Idea moves HC against Trai’s interconnect charge cut

Idea Cellular on Thursday moved the Bombay High Court against the Telecom Regulatory Authority of India's move to reduce the interconnect usage charge from Rs0.14 a minute to Rs0.06 a minute.

According to the Aditya Birla Group firm, the Trai move would help only one operator (Reliance Jio) while hurting the financials of all the established or 'incumbent' companies.

A similar move by market leader Bharti Airtel is also expected, according to Business Standard.

At the India Mobile Congress on Thursday, Idea managing director and chief executive Himanshu Kapania had lamented the proposed cut in IUC as being detrimental to an already stressed industry.

"The (recently) announced interconnect usage charges (IUC) deplete the industry of funds, besides creating inter-operator imbalances on account of high traffic asymmetry," Kapania had said (See: Telecom firms seek relief from high taxes, spectrum costs).  

Kumar Mangalam Birla, chairman of the Aditya Birla Group, had written two letters to Trai providing details of how reducing the IUC will not reduce tariff and on the contrary would put the entire financials of the telecom industry at risk.

These letters were ignored by the regulator. Last week it went ahead with reducing the rate to Rs0.06 from 1 October against a cost of 35 paise a unit (See: Trai to cut interconnect charge to Rs0.06 from 1 October).

The telecom companies pay the IUC for using each other's networks to complete calls. As a large number of calls are now originating from new entrant Jio's network due to its free voice call offer, any reduction in the clearly IUC benefits Jio while hurting the incumbent telecom companies.

In his letter to Trai dated 21 August, Birla said even in the past, while reducing the IUC in March 2015, the Trai failed to disclose how it determined the 14 paise per minute rate. ''There needs to be transparency in the process of determination of the IUC. 

The model that the Trai wants to use this time needs to be shared with the industry and feedback taken from all stakeholders before determination of the IUC. This practice is followed by regulators in most countries. Based on media reports, we are very concerned that Trai may decide the IUC rate without transparently sharing and discussing the IUC model,'' Birla had said.

Idea had said no economic rationale was provided to justify how an already 'lowest in the world' IUC rate of 14 paise per minute has been further lowered by nearly 60 per cent. 

''No thought has been spared as to how the Indian regulator can possibly arrive at starkly dissimilar answers to similar calculations as in the rest of the world, including the quoted European average settlement rate of €1.27 per minute (approximately 98 paise per minute), more than 16 times higher than the prescribed IUC rate of 6 paise per minute in India,'' Birla said the statement.