The Hindu Business Line : Positive switch

THE TELECOM REGULATORY Authority of India's decision to review the prevailing Access Deficit Charge and recommend a switch to the revenue-share regime based on consultations with different stakeholders is welcome. Telephone tariffs are likely to come down as the switch to the revenue-share regime will straightaway impart greater flexibility to the telecom operators to fix tariffs in line with market demands. This competitive flexibility is not available to the operators now as the access deficit charge is different for each type of call, ranging from Re 0.30 to Re 0.80 per minute for domestic long distance calls to Rs 4.25 per minute for international long distance.

In a preliminary review of the charge conducted by TRAI for the October 2004-September 2005 period, the net access deficit (payable by all private operators mainly to Bharat Sanchar Nigam) works out to Rs 1,400-3,400 crore, substantially lower than Rs 5,300 crore estimated for the earlier year. Even if the revenue share estimated by TRAI is pegged at the higher end of 5.3 per cent of adjusted revenues for all operators, there will be ample scope for telecom operators to bring down the tariffs with effect from October 2004.

The biggest impact arising from this switch to revenue-sharing may be seen in international long distance tariffs. From February 1, all ILD operators have been paying a fixed access deficit charge of Rs 4.25 per minute for both incoming and outgoing calls. This has artificially pegged the tariffs at a higher level. Once ILD operators are allowed the flexibility to fix tariffs, it is likely that the competitive environment will offer greater scope for downward revision in tariffs. Moreover, lower termination rates will also reduce the incentives for the flourishing grey market in incoming international calls that exists now. Finally, the experience gleaned from informal talks by TRAI with telecom operators shows that there could be glitches in the collection of these charges. In the five months since the ADC regime came into effect, BSNL has indicated that the payment response from other operators has been poor and there may even be misreporting of roaming and long distance calls, especially mobile-to-mobile. The switch to the revenue-share mechanism will address the problems relating to collection and funding of the charges in a single stroke.

While the switch to revenue sharing is desirable, the TRAI recommendations do not address the fundamental question whether the charge is justified at all. The private operators claim that the levy has no raison d'etre and must be scrapped. This argument becomes even more forceful, as TRAI continues to use only the historical costs of BSNL to arrive at the charge instead of the "Forward Looking Long Range Incremental Costs" used extensively in developed countries. And ultimately, the charge only serves to elevate costs for consumers and sends poor signals for foreign investment in the burgeoning telecom sector.

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