Idea offers formula to settle interconnect usage charges issue

Caught between intense competition from Reliance Jio and raging controversy over reduction in interconnect usage charges (IUC), Kumar Mangalam Birla-promoted Idea Cellular has suggested a formula under which IUC charges can be fixed after bifurcating total industry minutes into those terminating on Voice over LTE (VoLTE) and those terminating on traditional 2G or 3G networks.

In a communication to the regulator, Idea Cellular has proposed two solutions. The operator said that the voice traffic volume between VoLTE and TDM networks of the industry can be bifurcated and arrive at an IUC based on cost data and weightage between two types of network terminations. Alternatively, the regulator can fix two separate IUCs for calls terminating on VoLTE network and TDM (Time-division multiplexing)-based networks using 2G, 3G and 4G technology based on cost structure.

Himanshu Kapania, Managing Director, Idea Cellular, said the regulator should determine IUC separately for VoLTE and TDM terminations using fully allocated cost (FAC) or long range incremental cost plus (LRIC plus).

Incidentally, Kapania said FAC has invariably found favour in countries like India where large network investments are to be made with the government encouraging rural penetration which is low at 55 per cent.

The regulator can review the voice traffic volume between VoLTE and TDM networks every 12 months taking the previous three months traffic data as the basis. Based on VoLTE and TDM cost structure, IUC can be renewed every 36 months. Should the proportion of VoLTE traffic expand going forward, as the regulator expects, then this solution will dynamically and comprehensively reflect such expansion and the underlying cost, he said

Earlier in a letter to TRAI chief, Kumar Mangalam Birla, Chairman, Aditya Birla Group, called for a transparent cost-based interconnect usage charges and dispelled the myth that lower interconnect charges would bring down cost for consumers.

Lowering of termination charges below the full cost of the terminating operator will benefit the new operator (Reliance Jio) that is offering free voice calls, he added.

Over the last decade, Kapania said the industry has created world-class 2G and 3G networks providing connectivity to 1.2 billion Indians spread over 5 lakh towns and villages. A stable and a predictable IUC regime is critical to retain this key national asset, sustain competition and attract fresh investments need to connect the unconnected and transform India to a digital society, he said.

Terming the discussion around operator technologies as a smoke screen, Kapania said the regulation should not glide towards one technology (VoLTE provided by RJio) and use IUC to engineer such glides.

“To do so would be an added admission of regulation-driven cross-subsidy between competitors.

“The would be destructive of competition and violate the primary mandate of TRAI regulation,” he said.