TRAI cuts ADC

Category: Government | 1 Comment | Posted on March 1, 2006

Telecom regulator TRAI has announced a substantial cut in the Access Deficit Charge and a shift to revenue share regime.

ADC is a fee that private operators have to pay state-owned BSNL for subsidising rural telephony. TRAI has reiterated that ADC would come down to zero by 2008-09.

• There has been no change in mobile and fixed termination charges from the existing level of Rs 0.30 per minute. Migration to revenue share regime will not have any significant impact on rental and local call charges.
• For STD calls, Trai has replaced the present structure of a flat 30 paise per minute ADC with a revenue-share based system under which telecom companies will pay 1.5 per cent of their annual adjusted gross revenue as levy to BSNL. But operators’ revenue from rural subscribers will be subtracted before they share 1.5 per cent of revenue, Trai said.
• Trai has retained the per-minute levy structure for international calls, but has reduced the ADC on outgoing calls by over 65 per cent to 80 paise per minute and for incoming calls by over 50 per cent to Rs 1.60 per minute. Additionally, international long-distance operators will have to share 1.5 per cent of revenue.
• In another major decision, Trai has set a ceiling on carriage charges for domestic long distance calls at 65 paise per minute. This may reduce STD charges for a distance beyond 50 km, but can increase tariffs for the 0-50 km segment as the earlier carriage charges were 20 paise per minute.
• Private operators have been allowed to retain the ADC they collect from fixed-line customers.

If the entire reduction is passed on to subscribers by the operators, STD rates can reduce by up to 35% and ISD rates by about 25%.

Bharti has already announced that the cuts will be passed on to the customers. Other operators are likely to follow suit.

Whatever has been given here, without a doubt, will be passed on to our customers.

This is our commitment for a long time. Whatever keeps coming, not only this one but also anything that comes on the licence, will straightaway be passed on to the consumer.

Coming into effect on March 1, the new regime will reduce the total ADC collection to Rs 3,335 crore from about Rs 5,340 crore. This means that BSNL is likely to suffer an annual revenue loss of about Rs 2,000 crore. According to TRAI’s estimates, the total revenue of the telecom operators will be around Rs 90,000 crore in 2006-07.

TRAI claimed that the decision to lower the ADC on ISD calls would in turn reduce arbitrage and hence grey market. More importantly, the reductions will allow both state-owned and private operators to implement OneIndia tariffs i.e. STD at Re 1 per minute.

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