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DoT favours ADC at 2.5 pc of operators' annual revenue — Move may lead to cheaper domestic calls

Thomas K. Thomas

New Delhi , Feb. 16

IN A bid to pave the way for private telecom operators to lower domestic call rates further, the Department of Telecom (DoT) has asked the Telecom Regulatory Authority of India (TRAI) to consider pegging the Access Deficit Charge (ADC) between 2 per cent and 2.5 per cent of the operator's annual revenues.

Further, as per the proposals being worked out by TRAI, the total subsidy amount collected for the year 2006-07 is likely to be brought down to Rs 3,200 crore. Of this, the burden on domestic calls is likely to be only about Rs 1,000 crore. The rest is being loaded on to the international long distance (ILD) segment. But that doesn't mean that outgoing ILD calls are going to get dearer, as the ADC burden is likely to be put on the incoming ILD calls.

TRAI is likely to announce the revised ADC regime by the month-end. At present, the ADC, which is collected to subsidise rural phones, is charged on a per-minute basis. The new formula proposes to collect the charges on domestic calls as a percentage of the annual revenues, while on international calls TRAI proposes to continue charging on a per minute basis.

For arriving at the new formula, the telecom regulator is working on two different options in consultation with the DoT. In the first option, TRAI hopes to collect Rs 2,000 crore from ILD calls and the balance Rs 1,200 crore by imposing the revenue share on domestic calls. The total revenue estimated for the industry is over Rs 79,000 crore for 2006-07. This would imply a revenue share of only 1.4 per cent in domestic calls.

On outgoing ISD calls, TRAI proposes to bring down the ADC from Rs 2.5 per minute to 75 paise a minute, while on incoming calls the levy is being pegged at Rs 2 per minute from Rs 3.25 a minute.

If this option is exercised, then ILD operators will be able to drop outgoing rates by over a rupee. However, the levy on incoming ISD calls still gives margin for grey marketers to route calls illegally, as the ADC collected from incoming calls will be nearly Rs 1,850 crore.

In the second option, TRAI looks at collecting Rs 2,450 crore from ILD calls. This option will reduce the pressure on domestic calls even further with an estimated ADC collection of only Rs 750 crore, which is less than a per cent of the estimated annual revenues, giving the private operators enough reasons to match the OneIndia tariffs announced by the state-owned Bharat Sanchar Nigam Ltd (BSNL).

Related Stories:
The substitution effect on Access Deficit Charge
Call off the ADC
Telecom industry split over access deficit charge debate

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