Call rates to dip on NLD fee cut

Telecom tariffs expected to go down by 9%: Maran.

The government today reduced the entry fee and the licence fee for telecom service providers and initiated moves to increase competition in the sector. This will cause a steep reduction in domestic and international call tariffs from January 1, 2006.

The licence fee for international long-distance (ILD) and national long-distance (NLD) operators has been slashed from 15 per cent to 6 per cent. The entry fee for ILD operators has been reduced from Rs 25 crore to Rs 2.5 crore, while for NLD operators, the fee has been slashed from Rs 100 crore to Rs 2.5 crore.

Communications and Information Technology Minister Dayanidhi Maran said at a press conference today, "I am expecting at least a 9 per cent drop in long distance tariffs. We have removed all the barriers.... There will be a lot more competition in both segments and the major beneficiary will only be the consumer."

The net worth and paid-up capital requirement for both NLD and ILD licences has also been brought down to Rs 2.5 crore from Rs 2,500 crore and Rs 250 crore, respectively.

The government has also allowed infrastructure service providers having only fibre optic networks (IP-II), like GAIL (India) Ltd, Railtel and PowerGrid, and IP-VPN licence holders, to enter the ILD and NLD business on payment of the entry fee.

Further, access service providers have been permitted to provide net telephony, Internet and broadband services. They have also been allowed to use the networks of ILD and NLD licencees to provide long-distance services. The government has also decided to issue telecom service licences to companies, whether or not they have prior experience in the sector.

"This will result in the unused capacities of GAIL, Railtel, Bharti and Reliance to be used," said Cellular Operators' Association of India Director-General TV Ramachandran.

"The Telecom Commission has recommended these changes in order to increase competition in the sector and provide greater choice to consumers," Maran said. The move can see new players, like Hutch and Idea, enter the long-distance business. "It helps greatly because the entry and licence fees are lower and there are no ILD roll-out obligations," Idea's Chief Executive Officer Vikram Mehmi said.

Besides, ISPs have been permitted to offer restricted net telephony. "There are over 150 ISPs in India and they can all become long-distance service providers if they pay the entry fee. All this augurs well for consumers as more competition will result in lower tariffs," said Ramachandran.

Bharti and Bharat Sanchar Nigam Ltd executives said tariffs would come down and they would be reworking the telecom charges over the next few days. Mehmi said Idea would pass on the benefits it received from long-distance carriers to its subscribers.

"We feel this will benefit customers and is a step in the right direction for driving the growth of telecommunications in the country," Bharti Enterprises Chairman and Group Managing Director Sunil Mittal said in a statement.

VSAT operators and ISPs providing restricted Internet telephony will also be required to pay 6 per cent of their adjusted gross revenue annually as licence fee.

Internet Service Providers' Association of India Secretary Deepak Maheshwari, however, said the government might force some ISPs out of the market by keeping them out of the VPN- and broadband-content market. 'ISPs which were earlier paying a licence fee of Re 1 may also be affected because of the 6 per cent fee proposed. It is going to affect the end consumer,' he added.

Maran ruled out any compensation to existing NLD and ILD operators like Bharti, Reliance Infocomm and VSNL. 'Existing players will gain due to a multiple increase in traffic and this will compensate for the high entry fee paid by them,' added Maran.

The government has also decided to allow NLD and ILD service providers to provide last-mile connectivity.

The mandatory provision of setting up a point-of-presence in each long-distance charging area has also been removed for the NLD service licensees.

A new ringtone

LOWER TARIFF

Licence fee cut from 15% to 6%

Entry fee for ILD reduced from Rs 25 cr to Rs 2.5 cr

Entry fee for NLD cut from Rs 100 cr to Rs 2.5 cr

MORE CHOICE

Idea, Hutch may enter the long-distance business

ISPs, GAIL, PowerGrid, Railtel may enter the fray

Companies without prior telecom experience may use idle optic networks for service roll-outs

Net worth, equity norms eased