Incumbents made ~100k-cr windfall: Jio

Says bonanza due to IUC suggestions not being carried out by Trai

Stepping up its attack on incumbents, Reliance Jio has alleged that three major operators benefitted by over ~100,000 crore in the past five years owing to non-implementation of the telecom regulator’s 2011 recommendations on interconnect usage charges (IUC), or terminating charges.

In an affidavit to the Supreme Court in 2011, the Telecom Regulatory Authority of India (Trai) had recommended that the IUC charges be cut to half from 20 paisa and gradually shifted to the ‘bill and keep’ model — which means zero charge — by 2014. But in 2015, the IUC was only brought down to 14 paisa with the mandate that it would be revised after two years.

The additional money that the big three incumbents have made, according to Jio’s allegations, is based on the net present value (which includes interest income) and reflects the excess recovery made by them over the actual cost that they have to incur for terminating a call. The presentation was given by Jio to the Trai on Tuesday.

Jio also said that India was moving against the global trend of reducing IUC. It said that IUC as a percentage of blended retail mobile price is currently 1 per cent in China, 9 per cent in UK, 11 per cent in France, and 13 per cent in Japan. But in India, IUC, which constituted only 10 per cent of the average tariff in 2003, has now climbed up to 45 per cent.

Jio argued that the value of surplus recovery for the three incumbents was to the tune of ~20,624 crore in the financial year ended 2017.

Making a strong case for shifting to the bill and keep model, Jio stated that the cost of delivering voice on an IP network was practically nil and it seemed that new operators were merely subsidising the incumbents because of their ineffeciencies and older networks.

However, industry body Cellular Operators Association of India’s (COAI’s) directorgeneral Rajan Matthew said, “Earlier there was a net set off between the incumbent operators as the numbers of calls terminating between their networks were more or less symmetrical. With Jio coming in there has been an asymmetry of traffic, as a result of which this issue has come to the fore again. So you cannot say incumbents have made a huge bonanza earlier.”

Matthew also said that with tariffs falling dramatically due to the entry of Jio, the percentage of IUC is bound to go up. Saying that IUC has increased steeply is not fair, he said.