the decision to cut IUC and gradually reduce it to zero benefits only one player, Reliance Jio. The newest entrant in India's telecom industry has been lobbying in favour of lower termination charges. TRAI's move could benefit Jio by up to Rs 4,200 crore estimated an Edelweiss Securities report. Another brokerage CLSA expects a 4-7 percent decline in operating incomes of incumbent players.
The issue of who the decision favours and who it doesn't is not one that TRAI is concerned about, Sharma said. “We are concerned with computing the costs and we've done so,” he added. Incumbents have the right to approach the court but the regulator too has a right to defend its stance.
If you're being compensated for the cost of doing something, then number of calls on the network shouldn't matter.RS Sharma, Chairman, TRAI
Also Read: It's Advantage Reliance Jio As Regulator Cuts Call Connect Fee
Zero IUC
Sharma explained that moving to a zero-IUC regime by 2020 made sense as all operators will move to IP-based networks. This means voice calls would be made using data networks, as is the case with Reliance Jio's free VoLTE (Voice over Long-Term Evolution) calling services.
“In that world, the cost of handling a call becomes less than a fraction of a paisa. One megabyte of data can handle 4 minutes of voice calling”, Sharma said.
As of now, around 15-16 percent of networks in the country are IP-based and Sharma expects 100 percent conversion by 2020.
Also Read: TRAI's Decision To Cut Call Connect Charge Based On Flawed Logic, Says Sanjeev Aga
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