Birla urges telecom regulator to be more 'transparent' in IUC calculation

This comes after reports that Trai is planning to reduce IUC to Rs 7 a min and then to Rs 0 a min

Chairman of the Aditya Birla group, Kumar Mangalam Birla, has urged the Telecom Regulatory Authority of India (Trai) to be more “transparent” on how it plans to calculate the inter-connect usage charges (IUCs) between wireless phone operators, which, if reduced, would help only one firm (Jio) and lead to further financial stress in the sector. 

In a letter to Trai chairman dated August 21 (Monday), Birla said even in the past Trai failed to share its process for reducing the IUC to 14 paise per minute in March 2015. “There needs to be transparency in the process of determination of IUC. The model the Trai wants to use this time needs to be shared with the industry and feedback needs to be taken from all stakeholders before determination of IUC. This practice is followed by regulators in most countries. Based on media reports, we are very concerned that Trai may decide the IUC rate without transparently sharing and discussing the IUC model,” Birla said.  

Birla’s communication to Trai comes after reports that the telecom regulator is planning to reduce IUC to Rs 7 per minute and then to Rs 0 per minute. The earlier move  by Trai to reduce IUC has already been challenged by Idea Cellular in High Court of Gujarat and by Bharti Airtel in Delhi HC. Both cases remain pending.

Birla said in the Calling Party Pays (CPP) regime, IUC determination has to be based on the audited cost incurred by most industry players. “For the operators serving 90 per cent of Indian mobile customers, the cost of termination remains 30-35 paise a minute and the authority is aware of the same. Any determination of termination charge below the full cost of the terminating operator will benefit the new operator offering free voice calls,” Birla said on Reliance Jio’s free voice call offer, which has disrupted the Indian telecom industry and has led to a consolidation wave among the players.

Birla said IUC should be fixed at full cost to ensure fair compensation to terminating operator and promote healthy competition. 

As IUC is a settlement between the operators, Birla said it has no impact on consumer tariffs. “Contrary to the perception being created that IUC will result in lower tariffs, the fact is IUC is meant to be a fair settlement between operators for services rendered. At an industry level, the IUC is a zero-sum game. Therefore, it is a myth that tariffs are linked with IUC and any lowering of IUC will bring down consumer tariffs,” Birla said. 

Even during April 2009 and February 2015, when IUC rates were unchanged, the tariff continued to decline; hence, India already has one of the lowest voice tariffs in the world; even now voice rates of all operators continue to decline. "Again, the authority is aware that the new operator  is providing free voice, which itself is evidence enough that IUC has not impacted consumer tariff,” Birla said.

Birla said Jio’s claims of its cost structure being much lower and hence lower IUC settlement rate is needed, is without any basis.

“The prerequisite for any operator’s cost to be considered is that the operator should have prepared an audited profit and loss account for a full financial year from which the costs can be determined, which has not happened in the case of the new operator,” Birla said about Jio which has not yet completed its full year’s audited annual accounts since its launch. 

The cost of a call if worked on the basis of spectrum costs, network costs, including rental and energy costs for towers, sales and marketing costs, government levies, cost of capital etc. will lead to an IUC rate that is way above the current level of 14 paise per minute. 

Birla said in order to fulfill Indian government’s Digital India drive, the country must follow a cost based and transparent IUC policy like all developing countries.