TUSSLE BETWEEN JIO AND AIRTEL-VODAFONE-IDEA OVER IUC INTENSIFIES

Post entry of Reliance Jio, the Indian telecom industry is witnessing a major upheaval. A major war of words is going on between the new operator and top three incumbents — Bharti Airtel, Vodafone India and Idea Cellular — over the issue of IUC…

NEW DELHI, JULY 21, 2017: The issue of interconnection usage charges (IUC) has become a major bone of contention between new mobile operator — Reliance Jio — and top three incumbents — Bharti Airtel, Vodafone India and Idea Cellular. So much so that Airtel has termed the demand of Jio to do away with IUC as its “sinister design” to create “monopoly situation” in Indian telecom market.

While the top three operators – Bharti Airtel, Vodafone India and Idea Cellular — has again reiterated to the TRAI that IUC should reflect cost of operations and support the Calling Party Pays (CPP) model, Reliance Jio has contradicted their stand and stated that ICU should be scrapped as it throttles competition and has supported the Bill And Keep (BAK) model.

Bharti has vehemently opposed Jio’s contention and said that by proposing BAK with zero MTC (mobile termination charges), the new operator wants to transfer its cost to other operators, which as per current estimates is to the tune of Rs.15,000–20,000 crore annually and will increase going forward. Stating that CPP was the globally accepted norm and in only four countries MTC is zero but here customers pay for incoming calls. Incumbents have told TRAI that scrapping IUC will impact coverage in rural areas where revenue is less but cost of investment is high.

But Jio has said that using traffic asymmetry is like penalising an operator who has invested on more efficient technology. Traffic asymmetry will occur when a new operator comes into the market, however as the system matures, this asymmetry minimises. Jio has also told TRAI that since all major operators are in the process of launching VoLTE, their cost of providing a call would come down to 0.7-0.8 paise. It also said despite high IUC rates in the last 15 years incumbents have not passed on the benefits to customers by providing goof infrastructure as a result rural penetration today is just around 55%.

But Bharti Airtel has hit out at Jio by stating that by not paying IUC, 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?,” it added.

The allegations made by Reliance Jio regarding Airtel earning excess revenue from MTC are not only false but laughable. The TRAI mandated MTC of 14 paisa is well below the cost of producing a minute, which is currently at 35 paisa. In fact, with the tsunami of calls originating from Reliance Jio’s network, Airtel loses 21 paisa for every minute that is carried on its network. This has resulted in a loss of Rs 550 crore per quarter for Airtel alone, Airtel said in a statement.


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