Trai defers zero-IUC regime till Dec 2020

Trai's move is seen as a relief for the debt ridden sector and the industry body COAI expects that continuing with six paise mobile call termination charge will not have any impact on consumers as operators have already absorbed this charge in their recently increased mobile call and data rates.

Illustration: Dominic Xavier/Rediff.com

Telecom operators will continue to pay 6 paise per minute for every outgoing call made to their competitors' network till December 31, 2020 following sector regulator Trai's decision announced on Tuesday.

These charges were proposed to become zero from January 1, 2021.

Telecom industry body COAI sees it as a relief for the debt ridden sector and expects that continuing with six paise mobile call termination charge will not have any impact on consumers as operators have already absorbed this charge in their recently increased mobile call and data rates.

"For wireless to wireless domestic calls, termination charge would continue to remain as Re 0.06 (paise six only) per minute up to December 31, 2020," the Telecom Regulatory Authority of India (Trai) said.

The rate were reduced to 6 paise with effect from October 1, 2017 from 14 paise charged earlier and it was to become nil from January 1, 2020.

"From January 1, 2021 onwards the termination charge for wireless (mobile) to wireless (mobile) domestic calls shall be zero," the regulator added.

According to estimates, industry players lost Rs 11,000 crore when interconnect usage charge for mobile calls was reduced to 6 paise from 14 paise.

Further, removal of the mobile call termination charges from January 1, 2020 would have impacted the sector by approximately Rs 3,672 crore.

"Keeping in view the above, along with the interests of consumers, and to ensure orderly and sustainable growth of telecom sector, the Authority is of the considered view that the date for implementation of BAK (bill and keep- where no operators bills to competitor for IUC) be deferred by 12 months to make it applicable from January 1, 2021," Trai said.

Levy of mobile call termination implies operator providing free call will have bear the burden of 6 paise per minute for every outgoing call made outside the network and will therefore need to make provision within mobile call plans to recover these charges.

"The incumbent operators have perhaps requested longer period because IUC (interconnection usage charges) is held for about 3 years.

“This extension lends some sense of predictability, stability and transparency for investors. It is definitely a move in the right direction," COAI Director General Rajan S Mathews said.

Reliance Jio had started levying 6 paise extra per minute for calls made outside its network, while Trai was working on reviewing the IUC fees.

The company rolled out new plans from December 6 in which it claims to have made five times higher provision for free outgoing calls compared to normal usage of subscribers.

The mobile calling service has faced tough competition from app based calls but Mathews said internet-based calling will not have any "material impact" on the financial health of the telecom operators.

"IUC impacts people who are on 2G network and using feature phones. Smartphone users continue to use data network so there will be no material impact of app based calling on telecom operators," Mathews said.

At the end of September 2019, out of approximately 1,174 million mobile subscribers, 557 million are 4G data subscriber and the remaining, about 617 million subscribers, are still using 2G and 3G services.

Bharti Airtel and Vodafone Idea have announced to gradually switch off their 3G network and migrate to 4G.

However, they will continue to provide 2G service because everyone in the country cannot afford to buy 4G handset.

MTNL and BSNL are other players which still provide 2G and 3G connections and have not announced any plans to switch off these old technology networks despite government approving plans to allocate them spectrum for 4G services.

Trai said that 2G and 3G phones cannot work in 4G networks and therefore the transition of consumers from previous generation technologies -- 2G and 3G to 4G - is gradual during initial years, and therefore the networks of multiple generation technologies are required to coexist to serve different segments of consumers.

Based on the trends in the mobile service subscription, device market and expansion plans of operators for 4G networks, Trai expects that by the end of 2020 majority of subscribers would adopt the 4G technology after which it has proposed to remove mobile call termination charges.

Mathews, however, said that continuation of mobile call termination charges will not help telecom operators to bear the burden of Rs 1.33 lakh crore in adjusted gross revenue, which has to be paid in January.

"This (IUC) is going to help the topline but will be offset by the amount that you pay to other operator and settle with them.

“From cash flow perspective it is not going to have major benefit vis-a-vis AGR.

 The major benefit will depend on what Supreme Court says and then subsequent to that what the government will do in terms of our request," Mathews said.