Telecom tariff war: Jio’s loss could be Airtel, Vodafone’s gain

By Sourabh kulesh - October 10, 2019
Jio has announced that it will charge IUC rate of 6 paise per minute after being compelled by the regulatory authorities. Airtel and Vodafone-Idea, however, have welcomed TRAI’s decision citing asym....

Since its launch, Reliance Jio has been on an upward spiral when it comes to making a profit. Moreover, it is the sole reason why Indians were able to reap the benefits of the booming telecommunication scenario and the tariff war in the country. It seems that things have started to take a turn as Jio is no longer offering ‘free’ voice calls, and instead will now charge 6 paise a minute for every call made to rival networks. While the price may be nominal, but Jio gained popularity majorly because of ‘free calls’ that it promised to offer to its subscribers.

Reliance Jio said that it ‘has been compelled most reluctantly and unavoidably’ to charge the prevailing interconnect usage charge (IUC) rate following the Telecom Regulatory Authority of India (TRAI’s) decision to review the date for scrapping IUC from January 1, 2020. ‘For all recharges done by Jio customers starting today, calls made to other mobile operators will be charged at the prevailing IUC rate of 6 paise per minute through IUC top-up vouchers till such time that Trai moves to zero termination charge regime,’ Jio said in a statement.

This essentially means that every Jio user who makes a call to a subscriber of any other telecom operator, including Airtel and Vodafone-Idea, than Jio will have to pay 6 paise per minute. Jio clarified that it till now it has been paying IUC from its own resources to Airtel and Vodafone-Idea etc so that users can enjoy free voice calls on its network. So far, in the last three years Jio has paid nearly Rs 13,500 crore as NET IUC charges to the other operators.

For those who don’t know, IUC is a cost paid by a mobile telecom operator to another, when its customers make outgoing mobile calls to the other operator’s customers. These calls between two different networks are known as mobile offnet calls. IUC charges are fixed by TRAI and are currently at 6 paise per minute. TRAI has been in favour of bringing down the IUC charges to Zero, and it decided to scrap IUC from January 1, 2020. However, the regulatory body cited traffic asymmetry and is moving ahead with more deliberations on the issue. It said that millions of subscribers have still not moved to Voice over LTE (VoLTE), which would have lowered the cost of making a call.

This development is likely to come as a relief to Bharti Airtel and Vodafone-Idea, which were the biggest casualty of the rock-bottom tariffs that were offered by the Mukesh Ambani-led company. This is because scrapping IUC would benefit an operator with more outgoing traffic, which in this case is Reliance Jio. As of June-end, 64 per cent of Jio’s total traffic was outgoing, far more than its rivals. Airtel and Vodafone Idea would benefit if TRAI postpones the date of scrapping of IUC as they have more incoming calls than outgoing.

Jio, however, is trying another way to compensate for the IUC charges. It said that the company will provide additional data entitlement of equivalent value based on IUC top-up voucher consumption. This will ensure no effective increase in tariff for customers. Airtel and Vodafone-Idea have issued statements on this:

Statement from Bharti Airtel

One of our competitors has gone on to suggest that TRAI has re-opened the [IUC charges] issue. We would like to point out that, on 19th September, 2017, when TRAI reduced the IUC from 14 paise to 6 paise and proposed a move towards Bill and Keep (zero IUC) with effect from Jan 1, 2020 they had specifically mentioned the following:

The Authority shall keep a close watch on developments in the sector, particularly with respect to the adoption of new technologies and their impact on Termination cost. The Authority, if deems it necessary may revisit the afore-mentioned scheme of Termination charge applicable on Wireless to Wireless calls after one year from the implementation of the regulation. 

The assumptions made by TRAI were to evaluate two factors: One was the adoption of VoLTE, which TRAI assumed will bring the cost down. Second, with the growth of smaller sized operators, symmetry of traffic would ensue. Both these have not materialised. There are still over 400 million 2G customers from the poorest sections of society living in rural areas paying less than Rs 50 per month and who can still not afford to buy a 4G device. Second, there still is significant asymmetry of traffic.

In line with TRAI’s stated position, therefore, they have issued a consultation paper in September 2019 to reassess the timelines of the shift from 6 paise to a zero charge. Clearly, this off net charge being levied, therefore, is to force IUC to be brought down despite the heavy burden it puts in the receiving network. We are grateful that this very timely consultation paper to reassess IUC has been issued By TRAI.

Statement from Vodafone-Idea

The announcement by one of the telecom service providers today to charge for calls made to other service providers to cover the termination charge of IUC is not only an action of undue haste but it also does not bring out the fact that interconnect is a settlement between operators and not a consumer pricing matter. In our view, its TRAI’s call for a consultation on IUC keeping in mind the continuing asymmetry in traffic and in line with its earlier stated position on the matter. This announcement comes closely to the action taken recently to potentially hurt revenues of other operators with its recent unilateral action of reducing ringing time.

Vodafone Idea operates basis the singular principle of pro-consumer and pro-choice. Accordingly, our offerings are completely transparent, affordable and cater to a cross section of society and consumers with varying consumption needs via multiple technologies 2G, 3G and 4G. Even today over 50 per cent of Indian citizens use 2G and feature phones and we service them in remote parts of the country even when it is unprofitable for us to do so.

It is relevant to note that with some other operators, for low to medium usage voice customers, rates are higher and come with device restrictions – no such device restriction for VIL. It seems like the consultative process is being challenged and is potentially drawing attention away from the real issue that the industry is in deep financial stress, a fact that’s now widely acknowledged. Bringing up the IUC matter seems like an attempt to distract from the need for urgent action to address financial stress in the sector and ensure adequate competition exists to serve Indian citizens.

IUC packs from Reliance Jio

Jio is offering IUC top-up vouchers for Rs 10, Rs 20, Rs 50 and Rs 100, that will give users 124, 249, 656 and 1,362 minutes respectively. The respective data entitlement is 1GB, 2GB, 5GB and 10GB.

IUC packs from Vodafone-Idea

Vodafone Idea subscribers can use the network for 28 days for Rs 24 or buy an Unlimited voice plan with 1GB Data for Rs 119 for 28 days. Consumers with moderate Voice usage can purchase Rs 45 pack which offers FTT and a tariff of 1p/sec as well as provides 100 MB of data. They can also purchase 3GB data for Rs 49.

We will update the story when we get confirmed IUC packs from Airtel.

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