TRAI recommends Rs 500 cr. entry fee for NLD operations

BANGALORE: The Telecom Regulatory of India (TRAI) has recommended the opening up of the National Long Distance (NLD) communications to private competition on payment of an entry fee of Rs 500 crore and an annual licence fee not exceeding five per cent of revenues. TRAI has also said that the entrant should have a combined net worth of more than Rs 2,500 crore and experience in the business.

The TRAI has also given the Government an option to levy a differential service tax on NLD service in addition to the annual licence fee. The Authority has recommended free competition with open entry subject to selection criteria and network rollout obligations for licensing of NLD operators (NLDOs). Of the Rs 500 crore entry fee proposed, Rs 100 crore would be recovered in cash, which would be non-refundable and the balance Rs 400 crore would be a refundable deposit.

The refundable deposit, will be released in favor of the licensee subject to phased completion of the network roll-out, where Rs 100 crore would be given on completion of phase I, Rs 100 crore on completion of phase II and Rs 200 crore on completion of phase III. TRAI also recommended that a 20-year licence period that is extendible by 10 years at a time should be given. NLD licences will be issued only at the national-level and NLDOs will be allowed to carry intra-circle traffic. Existing access providers will be eligible to become NLDOs on the same terms and conditions as applicable to greenfield entrants through a legally separate entity.

NLD service providers will not be allowed to set up STD PCOs, which will continue to be the domain of the access providers. TRAI also said that, access providers would have to ensure that at every STD-PCO, the consumers are given the choice of selecting any NLDO for the carriage of their long-distance call. For infrastructure providers of NLD services, the authority has proposed that they may be divided into two categories. Category I will include those who will provide assets such as dark fibres, right of way, duct space, towers and buildings, etc. Category II would cover infrastructure providers who make available end-to-end bandwidth.

The TRAI has recommended that there should be no formal licence fee for category I infrastructure providers. Those falling under category II may, however, be licensed on simplified terms with no entry fee but an annual licence fee not exceeding 5 per cent of their revenue from leasing of bandwidth.

The authority has recommended facilities-based competition in the initial phase of NLD market liberalization. NLDOs may lease infrastructure and bandwidth from infrastructure providers. But resale of NLD services can be introduced only after three-to-four years when the market has matured.

The TRAI Chairman Justice S.S. Sodhi said that a higher entry fee would eliminate non-serious players from bidding for the services. But since the country's tele-density is very low, it is essential to have a reasonable licence fee to attract investment. Justice Sodhi said that interconnection arrangements among NLDOs and access providers will have to be commercially negotiated along with revenue-sharing arrangements subject to the TRAI's regulations.