A welcome move

In a move that could benefit millions of mobile phone users in the country, the Telecom Regulatory Authority of India (Trai) on Tuesday reduced Interconnection Usage Charge (IUC) to six paise per minute from the existing 14 paise per minute. The telecom regulator further made it clear that the charge would completely be removed from the year 2020.

IUC or the call connect charge is an amount that a telecom operator on whose network a call originates pays to the operator on whose network the call lands. For example, if a Jio subscriber makes a call to an Airtel subscriber, then Jio will have to pay IUC for the duration of the call to Airtel.

So, lower IUC will obviously result in lower call rates as the call connect charges account for a significant part of the tariffs for voice and data fixed by telecom players for their subscribers. As the public sector BSNL pointed out on Wednesday while reacting to the Trai’s move, the reduction in IUC will make telecom tariffs more competitive. The state-run telecom operator, according to its Chairman Anupam Shrivastava, will now come up with more aggressive tariff plans. That should be a pleasing news to over 10.5 crore people who use BSNL services in the country.

But other telecom operators like Airtel and Vodafone are not happy with the Trai’s decision. They allege that the move will favour Mukesh Ambani-owned Reliance Jio, a relatively new entrant which disrupted market and emerged as a leading player in India’s burgeoning telecom space within a short span of time.

They are partly right, though. As new player with loads of monies in its kitty, Jio invested heavily in the latest equipment and straightway rolled out its services on 4G-LTE technology. It could send the industry into a tailspin by offering free voice calls.

Airtel, Vodafone and Idea, which are still saddled with 2G, 3G technologies, are already reeling under the impact of Jio’s aggressive tactics with their bottom lines taking a huge beating. Trai’s latest fiat will further erode their revenue streams. With Jio offering free voice calls, a large number of calls are originating on its network and landing on the rivals’ network.

That way, Jio has been paying hefty IUC bills to its rivals even though its voice calls are free. With 47 per cent fall in the call connect charges now, Jio will make significant savings while Airtel and others will lose money.

But there is no point in complaining. Instead, telecom operators who stand to lose revenues due to the Trai’s decision should explore other avenues to make up for the shortfall. BSNL which is likely to see its IUC revenues falling to Rs 140 crore post Trai move from Rs 300 crore now says it will go for a tariff re-engineering to take advantage of the new regime.

Others also should follow suit and gear up for no-IUC regime which is now slated to kick in from the year 2020. Otherwise, the telecom players which fail to adapt to the changing market dynamics will pay heavy price!