With the year drawing to a close, it seems increasingly unlikely that the broadband target of 3 million subscribers by end-2005 will be met. Concerned on this front, the Telecom Regulatory Authority of India (TRAI), in a recent note to the Department of Telecommunications (DoT), has suggested measures such as exemption of service tax for internet service providers (ISPs) and unbundling of the local loop.
According to TRAI, efforts in this direction have become imperative because, despite the thrust by the government and operators to push broadband growth in the country, the broadband subscriber base remains at a paltry 0.61 million as in September 2005. In light of this, TRAI feels that the government needs to review some of the provisions of the existing Broadband Policy.
In fact, in its recommendations on the Broadband Policy, TRAI had suggested a few critical points, some of which were not accepted. These include the proposal to unbundle the local loop in order to accelerate provision of internet and broadband services. TRAI believes there is now a strong case to implement this.
“To ensure that infrastructure expansion continues through fresh investments, we will not insist on unbundling of new infrastructure that is less than five years old, as those installed in the last five years can be utilised by the owners themselves,” the regulator points out.
To promote quick growth and create immediate competition in broadband services, a non-discriminatory local loop unbundling should be executed in a timebound manner for both shared unbundling and bit stream access.
Based on detailed discussions with the incumbents, BSNL and MTNL, as well as other service providers and in keeping with best international practices, TRAI argues that the owner of the local loop who is a unified access or basic services access provider (local loop operator) should have the opportunity to decide in which exchanges they would make their investment to upgrade the infrastructure for their own use as well as for providing bit stream access to access seekers. They should also have the choice to decide on the type of unbundling they want, depending on their commercial objectives.
So far, a review of the current situation has revealed that BSNL and MTNL have not been able to make full utilisation of their infrastructure ?? either themselves or through the franchisee option made available to them in the Broadband Policy. Therefore, a large part of the existing local loop remains unutilised by the incumbents as well as by the private operators.
Moreover, according to TRAI, in a discussion with ISPs in July 2005, it emerged that the ISPs would find it difficult to achieve the broadband targets unless local loop unbundling by incumbents was mandated by the government and unless they received tax incentives for broadband equipment and services.
Taking this into account, TRAI has asked the government to exempt ISPs from the 8 per cent service tax, stating that it would bring down the cost of services. “The service tax levied on services that are used by ISPs in the delivery of their service to internet and broadband customers should be exempted,” the regulator stated.
TRAI has also asked the government to make it mandatory for all corporations to provide an allowance of Rs 6,000 per annum for broadband services and remove this amount from the taxable income of the companies. It wanted the same facility to be extended to self-employed professionals.
Moreover, TRAI has suggested that the government should recommend to all state governments that the sales tax on goods and services for e-commerce transactions should be waived for the next five years. “This recommendation should be followed by a legislation to ensure its execution by the state governments,” stated the TRAI release. It also added that the state governments should waive the 30 per cent entertainment tax for services provided through the broadband platform.
While the recommendations are sound, it remains to be seen whether they are accepted or not.
