TRAI issues consultation paper to bring SUC under revenue sharing model for ISPs

The Telecom Regulatory Authority of India (TRAI) on Friday issued a new consultation paper seeking to bring annual fee on internet service providers for using airwaves aka spectrum usage charges under the revenue sharing regime.

At present, the SUC applicable on Internet Service Providers is based on a formula, which factors in number of frequencies/carriers, the maximum distance over which the wireless network would operate and the carrier bandwidth.

In the consultation paper, the regulator sought the comments of stakeholders on whether there is a need of introducing SUC based on the percentage of Adjusted Gross Revenue (AGR) for ISPs or should the existing formula based spectrum charges continue. Under the proposed arrangement, SUC will be calculated as a percentage of AGR based on amount of spectrum held along with minimum floor level AGR (i.e. minimum presumptive AGR).

"The underlying principle in levying the SUC is the use of spectrum by ISPs in providing internet service to the subscribers. Therefore, in this context, a proper mechanism is needed where revenue generated from the use of spectrum and revenue generated without using spectrum could be easily identified," said Trai in the consultation paper. "This is a prerequisite to any change in existing SUC regime and shifting to AGR based SUC charging.

The move is likely to meet with resistance from ISPs as it increases the cost of delivering broadband for them.

"This is moving in a very wrong direction, because for ISPs spectrum is assigned administratively. This will delay the plans of ISPs, which are in the process of laying down the infrastructure for expanding services by increasing the cost of delivering high speed internet," said Rajesh Chharia, president of Internet Service Providers Association of India. "The increased cost will be passed to consumers which will then undermine the objective of Digital India, which aims to bring rural users online."

Trai said the AGR based spectrum charges are simple in implementation, as opposed to current link-to-link basis charging, which is relatively complex for the government as well as the operators, as the number of links vary in a dynamic manner.

Trai has also asked stakeholders, if AGR based SUC is introduced, whether the percentage of AGR should be uniform for all ISP licenses or should it be different, based on factors such as revenue and spectrum-holding.

The regulator has invited comments on introducing minimum presumptive AGR in ISP license for the purpose of charging SUC as well as on the value of minimum presumptive AGR. At present, there is no minimum presumptive AGR in ISP license or Unified Licence (ISP authorization) for the purpose of License Fee or SUC, the paper said.

According to the government data, there were 262 ISP licenses as on 31 December 2015. During the years 2011-12, 2012-13 and 2013-14, DoT received Rs. 71.52 crore, Rs. 95.65 crore and Rs. 91.85 crore respectively as royalty charges (formula based) from the ISP licensees.