Telcos remain divided over IUC charge

Telecom companies remain divided over the interconnect usage charge (IUC), a key input for mobile tariffs. 

Bharti Airtel, Idea Cellular and Vodafone sought doubling of the IUC, while Reliance Jio and Aircel favoured bringing it down during their presentations before the Telecom Regulatory Authority of India (Trai) on Tuesday. Some like Tata Teleservices said the current regime of 14 paise a minute should continue.

The IUC, fixed by Trai, is levied on every domestic incoming call by the telecom operator receiving it.

According to sources, Airtel and Idea said they incurred a cost of 30-35 paise a minute on calls and the current IUC of 14 paise was way below the cost. The IUC, they said, should be fixed on a “full-cost” basis. 

Vodafone also demanded an increase in the IUC. However, during the discussion, it reportedly said if the IUC was not increased, at least the current rate should continue. Tata Teleservices, too, favoured the continuation of the current charges.

However, Reliance Jio said the cost for termination of calls for it was around 0.4 paise a minute, which was negligible, and therefore the ‘bill-and-keep’ method should be adopted.

However, the incumbents said that in a CPP (calling party pays) regime, the bill-and-keep method was not prevalent across the world. On this argument, Jio proposed the adoption of the long run incremental cost (LRIC) method. 

LRIC is the incremental cost that arises in the long run with a specific increment in volume of production. An increment is the unit of output over which costs are being measured. Currently, India has the LRIC plus regime in place. In the current set-up, 12 paise per minute is the LRIC and 2 paise as other charges. However, according to Jio, its LRIC cost will also be negligible as it only costs 0.4 paise a minute for a call, sources said.

Speaking after the meeting, Trai Chairman RS Sharma said, “All major telcos have given their views. Some have asked for raising the IUC to 30-35 paise a minute; some have said the IUC should be kept constant; while some want it to be lowered.”

Trai, he said, would decide on the IUC soon. Asked about floor prices for data and voice services, Sharma said the issue was not discussed and the regulator would hold a meeting on July 21 with telecom operators on it.

The IUC has been a bone of contention between incumbents and Reliance Jio. The old operators say they are suffering losses due to incoming calls from Jio to their network as the current regime is below cost and there is huge asymmetry in incoming calls from Jio.

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