TRAI favours abolishing Access Deficit Charge

New Delhi, Jan 21 (UNI) Telecom regulator TRAI today recommended abolition of Access Deficit Charge (ADC), a levy paid by private telecom operators to the government to compensate state-run BSNL which offers services in non-lucrative rural areas, with effect from April 1.

The regulators' move, which came in a consultation paper today, may hit the country's largest telecom firm's revenue, as the PSU uses the fund to cover up its expenses for providing services in the non-profitable sectors especially the vast rural areas of the country.

Through the paper, the regulator has sought comments from the industry players and suggested the government to finance BSNL via Universal Services Obligation (USO) fund, a TRAI statement said here.

The total support provided to BSNL, since its formation and upto 2006-07, in various forms that is reimbursement of licence fee and spectrum charges, moratorium on payment of interest, support from USOF, ADC funding and exemption on entry fee was about Rs 31,500 crore. It is expected to be about Rs 12,500 crore during 2007-08 alone .

BSNL is maintaining a fixed wireline network with a large rural footprint and providing services in remote and far-flung areas.

In many countries, the telecom regulators have established the ADC regime at the time of liberalisation of the sector to ensure sustainability of incumbents fixed line operations in a competitive environment.

The regulator said the ADC, which came into effect on May 1, 2003 in the country, should be replaced or merged with the USO fund from the next financial year.

''The idea of instituting ADC was not to make the incumbent perpetually dependent on support but to allow them time for adjustment during the period of transition from a monopolistic environment and era of government funding and cross-subsidisation to a competitive business environment,'' the regulator said.

It was earlier contemplated that ADC will be phased out in 2008-09.

Trai said in view of phasing out of ADC, as a result of the saving that would accrue to the service providers, there may be a scope to lower the entry barrier in rural areas and making services increasingly more affordable without the need to disturb the existing policy of forbearance on mobile tariff.

It is expected that implemented after due diligence, the amendments would pave the way for lower telecom tariffs, higher growth specially in rural areas, reduction in grey market, removal of market aberrations caused by ADC.

UNI SBA PDT RN2005