With uncertainty looming large on moving to a zero interconnect usage charge (IUC) regime in 2020, telecom operator Reliance Jio has decided to recover the IUC charge of 6 paise per minute for mobile voice calls to other operators from customers. This would mean recovery of some of the IUC dues paid by Reliance Jio, worth Rs 13,500 crore, in the last three years of its operations to incumbents like Bharti Airtel and Vodafone Idea. The move comes after the Telecom Regulatory Authority of India (Trai) released a consultation paper seeking industry view on if the IUC charge removal should be deferred from the current January 1, 2020 deadline.

Background

In September 2017, Trai, after a comprehensive review of the IUC regime, post consultations with all telecom operators, issued the Telecommunication Interconnection Usage Charges Regulations, 2017. At that point, Trai wanted to implement a phased removal to not severely hit incumbent operators, Bharti Airtel, Vodafone and Idea (which were two separate companies at that time). Based on the regulations IUC was cut from 14 paise/ min to 6 paise/ minute from October 2017, with the aim of making this charge zero from January 1, 2020.

The incumbent players were not happy with the regulations and said that Jio’s free voice call creates an off-net outgoing imbalance. In September 2019, the regulator released a consultation paper to discuss the timeline of removal of IUC charge. The paper sought industry view on if there is a need to revise application date for scrapping the IUC citing high continued inter-operator traffic asymmetry. The paper also asked what parameters should be looked at to decide on an alternate date, if any, for the IUC charge removal. The move was hailed as a positive for Bharti Airtel and Vodafone idea, with Vodafone Idea being the most to gain from the deferring of the timeline, should it be announced.

Reliance Jio’s rationale for the move

“Relying on the repeated stance of Trai and the amendment already made to the regulations reducing the IUC to Zero, Jio continued to pay IUC from its own resources to Airtel and Vodafone-Idea etc. while offering free voice to its customers. So far, in the last three years Jio has paid nearly Rs 13,500 crore as NET IUC charges to the other operators. Unfortunately, after the above order in 2017, while the incumbent operators reduced voice tariffs for their 4G customers, they continued to charge exorbitant tariffs to their 35 - 40 crore 2G customers, and in fact increased the tariffs for voice calls to around Rs 1.50/ minute. They also charge a minimum of Rs 500 / GB for data from their 2G customers. The price differential of free voice on Jio network and exorbitantly high tariffs on 2G networks causes the 35-40 crore 2G customers of Airtel and Vodafone-Idea to give missed calls to Jio customers. Jio network receives 25 to 30 crore missed calls on a daily basis. This huge missed call phenomena converts the incoming calls to Jio into outgoing calls from Jio to other operators. But for the effects of the tariff differential, especially the missed call phenomenon, the off-net voice traffic is already symmetrical now for Jio. It is being made asymmetric by the other operators by keeping their 2G voice tariffs high,” says Jio in its detailed statement.

“Citing such traffic asymmetry as the only ground in the recently floated consultation paper, Trai has reopened the closed chapter on IUC, which has already been made zero with effect from January 1, 2020 by amendment to IUC Regulations. The amendment to the IUC Regulations in 2017 was after considerable deliberations and consultations. In this background the consultation paper has created regulatory uncertainty and therefore Jio has been compelled, most reluctantly and unavoidably, to recover this regulatory charge of 6 paise per minute for all off-net mobile voice calls so long as IUC charges exist,” the statement added.

What does this mean for Jio customers?

Jio customers calling other operators from off-net voice calls will be charged the current IUC rate of 6p/ minute. The recovery of this amount will be done via an IUC top-up voucher. Reliance Jio clarifies that customers will be compensated with equivalent data for value of IUC top-up voucher. Post-paid customers will be billed at 6 paise per minute for off-net outgoing calls with increase in free data entitlement. The charge will not be applicable to a) all Jio-to-Jio calls; (b) all incoming calls; (c) Jio-to-landline calls; and (d) calls made using WhatsApp or FaceTime and similar platforms.

The following top-up vouchers shall be available for customers to suit their requirements:

* Equivalent minutes with IUC charged at 6 paise per minute, with additional charge for GST and processing fee, and duration of each call rounded up to nearest minute.

What does this mean for Reliance Jio?

Initial estimates indicate a gain of Rs 1,900 crore per quarter post the IUC charge being levied.

Timeline

The charges will be effective from October 10 to December 31, 2019; or to the time when IUC charge is moved to zero by Trai. Commenting on the timeline; Jio statement said “Jio again assures its 35 crore customers that the 6 paise per minute charge on outgoing off-net mobile calls shall continue only till the time Trai abolishes IUC, in line with its present regulation. We will share all data with Trai to convince that zero IUC regime is in the best interest of consumers and how the huge number of missed calls is creating the wrong perception of asymmetric traffic. We are hopeful that the IUC charge will be done away with as per the current regulation and that this temporary charge will come to an end by December 31, 2019 and consumers will not have to pay this charge thereafter. In the meanwhile, consumers can continue to enjoy the additional data entitlement in lieu of the IUC top-up vouchers so that there is no effective tariff increase till December 31, 2019.”

Bharti Airtel responds to Jio move, defends Trai

In a detailed statement; Bharti Airtel responded to Jio’s decision to charge IUC. It began by expressing its discontent. “One of our competitors has imposed a rate of 6 paise for all off-net calls made to other operators to cover the termination charge of IUC (Interconnect Usage Charge). They have gone on to suggest that Trai has re-opened this issue,” it said. It further supported Trai’s original decision in 2017. “We would like to point out that, on September 19, 2017, when Trai reduced the IUC from 14 paise to 6 paise and proposed a move towards Bill and Keep (zero IUC) with effect from January 1, 2020 they had specifically mentioned the following: The Authority shall keep a close watch on developments in the sector particularly with respect to the adoption of new technologies and their impact on Termination cost. The Authority, if deems it necessary may re visit the afore mentioned scheme of Termination charge applicable on Wireless to Wireless calls after one year from the implementation of the regulation,” it said.

Bharti Airtel believes that the two assumptions made by the telecom regulator have not materialised. “The assumptions made by Trai were to evaluate two factors: One was the adoption of VoLTE, which Trai assumed will bring the cost down. Second, with the growth of smaller-sized operators, symmetry of traffic would ensue. Both these have not materialised. There are still over 400 million 2G customers from the poorest sections of society living in rural areas paying less than Rs 50 per month and who can still not afford to buy a 4G device. Second, there still is significant asymmetry of traffic. In line with Trai’s stated position, therefore, they have issued a consultation paper in September 2019 to reassess the time lines of the shift from 6 paise to a zero charge. Clearly, this off-net charge being levied, therefore, is to force IUC to be brought down despite the heavy burden it puts in the receiving network;” it added.

The company further supported Trai move considering the financial strain caused to most telecom players. “We are grateful that this very timely consultation paper to reassess IUC has been issued by Trai. The telecom industry is in a state of deep financial stress since the last three years with several operators having gone bankrupt and thousands of jobs having being lost. The IUC is determined based on the cost per call. Given the massive 2G customer base in India the cost of the call at 6 paise is already significantly below the real cost of completing the call,” it added.

ALSO READ: Jio to recover 6 paise/min for calls to Airtel, Vodafone Idea

Disclosure: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.

First Published:Oct 9, 2019 7:58 PM IST