The Hindu Business Line : Licence fee for second category bandwidth providers cut by 60 pc

THE Government on Thursday announced a 60 per cent reduction in licence fee for Infrastructure Provider Category-II (IP-II) operators from 15 per cent to six per cent of the annual revenue. The decision will cost the Government only about Rs 3-4 crore annually.

The move will marginally benefit companies such as Gas Authority of India Ltd, Power Grid Corporation, Railtel Corporation, Tata Power, Comsat Max and Hughes Escorts Communications. Together, these companies paid about Rs 7 crore as licence fee annually.

DoT sources said that the revenue from IP-II was low since the licence was only meant to facilitate utility-based companies to sell excess bandwidth. However, such companies are not allowed to sell bandwidth directly to end-users. For the consumers, the decision may bring only a marginal benefit. IP-II licence holders can sell bandwidth only to telecom service providers like national long distance operators and Internet service providers. With the reduction in the licence fee, they will be able to sell cheaper bandwidth to service providers who, in turn, may pass on the benefit to the consumers like corporates, banks and other leased line users.

The move may also result in better utilisation of IP-II company's resources since service providers would now prefer to take bandwidth from them at lower cost.

Industry analysts also point out that the impact of the decision for consumers may not be large since IP-II licence companies have only a marginal share of the bandwidth market. National long distance operators and IP-I licence holders like Bharti, BSNL and Reliance have the major share of the market.

``While the decision is a step in the right direction, but if the Government is serious about bringing down the bandwidth prices across the country, then it must reduce the licence fee for NLD operators and IP-I licence holders. That apart, bank guarantees should be completely abolished,'' said an long distance operator.

DoT officials said that the decision is only part of the Government's strategy to bring down bandwidth costs and other measures would follow. A number of policy measures have already been announced towards this. Infrastructure providers have already been granted relief by way of reduction of the bank guarantee from Rs 100 crore to Rs 5 crore.

Recently, the Communications Ministry announced a 50 per cent reduction in bank guarantee for long distance operators. On Tuesday, the telecom regulator had proposed a review of leased line tariffs with a 75 per cent reduction in costs.

In a press statement, DoT said that its hoped these measures would help in accelerating the growth of bandwidth at national level. "It will also enable IP-II to effectively utilise their existing infrastructure as well as to cause further augmentation and offer competitive prices. It is expected that this decision would promote telecommunication infrastructure for seamless flow of data and voice traffic within the country," the statement said.