Sunil Mittal takes up IUC issue with Trai

The narrative over interconnection usage charges (IUC) in the telecom industry has reached the promoters' level.

Sunil Mittal, chairman, Bharti Enterprises, has written to telecom regulator saying IUC has no relation to customer tariffs and the current IUC regime is not coming in the way of affordable tariffs.

“The current IUC at 14 paise is already below cost and it will be in fitness of things that while taking a final decision, Trai (Telecom Regulatory Authority of India) upholds the principle of compensation of work done by each operator and the IUC is set at costs discovered through a fair and transparent mechanism. Bill and keep regime should be rejected,” Mittal said in a letter to Trai chairman R S Sharma.

IUC is a time-tested international principle and the regulators - from the most advanced countries to the emerging ones - have all ensured that the concept of compensating operators for the investments and the work done by each one of them is adhered to, he said.

The debate over IUC has increased over the last few weeks as the regulator is close to finalising its views on the issue. While existing operators including Bharti Airtel, Vodafone and Idea have demanded an increase in IUC, new entrant Reliance Jio wants it to be scrapped and shift to bill and keep regime.

“IUC has no relation to customer tariffs and customers are enjoying free or affordable calls is a testimony that the current IUC regime is not coming in the way of affordable tariffs. Current IUC regime is ensuring investments in networks continue to be made by all operators and customer calls are satisfactorily completed,” said the letter dated July 24, a copy of which is with DNA Money.

An interconnect usage charge (IUC) is paid by one telecom operator to another operator for terminating the incoming call from their network.

Advance countries whether in North America or Europe, Japan, South Asia and the emerging markets of India, Bangladesh, Sri Lanka and all of Africa and Latin America operate under a fair IUC regime to compensate operators to deliver the calls coming from other operators onto their customers, Mittal said.

In the current debate, no one has even talked about IUC for international calls settlement. Currently, IUC for a call from India to the US is about 1.2 cent, to Europe about 3-30 cents, to the Middle East about 10-14 cents. Neighbouring countries like Bangladesh, Sri Lanka and Nepal charge about 2-13 cents.

Similarly, when the calls come into India, Trai has set an IUC to be paid to mobile operators at 53 paise, and in turn, the Indian international operator charges about 1 cent as IUC for the incoming call to their network.

Trai not even debating this issue confirms the Authority’s acceptance to the principle that IUC is indeed a settled global practice built on fair and equitable settlements, Mittal argued, asking why should India be any different?

Even for data, telecom companies pay to use bandwidth to interconnect to the global internet, hire towers for radio base stations. “For each one of these services they settle payment, which is no different from paying the other operators for carrying their domestic calls,” Mittal said.

In an earlier letter, Airtel had said if the demand of Reliance Jio is met, it will continue with its strategy of predatory pricing and ultimately throttle all competition.

Trai mandated MTC of 14 paise is well below the cost of producing a minute, which is currently at 35 paise. In fact, with the tsunami of calls originating from Reliance Jio’s network, Airtel loses 21 paise for every minute that is carried on its network. This has resulted in a loss of Rs 550 crore per quarter for Airtel alone, it had said.

Trai in an affidavit filed before the Supreme Court in 2011 had said telecom operators should be given time till 2014 to move to the bill and keep regime. Under this, operators only keep a record of incoming calls on their network but do not raise any demand from other operators.

While Reliance Jio had said the continuation of IUC beyond 2014 has resulted in incumbent operators benefiting to the tune of Rs 1 lakh crore.