IUC report: Reliance Jio alleges Rs 100,000 cr bonanza to incumbents

In a strong attack on incumbent operators, Reliance Jio has alleged that non-implementation of the interconnect user charges (IUC) report of the Telecom Regulatory Authority of India (TRAI) in 2011 has given a huge benefit of over Rs 100,000 crore to the three major operators in the last five years.

In 2011 TRAI had recommended that the IUC charges be cut to half from 20 paisa to Rs 10 paisa and gradually shift to the bill and keep model by 2014 in an affidavit to the Supreme court. Instead of moving to a zero IUC model in 2014 it was only brought down to 14 paisa with the mandate that it will be relooked after three years. Jio says that the three incumbents benefited due to the non-implementation of this recommendation.

The surplus recovery that the three incumbent operators have made is based on the net present value (which include interest income) and represents the excess recovery made by them over the actual cost of what they have to incur for termination. The presentation was given by the company to TRAI on Tuesday.

Jio has also pointed that India is moving against the global trend of IUC being reduced. IUC, which constituted for only 10 per cent of the average tariff in 2003, has now climbed up to 45 per cent.

It says that IUC as a percentage of the 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.

Jio argues that that the present value of surplus recovery for the three incumbents was to the tune of Rs 20, 624 crore in the financial year ending 2017.

Making a strong case for shifting to a bill and keep model for IUC Jio has stated that cost of delivering voice on an IP network is practically nil and it seems that new operators are merely subsidising the incumbents because of their inefficiencies and older networks. But this is unfair to customers.

However, Cellular Operators Association of India’s, which represents mobile operators director general Rajan Matthew says: “ Earlier there was a net set off between the incumbent operators as the number of calls terminating between their networks were more or less symmetrical. But with Jio coming in there has been an asymmetry of traffic as a result of which this issue has again come in the fore. So you cannot say incumbents have made a huge bonanza earlier.”

Matthew also points out that with tariffs falling dramatically due to entry of Jio, the percentage of IUC is bound to go up and claiming that IUC has increased steeply is not fair.