Idea moves Bombay HC against Trai’s IUC order

Aditya Birla Group’s Idea Cellular moved the Bombay High Court on Thursday against the Telecom Regulatory Authority of India’s (Trai’s) order to reduce interconnect usage charge, from 14 paise a minute to 6 paise. Idea says the move would help only one operator — Reliance Jio — while hurting the financials of all the incumbents. A similar move by Bharti Airtel is also expected.

Aditya Birla Group’s Idea Cellular moved the Bombay High Court on Thursday against the Telecom Regulatory Authority of India’s (Trai’s) move to reduce the inter-connect usage charge from 14 paise a minute to 6 paise a minute.

According to Idea, the Trai move would help only one operator (Reliance Jio) while hurting the financials of all the incumbent companies. A similar move by Bharti Airtel is also expected.

Just before the Trai's move, Kumar Mangalam Birla, chairman of the Aditya Birla group, had written two letters to the Trai providing details on how reducing the IUC will not reduce tariff and, on the contrary, put the entire financials of the telecom industry at risk. These letters were ignored by the regulator. Last week it went ahead with reducing the rate from 14 paise a unit to just 6 paise as against a cost of 35 paise a unit.

The telecom companies pay each other the IUC for using each other’s networks to complete calls. As a large number of calls are originating from the Jio network due to its free voice call offer, any reduction in the IUC benefits Jio while hurting the incumbent telecom companies.

In a letter, dated August 21, addressed to the Trai chairman, Birla said even in the past, while reducing the IUC in March 2015, the Trai failed to disclose how it determined the 14 paise per minute rate. “There needs to be transparency in the process of determination of the IUC. The model that the Trai wants to use this time needs to be shared with the industry and feedback taken from all stakeholders before determination of the IUC. This practice is followed by regulators in most countries. Based on media reports, we are very concerned that Trai may decide the IUC rate without transparently sharing and discussing the IUC model,” Birla had said.

Soon after the Trai cut the rate last week, Idea said the move brazenly ignored the high prices paid for spectrum, a key raw material without which mobile telephony services cannot be delivered, and will negatively impact the already stressed financial health of the sector.

In an avowedly technology neutral policy regime, regulation which should acknowledge both subscriber handset ownership and incoming calling patterns has, instead, erroneously determined that only one technology benefits. Idea had earlier said as of now more than 900 million consumers in India rely on established 2G/3G/4G (non-VoLTE) networks for accessing voice services. A majority of these users are located in the rural heartland and are dependent on enormous mobile telecom infrastructure investments to stay connected.

A large swathe of these rural sites are predominantly utilised for receiving incoming calls, and even in the erstwhile IUC regime these calls were being subsidised by existing operators. The revised IUC rate further jeopardises both rural coverage and connectivity.

Further, in an environment of a tenfold induced traffic asymmetry, this is a regulation-driven cross-subsidy among competing operators whereby one operator is passing the burden of terminating its voice traffic onto other operators.

Idea had said no economic rationale was provided to justify how an already ‘lowest in the world’ IUC rate of 14 paise per minute has been further lowered by nearly 60 per cent. “No thought has been spared as to how the Indian regulator can possibly arrive at starkly dissimilar answers to similar calculations as in the rest of the world, including the quoted European average settlement rate of 1.27 euro cents per minute (approximately 98 paise per minute), more than 16 times higher than the prescribed IUC rate of 6 paise per minute in India,” said the statement.