The telecom regulator also said that no call termination charge will be applicable from January 1, 2020.
Global ratings agency Fitch said the cut in the interconnect user charges will lead to transfer of up to $600 million (roughly Rs. 3.859 crores) per year to newcomer Reliance Jio from the incumbent operators.
Here are the main issues and the justifications given by the TRAI in its choice for BAK in the coming two and half years.
Moreover TRAI has proposed to remove IUC completely from 2020, placing emphasis on the growing redundancy of charging for voice calls. Companies like Bharti Airtel, Vodafone India, and Idea Cellular will suffer a great loss as all of them has a sizeable chunk of market share and more calls terminate on their network compared to the calls originating from them.
However companies were still not happy.
A Vodafone India spokesperson said: "We are disappointed and are considering options in response to it".
Last night, Vodafone had expressed dismay at TRAI's latest decision and had claimed that the "retrograde" measure, unless mitigated, will have serious consequences for investment in rural coverage and government's vision of Digital India.
"We are extremely disappointed with the latest regulation on the IUC (interconnection usage charges), especially at a time when the industry is facing severe financial stress".
Jio said the high cost IUC regime "thus far has caused financial stress for the smaller and new operators".
Reliance Industries stock surged after telecom regulator TRAI slashed interconnect fee from 14 paise per minute to 6 paise per minute on Tuesday.
Jio said it was "appalling that the incumbent operators", made allegations that the new rates were not transparent and baseless.
Under Bill and Keep regime, the operators only keep record of incoming calls on their network, but do not raise any demand from other operators. One can argue that voice call charges are also factored into the current tariffs but telcos can argue that if voice calls are offered for free, there's no way they can reduce the existing tariffs because of lower IUC charges. For instance, if an Airtel cellular customer is calling a Vodafone India cellular customer, Airtel will have to pay 6 paise to Vodafone for carrying a call to its network. With a view to promote new and more efficient technologies, the Authority is expected to be forward looking and base its regulations on the most efficient technology. Airtel, the country's biggest telecom company, collected Rs 10,279 crore a year ago on ICU charges, which contributes about 14 percent to 18 percent of their operating profits. The top players with the highest number of subscribers tend to gain from the fees.