The Telecom Regulatory Authority of India (TRAI) has announced the access deficit charge (ADC) component applicable for financial year 2007-08.The authority, which reviews the ADC regime on an annual basis after going through a consultation process, has notified the amended regulations, effective from April 1, 2007.
Realising that ADC is a depleting regime and cannot be continued in perpetuity, TRAI has brought down the ADC component to Rs 20 billion from the existing Rs 32 billion for financial year 2007-08.For this, it is counting heavily on revenues generated from incoming international calls, which would constitute about Rs 14 billion of the ADC levy for 2007-08.
The other key features of the amended regulations are as follows:
No ADC on revenue generated from rural wireline subscribers by access providers.
According to TRAI, the reduction in the ADC amount would be fully passed on to consumers by the service providers, thus paving the way for lower telecom tariffs. This would result in greater usage of services. It would allow sustained growth of telecom services and offer greater flexibility to service providers for reducing tariffs and offering innovative tariff packages to consumers. It would lead to a reduction in arbitrage in international incoming calls and hence leave little incentive for the ILD grey market. It would also level the playing field between outgoing international calls made through internet telephony and switched traffic minutes, leading to a growth in traffic minutes through switched telephony and in the revenue of service providers.
Says TRAI Chairman Nripendra Mishra: “The reduction in ADC in the percentage revenue share and removal of per minute ADC on international outgoing calls will be a major relief to the domestic telecom sector. In addition, this levy will not be charged on revenues generated from rural wireline subscribers. We expect all operators to fully pass on the benefits to customers.
Meanwhile, BSNL, which had dragged TRAI to the telecom tribunal over the reduction in ADC last year, has not actively responded to the key purpose for which ADC was given, the authority argues. “It may be recalled that ADC had a specific purpose (that is, tariff rebalancing) to be fulfilled in a time frame.Further, BSNL is now offering a tariff regime for bundled services which appears to have some element of crosssubsidy,” notes the amendment.
TRAI disagrees with BSNL’s ADC argument that it has to incur losses to sustain its rural rollout. The company has calculated that it would require an ADC amount of about Rs 143 billion to sustain its rural operations. TRAI says this argument does not hold as BSNL is a profitmaking company. For 2005-06, BSNL’s total profits stood at Rs 87.39 billion.Besides, there are a number of new revenue streams available like broadband, which provide additional revenue for copper networks. BSNL can generate additional revenue by unbundling its copper local loop. The potential to bear this notional loss of revenue clearly establishes that it is not incurring any access deficit.
Moreover, according to TRAI, out of the total estimated ADC collections of Rs 20.5 billion, around Rs 20 billion would be for BSNL. Besides, even the ADC regime that remains for BSNL is to be phased out and has to be merged with the USO regime in three to five years.
Lowering the ADC component has been a long-standing demand of private operators. TRAI’s amendment must, therefore, bring cheer to the operators. Users, meanwhile, can expect big gains ?? lower STD rates and up to 20 per cent reduction in ILD tariffs.
