Indian regulator TRAI more than halved the interconnect usage charge (IUC). Starting 1 October, the call termination fee paid by operators will drop to 6 paise per minute from the current 14 paise per minute.
The regulator targets further reductions towards an eventual elimination of the charges by 2020. According to TRAI, the establishment of a clear outlook for IUC will provide regulatory predictability and enable service providers to plan their networks and businesses accordingly.
India’s incumbent operators Bharti Airtel, Idea Cellular and Vodafone India have announced they will go to court against the regulator’s decision, The Economic Times reports. According to industry estimates, Bharti Airtel would lose around INR 20 billion per year from the lower IUC. For Vodafone India and Idea Cellular, ranked second and third, the annual loss is estimated to reach INR 15 billion and INR 12 billion, respectively. New entrant Jio is expected to save INR 50 billion, while RCom and Aircel will benefit by a marginal INR 2.5 billion each.
Winners and losers
India’s top three operators, Bharti Airtel, Vodafone India and Idea Cellular, are net gainers under the regime since they have more than 60 percent of the subscriber base and thus have more calls terminating on their networks compared with calls originating. Jio, a new entrant, has most calls going out from its network and terminating on incumbents’ network.
Trai believes that the IUC cut is justified at a time when communication apps are becoming more popular, generating a reduction in voice traffic. "Thus the cost of the service providers would now need to be borne by the feature phone users who do not have the ability to use OTT applications," the regulator said. "This would give rise to a peculiar situation where cost of services for low-cost feature phone users would actually end up being higher than cost of services for smartphone users. The bill and keep regime would encourage operators to invest in new technology and bring down the cost of voice services close to nil," TRAI also said.
Vodafone has announced it is “disappointed” with TRAI’s decision and is now considering its options in response to it. “The Indian telecoms industry is already experiencing the greatest period of financial stress in in its history. This is yet another retrograde regulatory measure that, unless mitigated, will have serious consequences for investment in rural coverage, undermining the Government's vision of Digital India", Vodafone added.
