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IUC for existing dominant telcos is like a subsidy: Jio

Trai is in the process of finalising its recommendations on IUC, which has become a bone of contention between existing telecom operators and the new entrant Reliance Jio

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IUC for existing dominant telcos is like a subsidy: Jio
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The war of words between Mukesh Ambani-run Reliance Jio and Sunil Mittal-owned Bharti Airtel on interconnection usage charges (IUC) seems far from over.

In the latest salvo, Reliance Jio has written to telecom regulator Trai again on Thursday saying the assertions of Airtel are spurious, not based on true facts, biased in nature, and purposefully misleading.

"With the advent of modern telecommunication technology and evolution of all IP (Internet Protocol)network, the world is moving towards near-zero IUC or BAK (bill and keep) methodology since it is in line with real costs as per new technology. Continuance with mobile termination charge only helps large incumbent operators and is against the interests of consumers and smaller operators," Reliance Jio said in the letter.

Over the past few weeks, there have been letters from both the camps to the regulator accusing each other of distortion of facts. Telecom Regulatory Authority of India (Trai) is in the process of finalising its recommendations on IUC, which has become a bone of contention between existing telecom operators and the new entrant Reliance Jio. As per media reports, IUC is expected to come down to 5-8 paise from 14 paise at present.

In the latest letter, Jio said smaller operators have excessively suffered by paying this IUC settlement cost to incumbent dominant operators, who have recovered their costs many times over, and this has led to the current financial stress for these smaller operators.

"This IUC is nothing but a subsidy for the incumbent dominant operators and has acted as disincentive for investment in new technologies. With ongoing migration of all networks to IP-based networks and voice consuming minuscule resources in the data world, the concept of IUC settlement has been rendered meaningless. We need to migrate to this imminent change which will benefit not only the customers but will also be in the larger interest of the overall industry," it said.

Earlier in a letter, Airtel had said that due to below-cost IUC, it had suffered a loss of about Rs 6,800 crore in the last five years on the present-value basis. Airtel dismissed the data provided by Reliance Jio, which claimed that existing operators benefited by about Rs 1 lakh crore in the last five years alone due to non-implementation of the Trai report of 2011. However, according to the letter by Jio, the present value of gross surplus recovery by Airtel stands at Rs 46,958 crore. According to Airtel, even if Reliance Jio claims were assumed to be correct, the present value of surplus recovery will be only Rs 7,443 crore and not Rs 46,958 crore as claimed by Reliance Jio.

For legacy players such as Bharti Airtel, Vodafone and Idea, a lower IUC would mean a dip in revenues at a time when they are already struggling in a highly-competitive telecom sector. Currently, IUC is fixed at 14 paise per minute.

While the incumbent players have demanded that IUC is increased to 35 paise, Jio wants it to be scrapped and shift to the bill-and-keep regime, under which operators only keep a record of incoming calls on their network but do not raise any demand from other operators.

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