The Hindu Business Line : Calling for a revenue cut

THE EVALUATION BY the Department of Telecommunications of a proposal to reduce the revenue share for national and international long-distance operators from 15 per cent to 10 per cent is welcome. Considering the two-phased reduction effected in revenue share for basic and cellular operators — the last was in December 2003 — there is considerable merit in the demands of the long-distance operators.

The latest policy move is finding favour with the DoT, as the chief beneficiaries will be Bharat Sanchar Nigam and Videsh Sanchar Nigam, which have near-monopoly on national and international long-distance services. To be fair, private operators such as Bharti and Data Access have been supporting this move as they also stand to gain in the long term. From purely a policy perspective too, the reduction in the revenue share for long-distance services is in the right direction. Even in early-2000, Dr Rakesh Mohan, Member, Telecom Regulatory Authority of India, in his dissent note to the opening up of long-distance services to competition, had called for keeping the revenue share at the lowest. In the interest of lower tariffs for consumers, some stakeholders had suggested that a revenue share at 7 per cent (5 per cent for universal service obligation and 1-2 per cent for administrative and regulatory costs) may be appropriate for these services.

Though the revenue share reduction seems justified, case-by-case policy initiatives hardly send positive signals to the overseas telecom carrier and institutional investment community. Moreover, as no policy decisions can be taken till the new government is in place, this policy will remain in limbo at least till June. This three-month hiatus may prove to be a blessing in disguise as it will help TRAI set the ball rolling on a couple of crucial regulatory decisions. TRAI recently came out with a proposal for unified licensing of all telecom services, as a follow-up to the Preliminary Consultation Paper issued late last year. In end-October 2003, at the time of making recommendations for Unified Licences for Basic and Mobile services, TRAI had proposed that within six months Unified Licensing Regime should be initiated for all telecom services covering all geographical areas using any technology. With the recent Consultation Paper, TRAI has raised the issue of bringing the revenue share on a par for all telecom services. If a consensus emerges among stakeholders, it will automatically settle the issue of revenue share in long distance, which is being viewed in isolation at the moment.

As part of its unified licence regime recommendations, TRAI has called for a consideration of the contentious issue of allowing "direct inter-circle connectivity" to different mobile operators. This will help cellular operators with a national footprint operating in contiguous circles carry their own long-distance calls. For consumers, this will offer "increased choice" and "more affordable long-distance services". While BSNL may have reasons to be unhappy at this prospect, as it will hit its long-distance revenues, TRAI should go ahead as this will be in the larger interest of consumers.

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