Misplaced Priority: Telcos need licence fee cut, govt scraps broadband charge

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Published: June 15, 2020 5:30 AM

There's a separate licence called fixed-line licence under which wired broadband comes where also the licence fee is 8% of AGR but the revenue accruing from these services is marginal for operators and even the government in the form of licence fee.

Telecom licences are of different categories. What is called access services licence is for mobile services where the bulk of revenue accrues.Telecom licences are of different categories. What is called access services licence is for mobile services where the bulk of revenue accrues.

At a time when the financially-stretched telecom industry is looking for some relief measures like reduction in licence fee on mobile services from 8% of the adjusted gross revenue to 3-6%, the government has decided to instead scrap licence fee on fixed-line broadband services. This does not provide any kind of relief to the firms as revenues from fixed-line broadband are miniscule .

Telecom licences are of different categories. What is called access services licence is for mobile services where the bulk of revenue accrues. Operators pay a licence fee of 8% on their AGR here. There’s a separate licence called fixed-line licence under which wired broadband comes where also the licence fee is 8% of AGR but the revenue accruing from these services is marginal for operators and even the government in the form of licence fee.

The Digital Communications Commission (DCC) has decided to scrap the 8% licence fee on fixed-line broadband services and instead charge a token Rs 1 fee. While this has been done in the name of promoting wired broadband in the country which stands at a miniscule 19 million, it hardly benefits the telecom operators and the government also does not lose any revenue.

In fact, the move of scrapping the licence fee on fixed-line broadband will benefit only the loss-making state-owned BSNL.

The industry has been clamouring for a reduction in access services licence fee, which stands at 8% of the AGR and spectrum usage charge which ranges between 3-5% of AGR. In fact, last year, telecom minister, Ravi Shankar Prasad had written a letter to finance minister Nirmala Sitharaman to reduce the licence fee to 6% by cutting the universal service obligation component by two percentage points.

Later, the DoT even constituted a group of officials to examine what kind of financial help could be provided to the telecom operators. The group recommended giving a two-year moratorium on deferred spectrum installments but nothing happened on the reduction of licence fee and spectrum usage charge.

Just how much insignificant the abolition of licence fee on fixed-line broadband services can be gauged from the fact that a company like Bharti Airtel has only 2.43 million customers against its around 328 million mobile subscribers. The company’s broadband revenues comprises just 2% of its consolidated revenues.

Reliance Jio has only 0.84 million wired broadband subscribers and its revenue is negligible as the services are still under promotional scheme so customers are not billed. Jio’s mobile user base stands at 376 million. Vodafone Idea does not provide fixed-line broadband services.

State-owned BSNL is the largest fixed-line broadband service provider with a user base of 8.23 million. The services contribute around 20-25% to its total revenues.

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