The Hindu Business Line : The Trojan horse in TRAI territory

IN THE now raging battle between telecom companies, ADC is not aide-de-camp or automatic drip coffeemaker, but access deficit charge. But what is ADC?

It is "the amount payable by the service provider at the caller's end to the service provider at the receiving end for accessing services rendered by the latter in domestic long distance telephony," defines BSNL's Telecom Guide on the Web site www.bsnl.in.

Thus, when Singh of Amritsar uses his Hutch connection to call his friend in a village near Cuddalore, Hutch has to pay ADC to BSNL and recover the same from Singh.

But, why ADC? To understand, we have to rewind in time. Long ago, there was only the government player in the telecom scene, and they laid their lines without expecting to make much profit, even as in many cases subscribers too didn't expect phones to always work.

However, for dragging the wires to remote nooks, there was the social case of giving everybody access to communication.

It cost more to do all this, but there was no way of recovering the full cost from users, as much as in the case of railways servicing isolated corners. But access charges comprising rental and call charges paid by people did not cover the long-run average incremental cost of the operator in providing access. Thus arose `access deficit'.

This is not a uniquely Indian phenomenon. "Access deficits are prevalent in many countries and are justified on the grounds that a policy of not charging for the full cost of gaining access to the network is aimed at ensuring universal access with all its associated benefits of maximising the positive externalities and ensuring the provision of a public good," explains http://itu-coe.ofta.gov.hk.

Therefore, along with losses arising from inefficiency, as in many public sector enterprises, companies such as MTNL and BSNL suffered resource drain in providing access to unremunerative places.

They made good the deficit by cross subsidising, that is, charging prices above costs for long-distance and international calls to sustain unviable services. Remember how expensive STD and ISD calls used to be not too long ago?

Then came a policy of encouraging competition, and allowing private players into the telecom scene.

Naturally, they looked at creamier options that were pricey, much to the chagrin of the state players who had a social baggage to carry. Soon we saw price war and a reduction of tariffs, especially in the hitherto costly segments that were helping government operators to cross subsidise.

Regulatory intervention happened through the Telecom Regulatory Authority of India or TRAI, to compensate access deficit for incumbent fixed line providers such as BSNL and MTNL. And it took the form of access deficit charge or ADC, incorporated into the interconnection usage charge or IUC, as when Singh called his friend.

TRAI justifies ADC thus: "Even developed countries like the US, Australia, Canada, and France, with lesser compulsions of providing low rentals and tariffs for unviable services have implemented schemes to recover the access deficit."

In January 2003, ADC had a troubled birth, when mobile phone operators went on a warpath in resistance, till they were cowed down by a Minister who used the threat of cutting off the essential last mile link that the sarkari companies offered to cripple any calls from the competition. And the latest combat is about the reduction in ADC the regulator announced a few days ago. ADC trickles in as small charge on calls and adds up to a heap.

According to TRAI's original estimates the annual access deficit was Rs 13,000 crore, however, it was revised to Rs 5,340 crore later.

To compute ADC, TRAI made many `reasonable assumptions' about capital expenditure incurred by the state-owned operator, capital employed, cost allocation, and so on.

Keeping aside ADC's size, if one were to look at the regime itself, ADC looks like a complex animal, for the levy depends on distance, circle, and the type of network originating and terminating.

Therefore, it is but logical that there are reports of non-payment of ADC by operators, untenable claims by them about call patterns (such as, no international calls!), grey market to subvert the system, mis-reporting of call category, and so on, all to avoid ADC.

TRAI's new regime for ADC is slashing charges, so Singh may pay 50 paise less per minute, but the move has predictably upset MTNL and BSNL. While MTNL is planning to knock the doors of the Tribunal, BSNL has claimed that the new regime would result in a loss of Rs 1,254 crore, and so it may have to rethink its rural telephone project.

`Agreement on Basic Telecommunications' negotiated in 1997 by GATS under the auspices of the WTO stipulates that any obligation imposed by countries to achieve universal service should be "transparent, non-discriminatory, and competitively neutral." It has been tough for ADC to meet these norms.

Experts opine that ADC may vanish in due course to give a free play to market forces. Till then, if consumers are the Helen that TRAI tries to protect, ADC issue may well be the Trojan horse in its territory.

ZeroBase@TheHindu.co.in

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