Telecom Commission defers imposing 8% licence fee on Internet service providers

The Telecom Commission has deferred a proposal on imposing an annual licence fee of 8% on Internet service providers (ISPs) as this could lead to a hike in Internet charges and impact the government's ambitious Digital India project.

The Department of Telecom (DoT) Secretary Rakesh Garg, who also chairs the Telecom Commission, at a meeting of the commission last week said the proposal needs to be discussed further as levying an annual fee may lead to a rise Internet tariffs and charges, sources said.

The proposal could hit government's plans to successfully implement the Digital India programme, a pet project of Prime Minister Narendra Modi, they added.

"DoT is of the view that imposing a fee on ISPs could hinder their efforts of connecting the cities and rural area through Internet and that will in turn impact Digital India," sources said.

Digital India is an umbrella programme with an outlay of Rs 1.13 lakh crore, which includes projects that aim to ensure government services are available to citizens electronically and people get benefits of the latest technology.

Earlier this year, sectoral regulator TRAI suggested a new definition of revenue for ISPs on which the government should levy 8% annual fee.

TRAI had suggested a uniform licence fee of 8% of the AGR (adjusted gross revenue) for all ISP and ISP-Internet Telephony licences.

Government levies licence fee on AGR of telecom firms after deducting some components that are not earned from telecom services.

TRAI had earlier also recommended that government levy 8% licence fee from April 1, 2013, but the proposal was deferred then, after questions raised on revenue items that should be considered for calculating the final charges.

Industry body Internet Service Providers Association of India had said the move to increase licence fee on Internet services will adversely affect its target to achieve 175 million broadband connections by 2017 and 600 million by 2020 as it will increase service tariffs.

ISPAI had also said if government includes deduction of bandwidth and lease line charges to pass through than Internet rates will rise only 8%. If not, then cascading effect will be to the tune of 25-30%.

Government's National Telecom Policy 2012 aims to provide affordable and reliable broadband-on-demand by the year 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand.