The Hindu Business Line : A strange call on ADC

IN A PECULIAR twist to the raging Access Deficit Charge (ADC) row, private cellular operators are supporting incumbent Bharat Sanchar Nigam's opposition to reducing this levy. Their contention is that as long as the ADC regime is applied on a call-by-call basis, the reduction in the levy by over 40 per cent (from Rs 4.25 to Rs 2.50 per minute) as contemplated by the Telecom Regulatory Authority of India will not provide enough disincentive to the grey market traffic in international long-distance (ILD) telephony. This is a climb down from their earlier resolve of getting the ADC scrapped or making it applicable only for rural telephony. Now, these players have told the regulator that they can consider increasing the mobile termination charge (payment for calls landing on the domestic network) on all incoming ILD calls. They are ready for a floor of Rs 1.75 — from 30 paise now — with a higher bias that can be negotiated with the foreign carriers. By subscribing to BSNL's view that a reduction in the ADC will only benefit users of other countries, they are conveniently turning the argument to their advantage.

But this alternative suggested by the private cellular operators betrays the fact that the ADC of Rs 4.25 payable mainly to BSNL has only served to keep the ILD tariffs artificially higher, both for incoming and outgoing calls. BSNL stood to get a significant chunk of this charge, estimated at Rs 5,300 crore for 2003-04. It is obvious that if the fixed ADC element is removed or reduced, it will drive down the international rates towards the local termination rate component of less than 50 paise payable by an ILD operator to the basic network. This will straightway have a double impact on incoming call rates. First, it will offer greater scope for tariff reduction, even if foreign carriers renegotiate downwards the settlement rates (with the Indian ILD operators). Second, the lower termination rate will reduce the incentive for grey market operators to terminate illegally the ILD traffic outside BSNL or any private fixed/mobile network. A combination of these factors will provide a big stimulus to incoming call traffic volumes. A similar logic will hold good for outgoing calls also.

Clearly, the right course for the private cellular operators would be to strengthen their case for a reduction of the ADC rather than seek to raise the termination charge. Under these circumstances, if TRAI has any reservations about checking the flourishing international call market, it will have to again make out a persuasive case for a switch to the revenue-share regime. If this regime has worked so well for the USO (Universal Service Obligation) fund, why can it not be applied by the government (or BSNL) to the ADC regime? If the switch to revenue share happens, it will in a single stroke eliminate all the problems of monitoring calls, remove the incentive for grey market and bring greater certainty to the amount collected from different operators every month. Moreover, if the revenue-share regime is put in place, the transition to the full-fledged USO regime over the next two-three years will also be smoother for all players along the entire telecom chain.

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