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Monday, 28 August 2017 04:04
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Whether IUC is halved not the issue, disclose the model


Since interconnect usage charges (IUC) comprise such a significant part of telco revenues—RJio ends up paying Rs 6,000-7,000crore of IUC to other telcos every year and Bharti Airtel’s FY17 pre-tax profits of around Rs 7,700 crore would fall by around Rs 2,300 crore if there was no IUC—it is not surprising the debate over slashing it, or getting rid of it altogether, is so shrill. RJio has, in fact, accused the incumbents of taking an extra Rs 1 lakh crore from subscribers over the last five years through IUC. To that extent, Aditya Birla Group chairman KM Birla’s letter to TRAI—it is going to come out with new IUC regulations later this week—tries to put some perspective on the issue. Since IUC, he points out, is based on the costs various operators incur in rolling out their networks, it is critical to have these details—but, he points out, in response to RJio’s claim that its superior technology means it has lower costs than existing telcos, there is no audited account of RJio’s costs and profits/losses. Also, as Birla points out, it is a fallacy to link IUC and telecom tariffs as is being done—between April 2009 and February 2015, he says, the IUC rate remained constant but consumer tariffs continued to decline. Even now, the 14 paise per minute IUC is not preventing RJio from offering free calls to subscribers—IUC is a commercial cost that operators incur, much like spectrum costs or licence fees.

So, rather than getting caught in the hyperbole over whether IUC is archaic or Bill and Keep (BAK)—the alternative being proposed—is progressive, TRAI would do well to focus on the facts and, more important, make its model public. Airtel’s presentation to TRAI on IUC, for instance, talks of it spending over `40,000 crore in just buying voice spectrum—if you assume a 15% interest plus amortisation, based on the number of minutes an Airtel gets on its network, that means a 4.5 paise IUC needs to be allocated for spectrum costs alone; in 2015, however, TRAI had allocated only 0.79 paise for this in its IUC calculations. Not surprisingly, telcos have challenged even the earlier IUC regulations—the cases go all the way back to 2006. And when, in 2010, the appellate tribunal, TDSAT, had ruled against TRAI and said that it had to take telco capex costs into account while calculating the IUC, TRAI did not justify its numbers but instead, challenged the TDSAT’s jurisdiction. If TRAI is so sure of the accuracy of its work, surely the last thing it should be doing is to hide behind a legal interpretation that prevents its decisions being challenged before TDSAT? A Transparent Regulatory Authority of India would allow TDSAT to quickly dispose off the old petitions and show its workings clearly to telcos.


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