KM Birla wants transparent interconnect regime for telcos
NEW CALL It will go a long way in restoring the health of the industry, says Birla
MUMBAI: Kumar Mangalam Birla, chairman of the Aditya Birla Group, has written to Telecom regulatory Authority of India ( Tr ai) chairman RS S harm a, urging him to establish “a full costbased and transparent IUC( interconnect usage charge) regime ”, which will “go a long way in encouraging competition, restoring the health of the industry and ensuring a viable and balanced industry structure”.
This is the first time Birla, chairman of Idea Cellular and also chairman of the entity that will be created by its merger with Vodafone India Ltd, has come out in public against a proposed move by the regulator to change the inter connect regime. The change, telcos such as Bharti Airtel Ltd have already argued, favours newcomer Reliance Jio Infocomm Ltd and hurts incumbent such as itself and Idea Cellular.
When IUC was introduced in India, the country moved from receiving party pays( R PP) to the calling party pays (CPP) regime wherein the user who gets the incoming call is not charged, Birla argued in his letter dated August 21, a copy of which has been reviewed by Mint.
For instance, when a call is made by a person on Vodafone’s network to a person on Airtel’s network, Vodafone is not allowed to charge the customer for the incoming call. Airtel compensates Vodafone for the call made on its network. This is IUC.
A telco currently pays IUC at 14 paise per minute. However, according to Birla, “...based on audited submissions, the cost of termination remains at 30 to 35 paise per minute”.
In this context, Birla has challenged the claim of the new opera- tor (Reliance Jio) that its cost structure is lower, alleging that the firm has not submitted an audited profit and loss account. Birla, in his letter, has called for the need to be transparent in determining IU Crates. He wrote that the model and calculation for the 14 paise per minute rate has still not been disclosed by Trai.
Globally, Birla pointed out, IUC rates in comparable markets such as China, Indonesia, Brazil and US are several times that of India. In Indonesia, it is Rs 1.67 per minute and in Brazil approximately ₹2 per minute, he wrote.
In his letter, Birla has also challenged the “perception being created” that adro pin IUC would result in lower tariffs. “IUC is a settlement between operators and has no impact on consumer tariffs,” he wrote. He further argued that “The Authority (Trai) would acknowledge that any determination of termina- tion charge below full cost of the terminating operator will benefit the new operator (RJio) who is offering free voice calls”.
Telcos such as Bharti Airtel and Idea Cellular Ltd have been rattled by Trai’s consultative review, currently in progress, of the IUC settlement rate. They argue that the bill-and-keep (BAK) model has never been imposed by regulatory fiat and that they are usually done voluntarily and typically put in place when there is symmetric traffic between the two networks( in the case of Jio, they argue, the volume of outgoing calls is around 9 times that of incoming ones).
In a bill-and-keep-scenario, Jio could save about ₹4,400 crore annually on IUC, while there would be equal and opposite loss for incumbents. Idea Cellular alone claims it could lose ₹2,000 crore a year because of the difference between the actual term in a- tion charge and the 14 paise per minute current IUC rate.
Reliance J io has been pushing for the BAK model.
In a July 18 presentation on IUC, the Muke sh Am ban i-owned Reliance Jio pointed out that “prominent countries such as the US, Canada, Singapore, Hong Kong, Brazil, Mexico have moved towards BAK.”
In its presentation, RJio notes that “...When the whole world is moving towards Nil IUC, India has been moving in the other direction--causing financial distress for smaller operators while benefitting incumbent operators”.
Jio didn’t respond to an email till the time of going to press.
It was only a month back that Sunil Mittal, chairman of India’s largest telecom company Bharti Airtel, wrote to Sharma, saying he is “at a loss as to why Trai should be considering bill and keep (BAK) model” and break away from the global well-established practice of IUC.
“India is in a high investment phase with the highest-ever telecom investments being witnessed both in spectrum and network cap ex for improving rural coverage and capacity and for investing in evolving technologies, all aimed at fulfilling ...( the) Digital India Vision. In such a situation, a cost-based IUC policy is most appropriate...,” Birla concluded.
Meanwhile, Idea Cellular also plans to introduce its own voice over LTE(VoL TE) services on its 4G LTE network by early 2018. Currently RJio is the only telco that offers VoLTE services.
UK-based Vodafone Group Pl c’ s India unit and Idea will have a combined strength of about 400 million customers and a 41% revenue market share once their merger goes through. RJio has about 120 million customers.