The Telecom Regulatory Authority of India (TRAI)’s annual review of the access deficit charge (ADC) regime has once again sparked off heated debate and discussion. Even as TRAI is working towards phasing out ADC, Bharat Sanchar Nigam Limited (BSNL) has demanded a fivefold increase in funds. Issues such as the collection mechanism as well as the eligibility of private basic operators to receive ADC funds have also resurfaced.
As per the existing ADC regime, BSNL is slated to receive Rs 32 billion in 2006-07. This is likely to decline to Rs 16 billion in 2007-08.
The PSU, meanwhile, has stated that it requires Rs 143 billion to offset the deficit it has incurred on account of providing rural wireline telephony services at below-cost rates.
This has not gone down well with private telecom operators. While the Cellular Operators Association of India (COAI) firmly backs the systematic depletion of ADC, as per the Association of Unified Service Providers of India (AUSPI) the regime should be discontinued, or at least reduced at a faster rate. “We firmly believe that the ADC should be reduced at a higher rate of around 60 per cent of Rs 48 billion so that the quantum of ADC for BSNL is restricted to Rs 12.8 billion as opposed to Rs 16 billion,” stated AUSPI in response to TRAI’s consultation paper.
Operators also advocated a change in the method of ADC collection. Currently, the government charges service providers 1.5 per cent of the adjusted gross revenue (AGR) as ADC. They also have to pay Rs 1.60 per minute on their international incoming call traffic and Re 0.80 per minute on their international outgoing call traffic.
For financial year 2007-08, cellular and unified service providers have opted to finance the ADC by charging a per minute fee on incoming ILD calls. According to them, the annual growth rate of incoming ILD call minutes has been expanding rapidly. It is estimated that there will be 17,000 million total incoming ILD minutes in 2007-08. A per minute levy of Re 0.75 on such calls will generate funds of Rs 12.75 billion.
Reliance Communications has further suggested that in case TRAI decides to maintain the ADC at Rs 16 billion, the balance amount could be funded through a levy of some percentage of the AGR.
This mechanism has several advantages:
However, ILD operators such as British Telecom (BT) and Videsh Sanchar Nigam Limited (VSNL) disagree. According to BT, the ADC should be uniformly distributed across all voice services. The company noted: “Levying ADC only on ILD incoming minutes will increase the opportunity for arbitrage and may fuel the grey market further.” It would also adversely impact the growth of incoming ILD traffic in the country.
VSNL, on the other hand, recommends that the ADC should be recovered by charging both a per minute levy on incoming ILD calls and a percentage revenue share on the AGR of all telecom operators. This will benefit consumers by removing ADC on outgoing calls.
ILD operators also criticised the current regime by pointing to the fact that access providers are able to retain the ADC generated from outgoing ILD calls, which have originated from fixed wireline services and the ADC applicable on the AGR accruing from rural wireline subscribers. ILD operators, on the other hand, pay ADC both on a per minute basis and as a percentage of their AGR.
Alternatively, VSNL has suggested that TRAI no longer charge ILD operators 1.5 per cent of their AGR as a large chunk of ADC funds are already coming from them on a per minute basis on ILD calls.
On the issue of providing ADC to service providers other than BSNL for their fixed wireline operations, there has again been substantial disagreement. The COAI contradicted Bharti Airtel, which suggested phasing out ADC to other basic service operators only when the overall ADC regime was phased out. Meanwhile, MTNL presented its own case to receive ADC support.
According to COAI, private fixed line operators only offer telecom services to the urban and semi-urban areas where tariffs are forborne. They also charge average monthly rentals which are higher than cost-based rentals. Moreover, they use wireless networks to offer the services. Consequently, ADC should be admissible only in the case of BSNL’s fixed wireline services in the rural areas.
TRAI clearly has its work cut out. It is expected to take a decision on the subject by the end of March. And the new ADC regime is likely to be applicable from April or May.
