How TRAI’s Recent Judgement on IUC And BAK Can Prove To Be A Game Changer for Subscribers and Telecom Operators?

By July 22nd, 2017 AT 5:10 PM

TRAI recently held the meeting on Interconnect Usage Charges (IUC) with the telecom operators. IUC or interconnect usage charge is a fee that the caller’s operator needs to pay to the other operator if a mobile call terminates at the latter’s network. For example, if you are an Idea customer and make a call to a Vodafone subscriber, and Idea has to pay 14 paise per minute of IUC to Vodafone for the call.

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The meeting soon turned into a high voltage drama between the incumbent operators like Airtel, Vodafone and Idea Cellular on one side and Reliance Jio on the other.?? Bharti Airtel was pressing for increasing the IUC owing to the high debt in the telecom sector which currently stands at Rs. 4.6 lakh crore. IUC is currently fixed at 14 paise per minute as per the TRAI’s order of 2011. Reliance Jio was unhappy and demanded zero or a complete removal of the IUC and implement the Bill and Keep (BAK) regime.

Incumbent operators like Airtel, Vodafone and Idea want the IUC fee of 14 paise per minute to be increased as they claim the actual cost of terminating a call on their network is 35 paisa per minute. So it causes a loss 21 paisa per minute for a call originating from the other telecom operator.?? Airtel further said to the regulator that because there is a huge number of voice calls from Jio, Airtel is losing Rs. 550 crore every quarter due to IUC charges.

To counter the above allegation by Airtel, Jio alleged the incumbent operators have earned more than Rs 1.2 lakh crore on account of IUC as they have not yet implemented BAK.

“Operators have made a significant excess recovery over the actual cost of termination. The number one operator has made excess recovery of Rs 73,385 crore and the number 3 operator has made Rs 45,940 crore” Jio said.

TRAI in 2011 had suggested that operators should implement BAK and they should be given time till 2014 to implement it. BAK stands for Bill and Keep. The rule says no interconnect charges will levy on any operator, which clearly means removal of IUC. In lay man’s term, BAK means each telco bills its own subscribers for outgoing calls that it sends to other telcos and keeps all the revenue received from its subscribers. ?The incumbents do not support BAK as they allege it will help Jio in building its monopoly over the market. By proposing a transition to the ‘Bill and Keep’ regime with zero MTC, Reliance Jio wants to transfer its cost to Airtel and other operators simply, Airtel said.

“In effect, Reliance Jio aims to build its business by getting a free ride on the highways built by Airtel and other operators. Their proposal to move to Bill and Keep will further burden other operators and make them weak. At the same time, it allows Reliance Jio to continue with its strategy of predatory pricing and ultimately throttle all competition. This is the sinister design of Jio. The question to ask does India want a monopoly situation in telecom?,” said Ravi Gandhi, Chief Regulatory Officer, Bharti Airtel.

A subscriber will gain if there is no IUC because of lower tariffs. On the flip side, telecom operators will bleed even more because of lower income. Lower income will result in lesser importance to R&D in the field of telephony, and this will lead to inconvenience for the user. BAK seems to be a win-win situation for the users as well as telecom operators, but it has to be priced accordingly.

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