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NEW DELHI: The telecom regulator has deferred by a year implementation of the zero-interconnect usage charges (IUC) regime that was slated to kick in from January 2020, giving some relief to India’s older operators Vodafone Idea and Bharti Airtel who can now keep getting some revenue on this account.
“For wireless to wireless domestic calls, termination charge would continue to remain 6 paise only per minute upto December 31, 2020…from January 1, 2021, onwards the termination charge for wireless to wireless domestic calls shall be zero,” the Telecom Regulatory Authority of India (Trai) said in a release Tuesday.
ET had first reported about the deferment on its online platforms earlier Tuesday.
Trai’s regulation is a relief for older carriers Vodafone Idea and Bharti Airtel -- who had backed postponing the implementation of the BAK (bill and keep) or zero-termination charge regime -- as they are net interconnect revenue earners.
Reliance Jio Infocomm, which is a net payer, had opposed any deferral.
Back in September, Trai had issued a discussion paper, seeking views on deferring the implementation of the BAK (bill and keep) or zero-termination charge regime, on grounds that consumers were yet to migrate completely to data calls coupled with the continuing imbalance of voice traffic between operators.
“It may not be advisable to implement BAK from January 1, 2020, keeping in view inadequate adoption of 4G technologies by consumers and asymmetries in traffic,” Trai said, issuing the regulation on Tuesday, adding that sticking to the earlier BAK deadline “may affect level playing field amongst service providers, and in turn, effective competition in the market”.
Further, it said, “in a capital-intensive sector (read: telecom) with a long gestation period, and where entry of new service providers in the short run is difficult, maintaining effective competition amongst service providers is necessary for ensuring affordable services to consumers”.
At present, interconnect charge is paid by the call-originating telco to the destination carrier.
But under the proposed BAK system, which was set to take effect from January, the call-originating telco, which also bills the user, would keep the money, thus making it a zero-IUC regime.
Rajan Mathews, director general of Cellular Operators Association of India (COAI), the telecom lobby body representing Bharti Airtel, Vodafone Idea and Jio, welcomed Trai’s regulation but said the “industry would have liked it to be extended by another year, but even one year helps the industry”.
“We hope by the end of the year, Trai will once again review the matter.
Second, two court cases are ongoing on this matter and we hope to hear some decisions regarding methodology of computing this charge,” Mathews told ET.
A senior executive at one of the older telcos though did not mask his disappointment, saying “IUC charges should be applicable as long as there is traffic asymmetry between service providers…this asymmetry is data-based and quantified monthly/quarterly, and to bring in a filter of time again (in this case, 1 year) is unwarranted”.
A latest deferment of zero-IUC regime means Bharti Airtel and Vodafone Idea will still receive some IUC payments.
But analysts expect Jio to benefit, regardless of the one-year deferment of zero-IUC as it’s now the voice minutes leader.
Nitin Soni, director (corporates) at global rating agency, Fitch, in fact, said Trai’s decision to defer zero-IUC regime by a year “is only mildly positive for net IUC earners Airtel and Voda Idea, given that traffic symmetry is fast changing, especially as Jio gains more subscribers”.
He also said “Jio won’t really be impacted” by Trai regulation as “it has already started recovering IUC for calls to other telco networks”.
Rajiv Sharma, research head at SBICap Securities, though said Trai’s regulation will benefit incumbents as “the mere existence of IUC allows them to continue charging for voice services”.
Trai’s review of the IUC issue comes a little over two years since it had slashed the charge by 57% to 6 paise a minute in October 2017, and ordered its end from January 2020.
That decision, which Trai had said it may review after a year depending on adoption of new technologies and its impact on termination costs, was then backed by Reliance Jio.
This is since Trai’s decision then enabled Jio, which had then recently launched its 4G services, to save on IUC payouts to its then bigger rivals Bharti Airtel, Vodafone India and Idea Cellular (Vodafone and Idea have subsequently merged).
The older operators had then strongly protested, since they faced a sharp revenue erosion, and appealed against the regulator's order in court.
The telecom regulator, however, has ruled out any review of the present 6 paise a minute interconnect charge, saying “it may not be meaningful to start such an exhaustive and complex exercise for the limited remaining period before the (scheduled) implementation of BAK from January 1, 2021.
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