Slash iuc licence and spectrum fees

Slash iuc licence and spectrum fees

The telecom regulator's proposal to bring down the Interconnect Usage Charge (IUC) promises to both increase bad blood in the telecom sector and worsen its finances. The government must intervene to protect the consumer and the sector's viability. IUC is the charge that an operator, in whose network a call originates, pays the operator in whose network the call terminates, for the service of receiving the call from the originating network and carrying it on to the called party . As compared to the old 2G days, the network usage per call is lower now when calls are converted into discrete packets that are sent over the network interspersed with packets of other calls and assorted data. This is the rationale for trimming IUC.
However, the cost of the network has gone up because of higher spectrum costs. A lower IUC would lower the cost of a call for the consumer, who, ultimately , bears the cost of the call. However, it would lower revenue for telcos. Now, for large networks such as Bharti and Vodafone, what one pays the other as IUC gets more or less offset by what it receives from it as IUC, since they have roughly the same number of subscribers.
Smaller networks pay out more as IUC to larger networks than what they receive as IUC. Apart from the decline in network usage due to packetisation of calls, two factors favour lower IUC. One, voice accounts for an ever-declining share of telecom revenue globally and net IUC receipts form a tiny fraction of this dwindling part of the business. Two, high IUC is anti-competitive, favouring incumbents against new entrants.
Telecom finances in the country have turned parlous with the aggressive entry of Reliance Jio and the government's insistence on high spectrum fees, extracted by auctioning tiny chunks of spectrum. To prevent telco loans from adding to the banks' growing mountain of bad debt, the government must intervene. It can lower the steep revenue shares it collects as licence and spectrum usage fees, still pegged at the high rates set when spectrum was allotted along with the licence without separate upfront payment.