New telecom law should suspend USOF levies, say industry bodies

A new legal framework for the telecom sector should freeze fresh levies from telcos for the Universal Service Obligation Fund, say ASSOCHAM, IAMAI

Leading industry associations such as ASSOCHAM and the Internet and Mobile Association of India (IAMAI) are pushing for the sunsetting of the levy forked out by telcos for the Universal Service Obligation Fund (USOF) or holding it in abeyance until the current available funds are exhausted.

ASSOCHAM and IAMAI have already submitted their views to the Department of Telecommunication (DoT) in response to a consultation paper mooted by the latter on the need for a new legal framework for governing the country’s telecom sector. The DoT had elicited responses and views from all stakeholders.

In its consultation paper, the DoT had pointed out that they were looking at overhauling the USOF and replacing it with a Telecom Development Fund. The move is significant, as telcos pay a substantial 5 per cent of AGR, or around Rs 7,100 crore (based on latest figures, though it has gone up to as high as Rs 10,000 crore in some years), annually to the USOF. The fund currently has a surplus of Rs 58,569 crore which has not been used.    

In a draft note, ASSOCHAM has said that the time has come to end the USOF levy since the private sector has been instrumental in achieving the objectives of rural connectivity by rolling out telecom networks in rural and unconnected areas. Today, rural density has surpassed the objectives laid down in various telecom policies. ASSOCHAM says that while the USO collection has increased, the disbursements have remained low, leading to a substantial accumulated surplus in the fund.

Therefore, it says that a new law should sunset the USO levy, or freeze the levy for the next few years until the available funds are exhausted. The USOF can then be restarted with a significantly lower rate and with an increased number of contributing entities.

ASSOCHAM also points out that research and development of new technologies, the promotion of employment and training, and activities unrelated to the objectives of the fund should be met with other funds of the government.

IAMAI has put forth a similar view, stressing that only half of the funds in the USOF have been disbursed for its primary objective, which was to enable connectivity in rural India.

And since rural connectivity has been achieved by the private sector, the USO levy should be discontinued, it says.

The two associations have also pitched for resolving the right-of-way (ROW) problem for network rollout, which has slowed down the laying of fibre as well as the fibre backhaul.

ASSOCHAM, in its draft note, has demanded that ROW should be legally enforceable and non-discriminatory, with ROW charges to be based on the actual cost of restoration. It also wants ROW permissions to be exempt from GST, telecom towers to be classified as plant and machinery, and all state and local authorities brought under the preview of the new law.  

IAMAI, too, has said that the new legal framework should resolve ROW issues by addressing the overlapping regulatory ambit of various central and state authorities. The new law should give legal backing across states for ROW permissions, the installation of telecom towers and small cells, amongst others, it says.

Industry bodies also want the new law to

• Simplify merger and acquisition rules and insolvency procedures
• Be Future-proof 
• Be Competition friendly
• Resolve right of way
• Have Light-touch licensing
• Harmonise with other acts
• Revamp penalties