The Telecom Regulatory Authority of India (TRAI) has slashed the interconnection usage charges (IUC) to 6 paise. The revised prices will be effective from October 1 and the regulator has also announced that the fee will be scrapped from 2020.
TRAI said that the revised plans will effective from October 1, 2017, to December 31, 2019, and after that starting from January 1, 2020, the prices would scrap totally. But what is interconnection usage charges? The IUC is a charge that has to paid by the service provider whose users originates a call to from its network to other service provider network. So, for example, if you are an Airtel customer and you call on a Vodafone user, then Airtel has to pay the IUC charges to Vodafone. Earlier, operators needed to pay 14 paise per minute for domestic calls. Further, these charges are only paid on a wireless to a wireless network, while other types of calls like wireline to mobile, wireline to wireline and mobile to wireline, the interconnection charges are zero.
The decision came out after an open-house discussion held by TRAI in July regarding the same, where Reliance Jio proposed that the interconnection charges should scrap altogether, while the incumbent’s players like Airtel, Vodafone, and Idea Cellular were against it. The operators demanded to increase the IUC to around 30-40 paise per minute.
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The biggest benefactor of this decision will be Reliance Jio as the operator has more originating calls as the compared to the ones that are terminated to its network. Jio has been providing free calls on its network since its inception, which has proven to be a burden for other telecom operators. Companies like Bharti Airtel, Vodafone India, and Idea Cellular will suffer a great loss as all of them has a sizeable chunk of market share and more calls terminate on their network compared to the calls originating from them. This is because the major operators follow calling party pays (CPP) regime under which the calling party pays to his/her service provider for the call, while the called party does not have to pay for the call.
“We are disappointed with this decision and are now considering our options in response to it. The Indian telecoms industry is already experiencing the greatest period of financial stress in its history. This is yet another retrograde regulatory measure that will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole. Unless mitigated, this decision will have serious consequences for investment in rural coverage, undermining the Government’s vision of Digital India,” a Vodafone official spokesperson said in a statement.