Dialling fair play

Most customers of private telecom firms across the country probably will not have noticed that 0.75 per cent of their monthly bill is passed on, largely to the state-owned Bharat Sanchar Nigam, in the form of an Access Deficit Charge (ADC). This is to compensate BSNL for charging its fixed-line customers below-cost tariffs. When the ADC regime comes to an end in April, it will mark the end of one of the most discriminatory regimes in the country's telecom history. In the five years that the ADC has been in existence, customers of non-BSNL networks have paid the company Rs 20,000-25,000 crore through a surcharge on their calls. Even today, international callers to India, on any network, have to pay Re 1 extra per minute on their calls by way of the ADC. In the initial years, ADC charges were in the 30-40 per cent range on national long distance calls, and even more on international ones. Apart from being unfair, this caused huge pricing distortions because the high ADC on international and national long distance encouraged the mushrooming of a big grey market as companies tried to disguise their international calls as local ones to avoid paying the ADC. Even Reliance Infocomm was caught doing this some years ago. Cheating on ADC, during that period, provided a competitive edge as Reliance, for instance, was able to provide calls to subscribers at rates which were far lower than what others (who passed on the ADC charges to their customers) charged.

The other problem with the ADC regime was the opaque manner in which it was calculated. In May 2003, for instance, the Telecom Regulatory Authority of India (Trai) had estimated that the amount required from ADC was Rs 13,000 crore. But Trai had calculated BSNL's per line operational costs, and astonishingly enough forgot to deduct the revenues it earned on these phones in order to arrive at the loss figure. When this was pointed out a few years later, Trai reduced its estimate to about a half! In June 2004, Trai came out with an ADC requirement estimate of between Rs 1,402 crore and Rs 3,436 crore (depending upon whether BSNL charged Rs 200 or Rs 156 as rental from its customers). Then, in January 2005, Trai came up with a final order saying the ADC would be Rs 5,300 crore! In short, there was never any scientific testing of the numbers put out by Trai.

Equally problematic was the fact that while private telephone firms said BSNL was using this money to subsidise its other operations, Trai has never been able to show that this was not the case. So the ADC regime meant that the private telcos were in all probability funding their competition. Now, since the end of the ADC era will also mean that the grey market will shrink, that is another piece of good news for firms in the international long distance market. For the country's BPO operators, for whom cutting costs is becoming vital, ending the ADC regime will be a godsend. Happy New Year!