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Trai may suggest spectrum usage fee on internet service providers

Trai could unveil a roadmap early next year for levying a spectrum usage charge or SUC on internet service providers.

, ET Bureau|
Updated: Dec 15, 2014, 04.43 AM IST
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Trai could unveil a roadmap early next year for levying a spectrum usage charge or SUC on internet service providers.
Trai could unveil a roadmap early next year for levying a spectrum usage charge or SUC on internet service providers.
KOLKATA: India’s telecom regulator could recommend levying a fee on internet service providers for using airwaves, as is done in case of mobile phone operators, a move that will make broadband more expensive for consumers as it will push up costs for companies such as Reliance Communications and Bharti Airtel.

The Telecom Regulatory Authority of India (Trai) could unveil a roadmap early next year for levying a spectrum usage charge or SUC on internet service providers, a senior Trai official told ET.

Trai has sought inputs from the department of telecom (DoT) on current spectrum holdings of internet service providers or ISPs, specific frequency bands held by them and their annual licence fee payouts.

The regulator has also sought feedback on the quantum of airwaves allocated to very small aperture terminal or VSAT operators since VSAT is seen as a low-cost alternative to capex-intensive optic fibre roll-outs for providing highspeed internet access, according to an internal DoT note seen by ET.

"We have sought feedback from DoT on current spectrum allocations to ISPs and VSAT operators in the run-up to issuing a consultation paper on ringing in SUC (spectrum usage charge) for ISPs early next year," the official said, requesting anonymity.

Mobile phone operators are currently charged an annual fee or SUC for using bandwidth. The move to bring in ISPs under the SUC ambit is likely to be met with opposition from the companies concerned, which argue that imposing the charge as a percentage of annual revenue will increase broadband service rates and in turn undermine India’s rural internet penetration targets.

Besides Reliance Communications, Bharti Airtel, Vodafone India and Bharat Sanchar Nigam, which offer internet services through separate divisions, the levy will hit pure play ISPs such as Tata Communications, Beam Telecom, You Broadband and CityCom Networks.

"Potential customers of broadband services across rural India are extremely price sensitive. Introduction of SUC will jack up the cost of delivering high-speed internet access in the villages, which would compel ISPs to increase broadband tariffs," Rajesh Chharia, president of Internet Service Providers Association of India told ET.

Chharia said that such a scenario could eventually pose barriers to delivering affordable citizen-centric rural e-services under the Centre’s ambitious Rs 1.13 lakh-crore Digital India initiative.

He also questioned the logic of burdening internet service providers with SUC and increasing the cost of delivering high-speed internet connectivity at a time when the government is spending big money in a national broadband venture to ring in affordable internet access across rural hinterlands in line with National Telecom Policy 2012 goals.

The move comes at a time when the Telecom Commission has just deferred plans to charge ISPs a higher licence fee – equivalent to 8% of their annual revenue – also suggested by Trai. Telecom Secretary Rakesh Garg had recently said that a "higher payout towards ISP licence fees would increase internet charges and hurt the Modi government’s Digital India goals".

Earlier this year, Trai had recommended that ISPs shell out 8% of their annual revenue as licence fee to bring them on a par with mobile phone companies. At present, licence fee is levied on telecom operators as a percentage of adjusted gross revenue.

In its May 2014 proposals, the sector regulator had suggested that the annual revenue for the purpose of computing an ISP licence fee should include all forms of revenue from internet services, allowing "only those deductions available for pass-through charges and taxes and levies as in the case of access services, without any set-off for expenses".
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