Trai to phase out ADC, call rates set to fall

BSNL may be paid Rs 2,000 cr from the USO fund as compensation.

Telecom call rates in India are set to fall marginally with the Telecom Regulatory Authority of India (Trai) deciding to phase out the access deficit charge (ADC) on domestic calls from April 1, 2008.

The levy goes into a corpus that compensates telecom operators for offering services in rural areas, which are not considered profitable.

The ADC waiver will adversely impact Bharat Sanchar Nigam Ltd's (BSNL's) rural expansion, which gets more than 90 per cent of the fund.

However, it has recommended that BSNL be paid Rs 2,000 crore from the Universal Service Obligation (USO) Fund for three years to compensate the company for its wireline obligations in rural India.

The USO fund is topped up from a share of the revenue that private telecom operators pay the government to subsidise rural telephony operations. The private domestic operators paid BSNL around Rs 600 crore in the form of ADC last year.

The regulator has also slashed the ADC on international long distance (ILD) calls to 50 paise from Re 1 on incoming calls. Even this reduced ADC on international calls will be phased out in September. However, this is not paid by the domestic customers.

Says TV Ramachandran, secretary general of the Cellular Operators Association of India (COAI): "The ADC is 0.75 per cent of the total revenue, so the bill amounts will go down only marginally."

Asked if this would impact BSNL, a senior member of the association said, "Trai has given them a bonanza of Rs 2,000 crore from the USO Fund, which is also topped by us. So, they should be happy."

The country's largest private sector operator, Bharti Airtel, welcomed the move. "We welcome this announcement by Trai and congratulate the government for taking this positive decision. We also welcome the phasing out of ADC on ILD incoming calls. As a leader in the telecom sector, we are committed to pass on the benefit of this relief to the customers, especially in rural areas," said a company executive.

A senior BSNL official said the move would hit them hard as the company was planning to deepen its rural foray.