NEW DELHI: Beleaguered telecom service providers Bharti Airtel and Vodafone Idea (VIL) received further relief on Tuesday, albeit indirectly, with industry regulator Telecom Regulatory Authority of India (TRAI) deciding to extend the contentious Interconnect Usage Charge (IUC) regime for another year.
Under the IUC mechanism, operators from whose network a call originates have to pay the operator of the destination network 6 paise per minute as call handling fees.
The extension of the mechanism, earlier slated to come to an end from January 1, 2020, will help Airtel and VIL since they are both net receivers of IUC payments.
In contrast, sources say that Reliance Jio had a quarterly cash outgo of around Rs 800 crore per quarter due to IUC.
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This imbalance had prompted vociferous protests from Jio after TRAI decided to review the end date for IUC earlier this year.
The Mukesh Ambani-led telco had even broken with the telecom industry body - Cellular Operators Association of India (COAI) - arguing that the IUC system was outdated, designed as it was for older 2G and 3G networks.
“An extension would create a strong and wholly-unjustified incentive for certain incumbent operators to not upgrade their 2G networks to 4G,” Jio had said in its submissions to the regulator.
Its rivals, for their part, had sought an extension of around 2-3 years on the grounds that many subscribers were still on older generation mobile networks.
Going by the reasons enumerated in the new regulations, TRAI seems to have picked a middle ground.
“Out of (India’s) five telecom service providers (TSP), one is 4G-only network operator, two operate a mix of 2G, 3G and 4G networks, and the remaining 2 PSUs have predominantly 2G and 3G networks. At the end of September 2019, out of approximately 1,174 million mobile subscribers, 557 million are 4G data subscribers and the remaining are still using 2G/ 3G services. While reviewing the IUC, it is necessary to balance the interests of both of these subscriber segments,” the regulator said.
According to the new rules, the IUC regime will come to an end from January 1, 2021.
TRAI floats consultation paper on tariff
Tuesday also saw the regulator make another decision that may help struggling telecom sector incumbents. Following consistent pressure from all major TSPs for minimum floor tariff mandate for mobile data, TRAI floated a consultation paper on the issues.
While the regulator admitted that “most economists advise against the fixation of price controls”, it also noted that the telecom sector was critical infrastructure provider for many sectors. “Thus, making sure that the telecom sector remains healthy and its orderly growth are equally important,” TRAI said.
All three major telcos raised tariffs by as much as 50 per cent this month after years of slashing prices, primarily due to a mammoth Rs 1.47 lakh crore license fee and spectrum usage charge bill set to come due in January this year.
"We believe that this will ensure that the industry remains healthy and robust, there is orderly competition and, above all, resources are available with TSPs to enhance quality of service and expansion of networks... It will also provide confidence to investors to make available needed resources," said COAI director general Rajan Mathews.