Telecom players seek 1-2 years’ time to scrap interconnect user charges
The war of the telecom giants never gets uninteresting. In recent times the clash over Interconnect Usage Charge or the “bill and keep” regime is perhaps the most riveting, not just because of the names involved but also the importance of this discussion in the Indian telecom landscape.
The war of the telecom giants never gets uninteresting. In recent times the clash over Interconnect Usage Charge or the “bill and keep” regime is perhaps the most riveting, not just because of the names involved but also the importance of this discussion in the Indian telecom landscape.
Incumbent telecom operators, Vodafone Idea and Bharti Airtel have written to the TRAI with their comments on Interconnect Usage Charge (IUC). Sources who are directly involved with the operators indicate that the view of the telecom players is that they need the IUC charge for at least 12 months to 24 months.
"We are of the view that for certainty in regulatory policy, a time frame must be defined. We have seen IUC being increased by even up to 3 years. So 1-2 years' time frame is fair.”
The comments by telecom players came on Friday which was the last date for such submissions. 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 01, 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, TRAI released a consultation paper to discuss the timeline for IUC charge removal.
The paper sought industry view on if there is a need to revise the 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 & Vodafone Idea.
As of the second quarter of this financial year, Vodafone Idea saw 30 percent of its EBITDA coming from IUC, whereas 7-8 percent of Bharti Airtel's EBITDA came from IUC.
A delay in IUC termination, while positive for Vodafone Idea & Bharti Airtel, is a setback got Reliance Jio that has paid about Rs 14,000 core as IUC dues to the incumbent players. Post the TRAI move, Jio had to announce charging of the 6p/min charge to customers to offset the hit.
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Here is what the incumbent telecom players have responded to the questions raised by TRAI.
TRAI question 01: Is there a need to revise the date for IUC termination?
Sources tell CNBC TV18 that the incumbent telecom players have sought between 12- 24 months' time for implementation of IUC termination. "Telecom players need a minimum of one years’ time of retaining the benefit of the IUC charge to sustain themselves. However, all operators agree that a fixed time frame is needed to create regulatory certainty and enable better planning. The TRAI can then look at a periodic review to determine the balance in network traffic and take a decision;" said another source who did not wish to be named
TRAI question 02: What parameters should be adopted to decide alternate date?
To this point, telecom operators have raised the importance of IUC when there is asymmetric traffic. Sources tell CNBC TV18 that the operators have said that it will take at least 1 year time for an imbalance in inter-operator off-net traffic to even out. "We need at least 1 year for sustainable adoption of more efficient technology and need the ability to seamlessly adapt to new tech critical for affordable tariff & quality services which will in the long run benefit customers," said an executive from one of the telecom operators that did not wish to be named.
TRAI question 03: Other suggestions related to domestic wireless termination charges
This point brings out a large debate, one that has even gone to court. Telecom operators explain that in a Calling Party Pays (CPP) regime, IUC can never be zero. "Bill and keep is a bilateral commercial regime. If two operators decide to do bill & keep it must be considered fair if the balance of trade is equal," says the source. "The regulator's job is to determine what the cost is in a CPP regime.
Bilateral arrangements should be able to determine if operators want to stick to a bill & keep model"
What happens now?
While the comments by Incumbent telecom operators have been submitted today, the counter comments are expected by November 01. Post this there will be debate and open house discussions between the stakeholders and the regulator. "We should expect the final guidelines to be made official either by November end or December beginning. As the initial date of termination of charges was due on January 01, 2020, TRAI would want to complete and announce the final decision by December," adds the source
Disclosure: Reliance Industries, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.
First Published: Oct 18, 2019 6:23 PM IST
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