Trai to review tariff for Domestic Leased Circuits

Telecom Regulatory Authority of India (Trai) has come out with a consultation paper on review of tariff for Domestic Leased Circuits (DLCs).

The DLCs carry data and voice traffic of customers from one place to another using networks of telecom service providers (TSPs), without any interconnection with public networks. Enterprises, particularly financial institutions, business process outsourcing (BPO) organizations etc. having their offices spread out in the country lease-in bandwidth capacities (DLCs) from the TSPs. Besides, TSPs who do not own sufficient transmission infrastructure in any geographical area also lease-in DLCs in order to provide various telecommunication services to their customers' viz. voice telephony, Internet etc.

Trai has assayed public opinion on different approaches that should be used for determining ceiling tariff for DLC service and bringing modern technologies under tariff regime etc. Stakeholders are requested to furnish their written comments by 14th April, 2014 and counter-comments by 21st April, 2014 to the Advisor (F&EA), Trai.

DLCs form crucial building blocks for e-commerce, e-governance, Internet access for the masses, BPO, IT and ITES industries. In the financial sector, banks are automating and expanding their branch networks to smaller cities through the use of DLCs. In the healthcare sector, collaborative sharing has become possible through the use of DLCs.

In the intervening period since the year 2005, the Indian telecom services market has witnessed a remarkable increase in the supply and demand of DLCs and significant advancements in the transmission technologies. As a result of these factors, the market for DLCs in the country has undergone several changes.

However, prevailing Tariff is significantly below the ceiling tariff prescribed by the Authority, particularly on the dense routes: Most of the service providers use the ceiling tariffs prescribed by the Authority through the Telecommunication Tariff Order (TTO) as their base tariff and offer discounts depending on the bandwidth, distance, location, volume of business etc. The discounts with respect to the ceiling tariffs are generally much higher on the dense routes.

Given the investment intensive nature of such infrastructure, the high growth has been witnessed only on those routes on which economic activity is very high. As a result, the supply and demand of transmission bandwidth have not been uniform across the country. In pockets like Assam, North East and Jammu & Kashmir, the supply lags demand. As a result, these geographical regions have the presence of only a few NLDOs and relatively scant transmission infrastructure is available there. Owing to the low competition, the tariffs of the DLCs on such routes and regions are comparatively much higher. It has been observed that, on the routes and areas characterized by low competition, the customers face a tariff at par with the Trai's ceiling tariffs as the TSPs generally keep their base tariffs for DLCs equal to the ceiling tariffs prescribed by the Authority. Per unit cost of providing DLC has reduced owing to advancements in the transmission technologies and increased demand particularly on the dense routes.

Trai said that the old tariff order does not cover modern technologies that have brought efficiency in DLC services and resulted in lowering cost of services

The Trai said that the tariff framework for DLC should be such that the tariffs are affordable to the customers and in turn can spur demand from customers. At the same time, there should be sufficient incentive to TSPs for further investment.

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