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Telecom regulations: The month that was - Views on News from Equitymaster
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  • Apr 20, 2007

    Telecom regulations: The month that was

    In this series of articles, we shall be coming out with regular updates on the important happenings in the telecom sector that have transpired at the regulatory level. In this series, we shall enumerate the important regulations/announcements and gauge how they will change the scape of the telecom sector in India.

    Responses to consultation paper on Access Deficit Charge (ADC)
    The main issues raised in the consultation paper released in January 2007 were:

    1. Should the regulatory authority continue with the present reduction trend in ADC?

    2. What should be the appropriate option for the collection of ADC?

    To this the regulator had received responses from AUSPI, COAI and various telecom service providers asking it to continue with the reduction in ADC as planned stating the following reasons:

    USO and ADC meet similar objectives and it is undesirable to have two different mechanisms in force to meet the same policy objectives.

    • Liberalization of the telecom sector has witnessed intense competition leading to an unprecedented growth of subscribers and reduction in tariff to levels, which are the lowest in the world. Having an ADC in such a competitive environment would mean that the private players are funding the operations of the incumbent.

    • Subsidies promote unfair competition and anti-competitive use of subsidies.

    • ADC inflates the price of subsidising services and reduces the demand for them.

    As regards the appropriate option for collection of ADC it was proposed that the burden on domestic subscribers be removed and ADC be collected from ILD incoming calls only.

    Idea Cellular Ltd. submitted compliance report on refund to cellular subscribers
    The company had charged differential call charges (in Delhi service area) with respect to calls that terminated on the BSNL/MTNL networks vis-a-vis private GSM networks. The regulator had asked disallowed the charging of such discriminatory charges and had asked the company to refund to its subscribers such excess charges as had been collected from them. This resulted in 192,000 customers getting refunds of an amount totaling to Rs 13.6 lakhs.

    TRAI lowered the Access Deficit Charge (ADC)
    The regulator announced the lowering of the ADC applicable as follows:

    • ADC for 2007-08 reduced to Rs 20 bn from their previous levels of Rs 32 bn.

    • Complete removal of ADC burden from domestic consumers on outgoing international long distance calls (ILDC).

    • Per minute ADC on incoming ILDC reduced to Re 1 per minute from their earlier levels of Rs 1.6 per minute.

    • ADC on percentage revenue share basis halved to 0.75% of AGR (Adjusted Gross Revenues) of all service providers.

    The move had been made in anticipation of:

    • Lowering of telecom tariffs

    • Greater usage of services as a result of affordable or lower tariffs.

    • Sustained growth of telecom services

    • Reduce arbitrage in international calls hence leave very less scope for ILD grey markets.

    Recommendations to Department of Telecommunication on terms and conditions for resale in International Private Leased Circuits (IPLC)
    'Resale' is the sale or lease of telecom services to an end consumer on retail basis after leasing from telecom service provider on a commercial basis at wholesale prices. Incase of resale of IPLC, resellers are required to take IPLC from International Long Distance Operators (ILDOs) and sell to end consumers such as software exporters, BPO units, Call centers, Banks and other small and medium enterprises (SMEs) that require to transmit a large quantum of data.

    Allowing of resale of IPLC is likely to result in the following:

    • Provide an effective entry vehicle for new entrants that may result in the reduction in prices in the IPLC segment.

    • Improve customer service to end customers and business entities.

    • Stimulate the usage of existing network through innovative means benefiting the facility-based provider as also the end consumers.

    • Induce innovative services in terms of new billing terms and innovative tariff packages.



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