TRAI Recommends Removing IUC Charge For SMS; Will Older Telcos Revolt Now?

Older telecom operators are the biggest beneficiary of these IUC charges for SMS because they have a huge base of subscribers.


TRAI Wants To Remove IUC Charge For SMS

In an unprecedented move, Telecom Regulatory Authority of India or TRAI has said that they want to remove IUC charges for SMS, or at least reduce the charges.

This can trigger a new revolt by older telcos such as Airtel and Vodafone, as their revenues will take a dip. Not a major dip, but a loss nonetheless.

TRAI: We Want IUC Charge To End For SMS!

Right now, TRAI charges 2 paise as IUC charges for normal text messages, and 5 paise for commercial SMS.

This IUC is paid by the mobile network to the recipient mobile network.

Hence, if a Jio user sends a text message to an Airtel user, then Jio will pay IUC charge to Airtel.

TRAI wants to scrap this IUC, and unleash a new change.

A TRAI insider said,

“There’s discussion to review the IUC on messages… it has not been changed for a long time and the industry situation has changed since then,

A new consultation paper will be soon launched, seeking opinions and feedback from the general public. Last year, IUC was reduced by 57% for calls, which was aimed at making calls cheaper.

Older Telcos To Revolt?

Older telecom operators such as Airtel and Vodafone are the biggest beneficiary of this IUC charges for SMS because they have a huge base of subscribers.

Hence, BSNL and Jio will get the benefit of scrapping IUC charges, and Airtel and Vodafone-Idea will be the ones in the loss.

Although SMS usage has reduced a great deal in India, and revenues from IUC charges for SMS generates only 1-2% of overall revenues for any telecom operator.

In 2013, SMS usage was down to just 2 per day on an average, and rising usage of Whatsapp and other messengers has been attributed to its downfall.

But still, if this 1-2% revenue is scrapped, then it won’t be a good news for telcos.

A possible face-off between TRAI and older telecom operators now seems imminent.

A senior executive from a telecom operator said,

“There will be impact, albeit small, and it will be questioned since the revenue as such from this service is very small but it is still revenue inflow,”

As per latest numbers, an average GSM user is sending 16 SMS per month, while a CDMA user is sending just 2 SMS per month. Commercial SMS usage is relatively high, compared to normal messages, and if IUC is scrapped, or reduced, then this can trigger a new wave of protests from older telcos.

We will keep you updated, as we receive more information on the SMS usage and IUC charges.

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