NEW DELHI: India’s telecom regulator more than halved the interconnect usage charge (IUC) from October 1 and said the fee will be scrapped from 2020, in a move that it said would benefit consumers.The decision saw the Telecom Regulatory Authority of India (Trai) coming down on the side of new entrant Reliance Jio Infocomm, while rejecting the arguments made by older telcos Bharti Airtel , Vodafone India and Idea Cellular.IUC has been reduced to 6 paise a minute from 14 paise a minute and to zero starting January 1, 2020, based on the view that costs incurred by operators will drop.India’s incumbent top telcos said they will go to court against the step. IUC is paid by the mobile operator on whose network the call originates to the network where it terminates.“Establishment of a clear outlook for IUC would provide regulatory predictability and enable service providers to plan their networks and businesses accordingly,” Trai said in its notification on Tuesday. “The authority has come to the conclusion that the termination charge for the domestic mobile-to-mobile call should be fixed at six paise per minute.”It said the “cost of termination of calls” will dwindle over two years and the residual charge can be mopped up through tariffs.“As a result, the authority prescribes a bill and keep (BAK) regime” from January 1, 2020.Under BAK, carriers don’t pay anything to each other for carrying calls, as opposed to the prevailing calling party pays (CPP) regime.This bars terminating operators from charging customers for incoming calls, leaving IUC as the only way to recover the cost of such incoming calls.According to industry estimates, No. 1telco Bharti Airtel would lose around Rs 2,000 crore a year from the lower IUC. For Vodafone India and Idea Cellular, ranked second and third, the annual loss would be around Rs 1,500 crore and Rs 1,200 crore, respectively. However, Jio is set to save Rs 5,000 crore, while RCom and Aircel will benefit by a marginal Rs 250 crore each.The top three – which had opposed the move to BAK – are net gainers under CPP since they have more than 60% of the subscriber base and thus have more calls terminating on their networks compared with calls originating from them. Jio, a new entrant, has most calls going out from its network and terminating on incumbents’ network.Trai’s Tuesday decision comes after an acrimonious war of words between Jio -- which had backed scrapping the fee -- and the incumbents, which wanted the charge to be doubled to cover carriage costs.Airtel’s Sunil Mittal and Aditya Birla’s Kumar Mangalam Birla had written to the government, explaining why IUC shouldn’t be cut. They were joined by Vodafone Group CEO Vittorio Colao and major Airtel shareholder Singtel. Jio had pushed for lowering the charge to zero on the grounds that the cost of carriage was marginal with new technology, a point that it made in various representations.“While on the one hand a lower termination charge benefits the consumer, it does not have a negative effect on the telecom operator because it is open to the operator to recover whatever cost it incurs through the retail tariffs, subject to competitive market conditions,” said Trai, which issued the regulation more than a year after consultations began. The older carriers said the move would hurt investments and that they were weighing their options.“We are disappointed with this decision and are now considering our options in response to it. The Indian telecom industry is already experiencing the greatest period of financial stress in in its history. This is yet another retrograde regulatory measure that, unless mitigated, will have serious consequences for investment in rural coverage, undermining the government’s vision of Digital India,” said the Vodafone India spokesperson.Airtel, Jio, Idea, RCom and Aircel did not respond to emailed queries.Rajan Mathews, director general at lobby group Cellular Operators Association of India (COAI), said the move would not lead to lower call tariffs.“Majority membership is extremely disappointed. Majority membership is intending to clearly move court in responding to this as it is clearly detrimental,” said Mathews. “Call tariffs will not go lower than what they are now, it is a misnomer. Even at IUC of 14 paise, calls were being given free.”Former Trai chairman Rahul Khullar, under whose watch IUC was reduced to 14 paise a minute from 20 paise in 2015, criticised the move to BAK in 2020, saying there’s no certainty what the technology will be like in two years.“The order to move to BAK in 2020 is misplaced. It’s too early to predict the technological developments and if the traffic will be balanced (similar number of calls flowing between each telco) in 2020. Also, the expectation that the industry will move to an all-IP network by 2020 is highly suspect as hardly any country in the world has that,” said Khullar.He further said that the move will impact industry revenue at a time when telcos are already bleeding and would hurt their ability to invest in creating all-IP or nextgeneration networks. The government has already set up an inter-ministerial group to look into alleviating the financial stress in the sector, which is saddled with debt of nearly Rs 5 lakh crore.Bharat Bhargava, partner, telecom advisory, EY, said IUC should reflect costs and termination charges below the operator’s cost could have negative repercussions. “The BAK model could work but in extreme situations a telecom operator can now charge customers for an incoming call as well,” he said.Bank of America Merrill Lynch said in a recent note that Jio will be a major beneficiary of any material cut in IUC, as “its net interconnect payments could come down materially, helping it to achieve ebitda (earnings before interest, tax, depreciation and amortisation) break-even earlier than expected”.On the other hand, Bharti Airtel and Idea would see ebitda erode by 4% and 9%, respectively, if IUC was cut to 5 paise a minute. If scrapped altogether, the impact would be 6% and 15%, respectively, said the note, which ET has reviewed.Trai said the move to cut IUC was justified at a time when communication apps are becoming more popular, leading to a reduction in voice traffic.“Thus the cost of the service providers would now need to be borne by the feature phone users who do not have the ability to use OTT (over-the-top) applications,” Trai said. “This would give rise to a peculiar situation where cost of services for lowcost feature phone users would actually end up being higher than cost of services for smartphone users... The BAK regime would encourage operators to invest in new technology and bring down the cost of voice services close to nil.”