According to the draft note prepared for the union cabinet by DoT on terms of reference for TRAI while considering these two major demands of the cellular operators, the authority may also examine whether the size of the network put in place is optimal.

TRAI will also look into the efficiency and cost factors of the cellular operators to draw a reasonable conclusion that the inability of the companies to pay licence fee is due to factors beyond their control. The government wants to ensure that it does not lose revenue due to operators' inefficiency.

The draft terms of reference say that TRAI should examine whether the network has been planned in an optimal manner aftertaking into consideration the likely subscriber base and income streams to avoid undue financial burden on the operators.

TRAI will also look into the acquisition price of equipment to determine whether a competitive process was evolved by the operators or it was supplier/vendor-driven.

Financial statements of the operators on operational costs are also proposed to be studied closely to ensure that these costs are reasonable and no attempt has been made to artificially inflate costs to depress the financial performance.

The TRAI is also expected to consider whether assumptions made in the techno-economic study/project report of the operator with regard to parameters such as build up of subscriber base from year-to-year and revenue streams were quantifiable, thus leading to an assessment of the break-even point and, if so, whether the actuals have varied from those assumptions to such an extent that the industry is not likely to be remunerative during the currency of the licence period.

The governmenthas stated in the draft note that TRAI would ensure that a transparent consultative process is adopted and recommendations are supported by detailed reasoning. The report of TRAI is likely to be submitted within three months.

INSIGHT

DoT willing to yield ground

DoT has recognised the trouble cell operators are in. Their revenues leave them with little after covering depreciation and debt servicing. The cell operators have pleaded for a moratorium on payment of licence fees and extension of the licence period. But this will upset the revenue calculations of the government. Hence, the suggestion that cell operators pay a proportion of their revenue as licence fee during the extended period of the licence, including the period of moratorium. TRAI will have to decide on DoT's compromise formula.