Reliance Jio to benefit as TRAI cuts interconnect usage charges

The Telecom Regulatory Authority of India (TRAI) on Tuesday cut the interconnect usage charges (IUC) by more than half to 6-paise per minute with effect from October 1 and abolished it all together for all local calls starting January 1, 2020. "The reduction in the mobile termination charge is likely to yield consumer benefits," TRAI said in a statement.

The move comes after an open-house held by TRAI in July regarding interconnection usage charges (IUC) where Reliance Jio proposed to make IUC zero, while incumbents such as Airtel, Idea Cellular, and Vodafone India were against it, demanding it to be raised to 30-40 paise per minute.

The incumbents now say that they will go to court against the TRAI decision. "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," said a Vodafone spokesperson on the rate cut.

IUC is paid by the mobile operator on whose network the call originates to the network where it terminates. Some analysts say that the reduction in IUC from 14 paise to 6 paise would mean a gain of around Rs 3,800 crore for Reliance Jio and a corresponding loss for incumbents.

TRAI, on the other hand, believes that the move to the so-called Bill And Keep regime (where no interconnect charge is paid by a telco to another) would “encourage flat rate billing and time differentiated charges, both of which will improve capacity utilisation and will be in the interest of consumers”.

Read also: Reliance Jio dismisses incumbents’ theory that IUC cut will benefit Jio alone