TRAI cuts ADC to 1.5 per cent of revenues; call rates to fall

In a major policy change, the telecom regulator TRAI has changed the Access Deficit Charge (ADC) calculation from per minute of call basis to percentage of revenues. ADC would hence forth be charged at the rate of 1.5 per cent of gross revenues. The new regime would be effective from 01 March 2006.

As a result of the change, total ADC amount for the financial year 2006-07 would decline to Rs3,335 crore. Out of this, an amount of around Rs3,200 crore would be due to BSNL. Based on the existing method, total ADC for the year would have been Rs4,800 crore, according to a TRAI statement.

However, private fixed line operators would not have to pay any ADC on their revenues from rural areas.

The ADC on international long distance calls have been reduced by more than half, though the computation would continue to be on per minute of call basis. On incoming calls an ADC of Rs1.6 per minute would be applicable while outgoing calls would attract a lower rate of Rs0.80 per minute.

TRAI estimates total ADC of Rs1,278 crore from domestic calls, Rs1,800 crore from international incoming calls and Rs257 crore from international outgoing calls for the year 2006-07.

More significantly, TRAI has said that there would be no ADC by the financial year 2008-09.

ADC is levied to subsidise the lower than cost monthly rentals and local call charges for domestic fixed lines, mostly of BSNL.

The TRAI has also fixed a ceiling for domestic carriage charges at Rs0.65 per minute irrespective of the distance. This is seen as a move to facilitate the migration to the 'One India' uniform call tariff initiative of the telecom ministry.

Termination charges, the share of call charges due to the operator at the call termination point, would remain the same at Rs0.30 per minute for both fixed line and mobile networks. Interestingly, the regulator has stated that termination charges can be lower than the current level without changing the rate.

Private telecom operators are expected to bring down tariffs after the reduction in ADC. Bharti-Airtel has already declared that the entire reduction would be passed on to customers.

Though the rates have been reduced, it may not affect BSNL considerably as volume growth would result in higher revenues. It is estimated that ADC due to BSNL for the current year 2005-06 would be considerably higher than the original TRAI estimates as a result of higher traffic.

The international long distance (ILD) and national long distance (NLD) operators are also unlikely to be affected in a big way for the same reason.