The Hindu Business Line : THE ADC SWITCH

The long-awaited changes to the Access Deficit Charge regime have finally come through, after nearly a year of intense debate, since the last major alteration in this subsidy. The switch from a per minute call-by-call formula to a revenue share of 1.5 per cent and a drop in the annual collections from this levy by a third to Rs 3,335 crore are expected to be a tariff treat for consumers and pleasant relief for telecom operators. A switch to revenue share not only makes the levy simple and transparent to administer, but also allows the market forces to play a greater role in dictating the strategies of players in a competitive telecom landscape. And the icing is the Telecom Regulatory Authority of India's move to exempt the revenues accruing to operators from rural users from this levy. The incentive for operators to invest in the rural areas and charge affordable tariffs will be greater than in the past.

With the switch to revenue share, private sector players will have to deliver on the concept of a single tariff for the country as a whole, on the lines of the `One India' tariff plan unveiled by the Communications Minister recently for the public sector BSNL and MTNL. The latest change should lower the national long-distance rates to Re 1 a minute from an average of Rs 2.50. The likely drop in tariffs becomes relevant as in the whole ADC exercise the regulator has sought to reduce the overall burden on the domestic subscribers by Rs 2,000 crore, while maintaining the total collection from international calls.

On international long-distance, while retaining the ADC levy on a per minute basis, TRAI has slashed by half the rates for both incoming and outgoing calls. Defending this move to continue the per minute levy, the regulator has indicated that against an ADC levy of Rs 2,000 crore, the gross revenues of the sector were only Rs 1,600 crore. The reduction in the per minute international tariff is expected to pale the attractiveness of grey market calls. But it appears that the incentive to avoid terminating calls outside BSNL or any of the private operators and thereby make it appear as a local call may not disappear altogether. The efficacy of this move will be evident from the buoyancy in call volumes handled by international long-distance operators in the next couple of quarters.

Since the public sector giant BSNL is staring at the prospect of a drop in inflows from the ADC by Rs 2,000 crore and abolition of this levy by 2008-09, it will be forced to take some tough decisions. One move could be the speeding up of the merger with MTNL that has been hanging fire for some time now. Besides access to MTNL's healthy cash flows and reserves, this move will obviate BSNL from duplicating investments in Mumbai and New Delhi.

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