Idea says IUC cut will hurt an already stressed telecom sector even more

Telecom operator Idea Cellular on Thursday said sector regulator Trai's decision to cut mobile call connection charges is a body blow to the segment and "riddled with egregious infirmities".

Idea claimed that the decision to cut in mobile call connection charges or interconnection usage charges (IUC) will jeopardise both rural coverage and connectivity.

The Telecom Regulatory Authority of India (Trai) on Tuesday decided to cut or mobile termination charge to 6 paise a minute from 14 paise with effect from October 1 and to nil from January 2020 onwards.

Demanding withdrawal of the decision, Idea called the decision as regulation has driven cross subsidy among competing operators.

"The proposed reduction by the Trai in the Mobile Termination Charge (MTC) is a body blow to all operators who depend upon fair, equitable, and transparent regulation to encourage and sustain reinvestment in the sector. The decision is riddled with egregious infirmities," Idea said in a statement.

Established telecom operators have argued that every call on the network has a cost, and expenses of an incoming call on their network should be borne by the operator from whose network the call has originated.

Trai has asked "why telecom operators are not migrating to newer technologies such as VoLTE (Voice over Long-Term Evolution)" when clear demonstrable large differences exist in the cost of providing same services.

"In an avowed technology neutral policy regime, a regulation which should acknowledge both subscriber handsets ownership and incoming calling patterns have, instead, erroneously determined that only one technology benefits. Presently, more than 900 million consumers in India rely on established 2G, 3G, 4G (non-VoLTE) networks for accessing voice services," the statement said.

It claimed that a majority of the users are located in the rural area, and are dependent on the mobile telecom infrastructure investments to stay connected.

"A large swathe of these rural sites are predominantly utilised for receiving incoming calls, and even in the erstwhile IUC regime were being subsidised by existing operators. The revised IUC rate further jeopardises both rural coverage and connectivity," Idea said.

The Aditya Birla group firm said that the drastic reduction in the prevailing IUC and the proposed migration to a BAK (Bill And Keep) regime from 2020, the mobile telecom sector may very well be further exposed to the "claws of predatory and anti-competitive pricing tactics, disturbing the long-term competition structure of the industry to a near monopoly".

Though the regulator has explained the methodology used to arrive at 6 paise per minute cost, Idea alleged that no economic rationale has been provided to justify "how an already lowest in the world IUC rate of 14 paise per minute, has been further lowered by nearly 60 per cent".

"No thought has been spared as to how Indian regulation can possibly arrive at starkly dissimilar answers to similar calculations as in the rest of the world, including the quoted European average settlement rate of 1.27 euro cents per minute (approximately 98 paise per minute), more than 16 times higher than the prescribed IUC rate of 6 paise per minute in India," Idea said.