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Phone tariffs might drop soon

October 28, 2005 09:35 IST

In a move than can bring down tariffs for all sections of the telecom industry, the finance wing of the department of telecommunications has suggested a reduction in the revenue-share licence fee across services.

These services include intra-circle calls, domestic long-distance calls and Internet protocol-virtual private network.

DoT officials told Business Standard that the matter was being examined and a decision was expected soon. "If the member (finance) suggests something, then the matter needs to be looked into seriously," said an official.

The move has been prompted by a DoT proposal to reduce the licence fee for national long-distance operators to 6 per cent from the present 15 per cent. Telephone operators pay an 8 per cent licence fee for all calls within a circle.

Officials said the DoT's finance wing had pointed out that this might result in diversion of intra-circle calls and that, they could be routed through NLDOs.

"Reducing the NLD licence fee to 6 per cent will impact future growth in the intra-circle network, insofar as expansion by a licensee of a telecom service in new areas is concerned," said an official.

The finance wing has also pointed out that unified access operators pay a differential licence fee, ranging between 5 per cent and 10 per cent, depending on the circle they operate in. If a flat 6 per cent revenue-share is implemented for NLDOs, unified access operators will also demand a reduction in their licence fee.

Further, the government may also be forced to reduce the licence fee for Internet service providers offering IPVPN services since they depend on NLDOs. 'To be viable, their licence fee should be lower than that for NLDOs,' said an official in the DoT's finance wing.

The DoT's finance wing has estimated that the proposed reduction in the licence fee for NLDOs will affect government revenues by around Rs 500 crore (Rs 5 billion) a year.

Any reduction in licence fees will require the concurrence of the finance ministry. Telecom licence fees and revenue earned by the Wireless Planning and Coordination Organisation are amongst the big sources of non-tax revenue for the Centre, which hopes to collect Rs 7,000 crore (Rs 70 billion) during the current financial year.


Forcing the govt's hand

The proposal

  • Fix NLD licence fee at 6 per cent of aggregate gross revenue.

Glitches

  • Intra-circle calls may be routed through NLDs due to licence fee differential.
  • Unified access operators, paying 5-10 per cent licence fee, may demand lower revenue share.
  • Internet protocol VPN players depend on NLDs for services but will have to pay higher licence fee at 8%.
Joji Thomas Philip in New Delhi
Source: