The Hindu Business Line : ADC: `TRAI has addressed all core issues'

This is with reference to the editorial "Unclear still on ADC" (Business Line, January 11) which raised the following issues: 1. There is no rationale for keeping the ADC sum unchanged at Rs 5,340 crore and the latest TRAI order sticking to this figure is a flawed assessment.

2. Unless the ADC is worked out on a fair and rational basis and accounting separation is strictly enforced for BSNL/MTNL, this whole exercise will be futile.

3. TRAI backtracked after making out an elegant case for a switch to the revenue sharing regime in its Consultation Paper of June 2004.

4. The promise of a fresh review only prolongs the uncertainty on the ADC front, though workable solutions are readily available to the regulator.

The facts and the TRAI position are:

The first issue is elaborated in paragraph 26 and 35-38 of the Explanatory Memorandum to the IUC Regulation dated 6.1.2005 and the main points are:

"Para 26: Thus we need to bear a number of factors in mind in the context of a revision of the ADC regime. The net effect of depreciation in the gross CAPEX and allocation of costs to non-fixed line items is likely to decrease the overall costs per subscriber over a period of couple of years.

Issues relating to BSNL being given Mobile Licences without entry fees, increasing application of Forward Looking Long Run Incremental Costs to estimate the ADC and an increase in the disbursements made through USO also need to be taken into consideration.

In the current exercise, the Authority has focused mainly on the change in overall minutes funding the ADC amount with the ADC amount being the same as that used for the regime notified on 29th October, 2003.

"Para 35: The Authority has decided that since the present review is in the nature of an interim review based on the limited data, the revised regime should result in providing the same amount of ADC as specified under its Regulation of 29th October, 2003".

As far as issue No. 2 is concerned, as per TRAI's Accounting Separation Regulation, BSNL and MTNL have recently filed their accounts and the same is being examined by the Authority.

And Para 50 of the Explanatory Memorandum explains issue number three.

"In its assessment of whether it is appropriate to move at present to a revenue share ADC, the Authority took note in particular of the comment that such a transition could create problems of adverse impact on local call tariffs. In order to maintain the same quantum of ADC receipts to BSNL and other Access Providers in a uniform revenue share regime, the contribution of International and National Long Distance traffic revenues will fall and that of local calls will increase which will impact local call tariffs upward."

Regarding issue No. 4, the promise of a review does not create uncertainty on the ADC system as Para 17 clearly explains. "The Authority will review the ADC rates without going in for any consultation process in case new figures of data suggest that revision of ADC values is justified for the last two quarters of the new annual cycle of ADC."

From the above, it is quite clear that TRAI has addressed all the core issues raised in the editorial.

Pradip Baijal

Chairman,

Telecom Regulatory Authority of India

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