Jio Wins, Consumers Too Win As TRAI Reduces IUC by 57%– Cheaper Calls?
TRAI's reduction of Interconnect Usage Charges has disappointed Operators like Airtel, Idea and Vodafone. However, it is a big win for Jio and with it for consumers too as the calls will get cheaper now!
In a drastic move by Telecom Authority of India (TRAI), Interconnect Usage Charges or IUC has been slashed by 57%, and absolutely scrapped for all local calls starting January 1st, 2020.
IUC had been the bone of contention between various telecom operators, but eventually, consumers prevailed as the ultimate winners.
Lowering of IUC means that calls would be now even more cheaper, and consumers must be thankful to TRAI, because despite strong opposition by Airtel, Vodafone and Idea, TRAI decided to take a decision which will benefit the consumers.
On the other hand, thanks must also be expressed to Reliance Jio, which was the only telecom operator to have opposed the high IUC charges, and have been pressurizing TRAI to lower the charges since the beginning.
Overall, Jio and telecom users, both are victorious here.
TRAI Slashes IUC By 57%
Say a Jio user calls an Airtel user. When the call terminated, Airtel is supposed to charge an IUC from Jio, for terminating the call.
As of now, IUC was billed as 14 paisa per minute.
TRAI has now reduced this IUC to 6 paisa per minute, and have completely abolished IUC for all local calls, starting January, 2020.
In a statement, TRAI said: “It has been observed that reducing termination rates (IUC) has benefitted consumers and enhanced competition… The reduction in the mobile termination charge is likely to yield consumer benefits.”
Financially, this is a big gain for Jio, as previous estimates predicted that if IUC is reduced to 6 paisa per minute, then Jio will gain around Rs 3800 crore per year, which is direct loss for other telecom players.
Telcos Are Disappointed (except Jio)
Airtel, which has been asking TRAI to increase IUC to 30 paisa from 14 paisa, was ‘extremely disappointed’.
In a statement Airtel said, Airtel has indirectly accused TRAI of favoring Jio.
They said, “We are extremely disappointed with the latest regulation on the IUC, especially at a time when the industry is facing severe financial stress. The suggested IUC rate, which has been arrived at in a completely non-transparent fashion, benefits only one operator which enjoys a huge traffic asymmetry in its favor..”
Vodafone too expressed their disappointment.
In a statement, they said, “We are disappointed with this decision and are now considering our options in response to it. The Indian telecoms industry is already experiencing the greatest period of financial stress in in its history. This is yet another retrograde regulatory measure that will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole. Unless mitigated, this decision will have serious consequences for investment in rural coverage, undermining the Government’s vision of Digital India.”
But Why Telcos Are Disappointed Over Lowered IUC?
Because now, they will be earning less profit.
Sample this: Around 51 billion minutes terminate on Airtel, and they charge Rs 628 crore for terminating those calls. Now, as IUC is reduced, Airtel’s revenue will also decrease.
Right now, almost 15-20% revenues of telcos are generated via IUC, and reduction of 57% in IUC means 57% less revenues.
Starting 2020, when IUC would be all together removed, then the losses to telcos would increase to Rs 6700 crore.
And Jio was supporting this reduction, because more calls originate from Jio, and terminate on other telcos, rather than the other way around.
Do you think that this is a victory for Jio? Or Consumers? Do let us know by commenting right here!