Much of the discussion over the 57% cut in the IUC by Trai has centred around whether it was done to benefit only RJio or whether the pure-LRIC model used by the regulator this time was less appropriate than the LRIC+ model used the last time around.
Much of the discussion over the 57% cut in the IUC by Trai has centred around whether it was done to benefit only RJio or whether the pure-LRIC model used by the regulator this time was less appropriate than the LRIC+ model used the last time around. Two previous chairmen of Trai have weighed in on the matter—one supported, one opposed—and while the older telcos like Bharti Airtel, Vodafone and Idea are challenging the model in court, Idea’s CEO is on record saying the model used is forcing telcos into using only 4G technology; if this is indeed correct, and RJio argues that it is not, then it is unfair since the vast majority of Indians don’t have 4G handsets.
While the courts will try and find answers to these questions, a more pertinent one to ask is whether the regulator even needs to fix IUC rates. When the industry was in its infancy, the regulator needed to mandate interconnection—if this was not done, the monopolists at that time, MTNL and BSNL, would never allow the private players to interconnect and their services would never have taken off. And since all tariffs were regulated, and the plan was to try and lower them, mandating a cost-based IUC made sense. Today, however, when there is so much competition and when no aspect of the industry, especially spectrum costs, is regulated, does it make sense to regulate one aspect of it?
If the IUC isn’t fixed by Trai, many argue, incumbents like Bharti Airtel or Vodafone will keep IUC rates so high, it will ensure a newcomer like an RJio can never enter the market. Given that RJio was offering tariffs much lower than the IUC when it was set at 14 paise a minute, and that it has said it doesn’t plan to cut these just because the IUC has been lowered, it is a bit difficult to argue a high IUC will keep out newcomers. Also, this is where competition law comes in. If the incumbents have different IUC rates for different telcos—other than, say, volume-based discounts—a newcomer like an RJio can easily prove discrimination and get the IUC struck down. If the IUC is high for a call across networks, like from a Vodafone to an Airtel or vice-versa, but lower for calls within a network—what, in jargon, is called ‘on-net’ traffic—an incumbent can once again show this to be discrimination.
That is, it is enough for Trai to lay down non-discriminatory principles for setting IUCs, and leave the rest to the industry. Apart from being in keeping with market principles, it would also save the regulator the blushes each time it sets the IUC since there haven’t been too many times when this has not been followed by telcos petitioning the courts.