Will the telecom industry be viewing its next big shake-up? Is Reliance Jio trying to manipulate the meaning of unlimited? Yes, you read it right. Jio, on 9th October 2019, decided to impose an inter-connect usage charge of 6 paise per minute on all the off-network calls made by their users.
What is Inter-Connect Usage Charge (IUC)?
This is a tariff imposed by the Telecom Regulatory Authority of India (TRAI), which states that a network provider has to pay a fee of 6 paise per minute for all the off-network calls that the users make. The network on which the calls are made collects this fee. Eg. If Jio user calls an Airtel user, then Jio has to pay this fee to Airtel on a per-minute basis.
Why did Jio do this?
Telecom Regulatory Authority of India (TRAI) has decided to revisit its decision to remove IUC from 1st January 2020. Earlier it was declared that these charges would be dismissed. Till now, Jio was paying this fee on behalf of their users to other networks. Can you believe that the company has burnt 13,500 crores as IUC! Other operators like Idea, Airtel and BSNL reported that this is the primary source of their earnings although these companies continue to provide the privilege of free off-network calls to their subscribers.
Why is it affecting Jio and not others?
Presently, almost 35 crore people still use 2G and are exposed to high call rates. These people have adopted a smart trick of giving missed calls to Jio users. About 25-30 crore missed calls are recorded every day on Jio. The more surprising fact is that Jio pays almost 200 crores each day for outgoing calls to other networks as IUC. If incoming and outgoing had been the same for Jio, this decision would never have been taken. But the difference is way too high. This compels the company to make this decision.
What can be the impacts?
The share price of Airtel has almost risen to its 52 week high. The share price of Vodafone Idea limited is also increasing. This clearly shows that the demand for these is increasing. Yes, there will be a shift of Jio users to other networks. The extent to which this transition will take place is difficult to estimate.
Jio has made a brand value in a very short span and has become the number 1 company in this sector with the highest market share. They cannot afford to lose subscribers. As a solution, they have come up with special IUC top-ups starting from Rs 10 and are also giving free data with these recharges. The company promotes the use of the internet for calls but as we know that a large percentage of Indians still lack smartphones, the effectiveness of this strategy is still a question. The industry would be viewing a series of transition from Jio to other networks.