Jio to Charge for Offnet Calls, to Push TRAI to drop IUC?

Jio, the dream telecom and digital project by Mukesh Ambani was a pioneer in many things in Indian telecom, which I explained in earlier article. Most prominently Jio cut down the tariff drastically that none of the incumbents thought of. The unlimited data (per day 1.5 Gig of data, then FUP) and truly unlimited voice calls from Jio made the incumbents think differently and they were compelled to follow Jio's way of tariffs. However Jio stops unlimited calls w.e.f. 10th October 2019, onnet calls will be free and calls to other network will be charged at 10p/mi.

Back in 2008-09 Virgin Mobile was offering 10p/min of balance credited for incoming calls, yes they were getting paid from the call originating network at 20p/min as IUC (interconnect usage charge) and was generous enough to pay back to customers.

TRAI reduced IUC to 14p/mi in 2015, and then again IUC reduced to just 6p/mi from October 1st, 2017. TRAI wanted to make IUC zero from January, 2020.

TRAI explains in 2017 that, "Lower termination charges are, therefore, likely to benefit consumers overall (both fixed and mobile) because operators will have greater retail pricing flexibility. Operators would be able to offer consumers a wider variety of retail packages and tariff structures," They elaborated that with drop in IUC customers can enjoy much cheaper tariff.

The move was good for Jio, and bad for incumbents like Airtel, Vodafone, Idea, as these players with major subscriber base were earning revenues from other operators as huge incoming calls made to their network. Even COAI, the GSM body of India was vocal against TRAI's move.

Cut to 2019, Jio holds the largest customer base, Airtel and merged Vodafone Idea entity also holds 2nd and 3rd position respectively; and everybody have more than 300 million subscribers. But unlike the then incumbents, Jio is usual is before, they are to welcome zero IUC regime, while Airtel and Vodafone-Idea even BSNL are wishing for extended IUC regime of 6p/min. As Jio said they paid Rs 13000 cr to other mobile operators so far, and every month counts for Rs 200+ cr for IUC.

The truth is Jio does not need IUC to make revenue as they barely spent less than a paisa for a voice call made over their future ready VoLTE network. Jio, being 100% LTE based data driven network does count on data only, not in voice minutes.

Compared to Jio's 100% calls over VoLTE (or on IP network), Airtel keeps 18% of voice calls on LTE network and Vodafone Idea scores very very poor - just 5% calls carried on LTE network. 

Interestingly Sunil Mittal owned Airtel back in September accused that Jio is using different accounting practice to show lower network cost. Jio clears the fact that on IP based LTE network the cost is less than 0.05p/mi for a voice call.

Post that, at September 2019 Airtel blames Jio again, that Jio is ringing less time (20 seconds) for incoming calls, as it turns to be a missed call and with free calls, Jio users making calls to others and thus Jio is gaining by manipulating IUC regime. Jio eventually increased ring time to 25 seconds, and defends as global norm.

So there are few questions arises,

1. While Airtel is accusing Jio manipulating IUC to create revenue, why Airtel is not welcoming zero IUC? 

2. TRAI planned for zero IUC from 2020, why they are floating a new consultations for extending 6p/min regime?

3. Why is Jio set to recover IUC from customers while promised free unlimited voice calls?

I am trying to explain one by one, before that let's check the data from TRAI on incoming/outgoing call ratio of these three players.

1. Airtel is a big beneficiary, also Vodafone Idea by IUC. As Jio makes money from IUC they are also. But carrying a call costs more on Airtel as their most networks are 2G or 3G (though they are shutting down 3G in circles to refarm spectrum for 4G). Already in huge debt, Airtel needs to generate revenue and without IUC they will loose a good portion of revenue.

2. TRAI observed there is a voice traffic imbalance - Jio has 100% voice on LTE, while Airtel has 18% and Vodafone 5%. That's why TRAI is likely to defer the original decision to make zero IUC from January 2020, and initiates a Consultation paper regarding it. Also there has definitely been some move inside the finance and telecom ministry propelled by Airtel and Vodafone Idea to extend IUC regime in the view of poor state of telecom industry.

3. Jio wants zero IUC, as they will not have to pay IUC to others and their LTE network will take care of cheapest voice calls in terms of data. Now putting offnet calls at 6p/min means they are transferring cost due to IUC to directly on customers. The graph though showing incoming calls on Jio are increasing steadily. 

Now it could be their strategy to make a mass effect and put TRAI under pressure. The move is like Jio wants to offer free calls, but TRAI and incumbents are not allowing them to do the same.

There is another thing Jio is doing, they are ready to sold off its tower arm Jio Infratel to Brookfield to get investment of $ 3.66 billion. It seems Jio is saving money for 5G spectrum auction and 5G deployment in coming days.

Many people is putting this move by Jio beside BSNL's downfall as central government (BJP backed) plans for privatization of several government sectors like Indian Railways. Some says it's a business move by Ambani and next they will increase the tariff. In the midst Twitter gets all fun - Airtel says #AbTohSahiChuno and Jio says #Air-toll and #Woh-duh-fone.

At the end I must say, it's business and Ambani is playing in that way to create a monopoly. Well duopoly may be a better term. 

So if you support Jio, expect to see Jio's monopoly in the market sooner or later. 

Another good read here: Jio: The Camel in the Tent  (it may not be free link)