Tria reduces IUC charges to 6% from 14% - so would your call rates reduce further?
Want to know if your call rates are going to reduce further after the recent TRIA announcement of reducing the IUC charges from 14% to 6%? The answer is not that simple with different companies giving different reactions on this announcement. Read on to know what to accept in the near future.
TRIA, the Indian telecom regulator today announced the reduction of Interconnect charges, the charges that the call originating company pays to the call receiving company, from 14% to 6% and further announced that this charge will be completely abolished by 2020. Though the newcomer in the telecom sector, Jio, has appreciated the move, the older telcos are not so happy about this move and may plan to challenge it soon enough.
Since Jio made voice calls completely free there is a huge outgoing traffic from the operator to legacy telecom operators resulting in a huge about of money going from Jio to other operators, primarily Airtel, Vodafone and Idea as IUC charges. It means any reduction in this charge like this one is going to benefit Jio directly in terms of less expense towards paying other telecom operators. However, this would lead to loss of earnings to the other operators.
We are disappointed with this decision and are now considering our options in response to it. The Indian telecoms industry is already experiencing the greatest period of financial stress in its history. This is yet another retrograde regulatory measure that will significantly benefit the new entrant alone while adversely affecting the rest of the industry as a whole. Unless mitigated, this decision will have serious consequences for investment in rural coverage, undermining the Government's vision of Digital India." - Official Spokesperson, Vodafone India
Jio's entry since last September has already led to a bloody price war pushing operators like Idea and Vodafone into a negative zone of earnings and reducing the profit of top operator Airtel by 70%. With spectrum cost in India being the most costly anywhere in the world but the ARP (Average Revenue per customer) being the lowest in the world Indian telecom market is a unique business case. This IUC cut might lead to Jio reducing their tariff further from the present starting pack of Rs.149 which they are going to offer to their customers of the Jio phone.
Expect to see the older operators reach the High Court within a few days against this change. This would mean even if the IUC charges are going to reduce that is not going to happen in a hurry and customers might have to wait for a few months at least before the court decides on the matter the final rate changes if any, will be decided.
In case of favorable decision in Court on IUC reduction and finally eradication, customers can actually expect the return of charges on incoming calling since there will be nothing to compensate the telecom operators now for the traffic of voice calls they will be receiving on their networks and the only person they can charge will be the customer. This method is called the Bill and Keep method which was applicable when the Indian telecom sector was in its state of infancy before TRIA brought the concept of IUC.