Yesterday’s TRAI open house on Interconnect Usage Charges or IUC seemed like a war zone with heated arguments between the operators, precisely between Reliance Jio at one side and the incumbents like Airtel, Vodafone and Idea Cellular at the side.
While country’s largest operator Bharti Airtel is pushing for increasing the IUC, which is set at 14 paise per minute, Reliance Jio at the other hand asking for a complete removal of the same and implement the Bill and Keep or BAK rules.
What Is IUC
IUC or interconnect usage charge is a fee that an operator needs to pay to the other operator if a mobile call terminates at the later’s network. Simply put, if you are an Airtel customer and make a call to Idea, then Airtel has to pay 14 paisa of IUC to Idea for minute.
Incumbent operators like Airtel, Vodafone and Idea want the IUC fee of 14 paisa per minute to be increased as they claim the actual cost of terminating a call on their network costs 35 paisa per minute. So, in their money, they are loosing 21 paisa for every minute a call from other operator lands on their network.
Airtel further submitted to the regulator that because there is an assymetry of voice calls between Jio and Airtel, meaning calls from Jio landing on Airtel network are more than the other way round, the largest operator is loosing Rs 500 crore every quarter, just for Jio.
To counter that Jio said the incumbent operators have earned excess revenue of Rs 1.2 lakh crore on account of IUC as they have not yet impplemented the TRAI ruling to go by BAK.
“Operators have made significant excess recovery over actual cost of termination. The number one operator has made excess recovery of Rs 73,385 crore and the number 3 operator has made Rs 45,940 crore,” Jio said. The company however did not name the operators.
TRAI, in 2011, had suggested and in fact filed an affidavit in the Supreme Court that operators should implement BAK method for interconnect usages and they should be given time till 2014 to implement it.
What Is BAK
BAK stands for Bill and Keep. The rule says under this method, no interconnect charges will levied on any operator, means abolishment of the IUC. Simply put, BAK means ‘you (B)ill for the IUC (A)nd (K)eep’ it to yourself.
In this method, each operator agrees to terminate calls from other network at no charge.
The incumbents, like Airtel, are however not in favor of BAK as they allege it will help Jio in building its monopoly over the market. By proposing a transition to the ‘Bill and Keep’ regime with zero MTC, Reliance Jio wants to simply transfer its cost to Airtel and other operators, Airtel said.
“In effect, Reliance Jio aims to build its business by getting a free ride on the highways built by Airtel and other operators. Their proposal to move to Bill and Keep will further burden other operators and make them weak. At the same time, it allows Reliance Jio to continue with its strategy of predatory pricing and ultimately throttle all competition. This is the sinister design of Jio. The question to ask is does India want a monopoly situation in telecom?,” said Ravi Gandhi, Chief Regulatory Officer, Bharti Airtel.
Many countries including the US have gone for the BAK which is a more scientific way to bring down the retail tariff of call charges.