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ADC on Roaming - Is it justified?

May 15, 2005
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The Telecom Regulatory Authority of India (TRAI) has announced an additional ADC on roaming calls and stated that calls from national roaming subscribers be treated as STD calls and those of global roaming users as incoming international calls. The move has stirred a hornets' nest among cellular operators who feel the decision is unjustified and discriminatory. We bring you the views of various sector specialists...

Is TRAI justified in levying additional ADC on roaming calls?

S.C. Khanna: TRAI is not at all justified in taking this step. The definition of roaming with payment of associated ADC charges as incorporated now in the IUC amendment is discriminatory and inconsistent. In fact, the definition of national/international roaming is likely to benefit only the incumbent. It also serves to perpetuate ADC payments contrary to TRAI's stand as a regulator to phase out the ADC regime.

In this connection, we would like to state that when a roaming subscriber makes local calls in the visited network, they are no different from a normal local or intra-circle call and as such, the interconnection and IUC payments should be treated the same way. It would not be correct to treat all calls made by a national roaming subscriber as long distance calls. The situation for international roaming subscribers is similar. Therefore, TRAI's stipulation that all calls from national roaming subscribers be treated as long distance calls and all calls from international roaming subscribers be treated as incoming international calls for ADC purposes will have an adverse effect and will be detrimental to both the network and the subscriber.

Further, TRAI had issued a consultation paper on March 17, 2005 and the response of the stakeholders and the public was invited by April 30, 2005 followed by open houses for full discussions on the issue of ADC. Therefore, TRAI has no justification to impose an additional levy till the new regulation on ADC is finalised. AUSPI has been advising TRAI from time to time that there is no case for ADC. However, if some ADC has to be paid to Bharat Sanchar Nigam Limited (BSNL), it should be only for rural telephone lines and this should be paid out of the USO Fund or the revenue share paid by service providers. The current revenue share paid by service providers is 6 per cent, 8 per cent and 15 per cent for various categories, which includes 5 per cent towards the USO Fund. There is no need for service providers to pay an additional levy of ADC to BSNL. Elimination of ADC and in the worst case payment of ADC out of the USO Fund for rural telephony will make services more affordable and help in achieving the target of 250 million telephone lines by December 2007 set by the government.

T.V. Ramachandran: No, TRAI's move is not justified. On January 6, 2005, after completing a nearly eight-month-long consultation process, the authority concluded that the ADC quantum for BSNL should be maintained at Rs 53.35 billion. As the ADC is collected on a per-minute call-by-call basis, TRAI also announced a revised formula for collecting this ADC quantum. On March 17, TRAI initiated another consultation on review of IUC, which also dealt with various issues related to ADC.

The cellular industry's contention is that having only recently concluded an elaborate exercise and introduced a new formula for ADC collections to meet the ADC requirements of BSNL, why is an additional stream of ADC revenue now being opened up for BSNL by imposing additional ADC on roaming calls?

TRAI's justification that this additional levy is being imposed because there is a possibility of cellular operators misusing PoIs and because cellular operators are charging higher amounts for roaming is untenable. ADC is a balancing act meant to bridge the deficit in access suffered by BSNL. It is not a penalty to prevent imaginary misuse of PoIs nor is it a mechanism to share the revenues of operators.

The industry also objects to the fact that this step has been taken in a unilateral and non-transparent manner when a consultation process dealing with ADC issues was under way. Requests by the industry for a personal hearing in the matter were turned down on the grounds that the matter had already been discussed and decided, when in fact no discussions had been held on this subject.

Archana Sasan: TRAI is not justified in taking this step. The stand taken by the cellular operators that the funding of the access deficit should be merged with the USO programme is more pragmatic. Though the recent notification of TRAI may not substantially impact the bottomline of cellular service providers, the principle behind the notification of providing additional funding to the basic service provider which is using its extensive network to increase rural telephony, can be achieved by the USO Fund, which has been created with the said objective.

TRAI should note that one of the basic tenets of the National Telecom Policy, 1994 was to increase the teledensity in India. To achieve this objective, it was necessary that rural, hilly and tribal areas of the country be connected to the telecom network of the country. In fact, this was one of the main objectives of the USO placed upon service providers by the NTP, 1999.

Rajat Sharma: The methodology adopted by TRAI to go about announcing this is not justified. The logic of ADC is to offset the deficit incurred by the incumbent (in view of no clear visibility of accounting separation of the incumbent, there is always a doubt about the same), which TRAI has considered during the recent revision of IUC (made applicable from February 1, 2005).
It is not clear whether this was at the behest of state-run BSNL, complaining about separate trunk groups, or any additional deficit which came to the notice of the regulator.

Mahesh Uppal: While my response should not be seen as a clean chit for the ADC regime, which is full of anomalies and is in general quite unsatisfactory, there is a point in what TRAI is proposing. If the call uses the long distance network, it is only fair that it is treated as any STD/ILD call and the appropriate ADC charged.

Although the regulator claims that cellular operators have enough margins to absorb the increase, do you believe this charge will be passed on to the end-user?

S.C. Khanna: Tariffs in India are the lowest in the world. We provide affordable mobile service in India. By imposing this extra levy, customers will be discouraged to use mobile phones while roaming. Therefore, there is no case for imposing this extra ADC which will be ultimately paid by the subscribers. In fact, one of our members is not charging any national roaming charges.

T.V. Ramachandran: ADC is a pass-through levy that is collected by the service providers from the consumers and passed on to BSNL.
Imposition of an access deficit charge on local roaming calls (that is, calls made by the roamer within the visited network), which otherwise attracted no ADC levy, would definitely increase the cost of roaming and would not be in the consumer's interest. It may be noted that, while cellular operators recently reduced roaming charges by 33 per cent, the regulatory action is actually burdening the user with a new cess!

Archana Sasan: There is a likelihood that cellular operators will pass on this additional burden to the customer if TRAI does not revoke its recent notification.

Rajat Sharma: Since the roamers are already paying ADC on calls to the PSTN, the only additional impact will be on mobile-to-mobile calls.International roamers are as it is charged very high rates; hence, operators can perhaps absorb the necessary charges.

Mahesh Uppal: It probably will. The reason is that, the nature of roaming services worldwide is such that there is effectively no competition as far as the user is concerned. Subscribers who need roaming can only do so on terms and conditions imposed by their own operators and cannot take their custom elsewhere, even if the price charged by their operator is high. If another operator offered lower roaming charges, that service could be used only if the customer was willing to cancel his current subscription, change his phone number and accept the new operator's other tariffs. This is usually not an attractive prospect.

Will it significantly affect the revenues generated from roaming subscribers?

S.C. Khanna: No comments.

T.V. Ramachandran: At this juncture, it is difficult to estimate or quantify the impact of this on roaming revenues. However, the core issue is not the quantum or impact of this additional levy, but the fact that the same has been introduced for extraneous considerations and in a unilateral and non-transparent manner.

Archana Sasan: It may not significantly affect the revenues generated from the roaming subscriber.

Rajat Sharma: ADC on national calls whether local or STD is uniformly billed at 30 paise per minute, whereas international roamers are billed at very high rates, therefore it is unlikely that this is going to significantly impact the revenues generated from roaming subscribers.

Mahesh Uppal: The effect should be marginal. Roaming subscribers are usually business users and/or are perhaps better off. They may be less price sensitive than the ordinary user who typically does not avail of roaming services.

Will the redefining of the Telecommunication Interconnection Usage Charges Regulation, 2003 make any major difference to the roaming services provided by operators?

S.C. Khanna: The definition of roaming subscribers for ADC purposes is not a logical definition and is discriminatory. It is feared that it may have major implications on the routing and cost of calls.

T.V. Ramachandran: In this regulation, TRAI has stated that local/intra-circle calls made by national and international in-roamers in the visited network will be deemed to be national long distance calls and incoming international long distance calls for the purpose of ADC.

The TRAI definition is completely contrary to commonly accepted call routing definitions as per licence and other agreements as a call which is initiated and completed within the visited service area. This is being treated as a long distance call, when in fact there is no long distance call taking place. Furthermore, it is apprehended that such redefining of calls could have other unforeseen implications that cannot be envisaged at this stage.

Archana Sasan: The recent amendment to the Telecommunication Interconnection Usage Charges Regulation, 2003, may not make any major difference to roaming services provided by service providers. Moreover, the fluctuations in call tariffs have to be in compliance with the prescribed ceiling.

Rajat Sharma: It is unlikely to make any major difference because any future revision of the IUC by the regulator is only likely to bring down the ADC impact.

Mahesh Uppal: It is unlikely to make a big difference. I guess the charges may rise in the short run.

Are the cellular operators likely to contest this before TDSAT?

S.C. Khanna: No comments.

Archana Sasan: We understand that the cellular operators have already contested the new notification with TDSAT on April 27, 2005.

Rajat Sharma: Cellular operators will have a point in contesting the move since technically a local call can never be termed as a long distance call nor outgoing local calls be termed as incoming international calls.So, playing with fundamental definitions of the call scenarios could lead to potential disputes in the future. Cellular service providers may contest the order on these technical issues.

Mahesh Uppal: It seems unlikely.

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