Trai recommends entry fee cut for mobile, other telecom service licences

Telecom regulator TRAI on Tuesday recommended a cut in the entry fee for mobile and other telecom service licences, and favoured merging of bank guarantees, in a bid to facilitate entry of new players and promote ease of business for existing ones.

In a sweeping set of recommendations, the sector regulator has mooted that the entry fee for Unified Licence (UL) in case of access service be halved, which along with suggestions of merging bank guarantees and other measures will "facilitate the orderly growth of the sector".

The measures will spur investment and growth, and in effect improve the quality of service and enhance consumer welfare, according to the Telecom Regulatory Authority of India (TRAI).

"Entry fee for following UL authorisations should be rationalised...Access service from Rs 1 crore to Rs 50 lakh for each telecom circle/ metro area; from 0.5 crore to 25 lakh for J&K and North east each," TRAI release said.

For National and International Long Distance, TRAI has recommended that the said fee be reduced from Rs 2.5 crore to Rs 50 lakh, while for Public Mobile Radio Trunking Service (PMRTS), it suggested reduction from Rs 50,000 to Rs 20,000 for each telecom circle/metro area.

For internet service providers in the national area, TRAI recommended reduction in entry fee by a third - from Rs 30 lakh to Rs 10 lakh. For ISP category B it recommended reduction from Rs 2 lakh to Rs 50,000 for each telecom circle, and Rs 25000 for Jammu and Kashmir and North-East each.

TRAI has also recommended no entry fee at the time of renewal of licence.

"For Unified License, Financial Bank Guarantee (FBG) and Performance Bank Guarantee (PBG) should be merged into a single Bank Guarantee for securitizing the dues, to cover the violation of license conditions and to ensure the performance under licence agreement," TRAI release said summarizing the recommendations made to Telecom Department.

TRAI recommended the merging of FBG and PBG for Mobile Number Portability license, into a single Bank Guarantee, and favoured submission of electronic bank guarantee (eBG) for ease of doing business.

"In an environment of rapid technological transformation in the telecommunications sector, in order to facilitate the orderly growth of the telecom sector and Ease of Doing Business, TRAI has made recommendations to the Government for reducing the entry fees across various license authorisations and the merging of bank guarantees," TRAI said.

TRAI said the reduction in entry fee is expected to lead to the entry of new service providers in the market, increase investment and enhance competition in telecom sector.

The merging of bank guarantees will encourage ease of doing business and enable licensees to make investments in the sector thereby ushering the growth in the sector.

Both these measures will improve the quality of service and enhance consumer welfare, TRAI said.

"The Authority has also recommended no entry fee at the time of renewal of license. Such a move will ease the financial burden on existing, as well as new entrants, and will be beneficial for UL (VNO) licensees especially," it explained.

In the telecom licences parlance, Entry Fee is a fixed one-time amount that prospective entrants must pay to enter a market. Entry Fees are typically non-refundable and constitute start-up costs for a firm.

A Bank Guarantee is a type of financial instrument to safeguard the interests of the Government as it ensures that the licensee pays its dues on time and fulfils their obligations as per the terms and conditions prescribed in the license agreement.