The Hindu : Business : Consumers to benefit from cut in ADC rates

Online edition of India's National Newspaper
Friday, Jan 07, 2005

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Business

Consumers to benefit from cut in ADC rates

By Ramnath Subbu

MUMBAI, JAN. 6. The announcement by the Telecom Regulatory Authority of India (TRAI) to cut the Access Deficit Charge (ADC) payable by cellular operators is yet another benefit coming the consumers way.

"The high ADC rates payable by the operators were a barrier to their reducing rates further largely because they do not own any of the fixed lines where calls originate or terminate,'' said Kobita Desai, Principal Analyst, Gartner India. The cut in ADC rates range from 60 per cent for outgoing ISD (cut from Rs. 4.20 to Rs. 2.50) and Rs. 4.25 to Rs. 3.25 for incoming ISD to almost 70 per cent for domestic consumers where the cut is from 50-80 paise to 30 paise. "It is quite likely that not all players will be able to pass on the full benefits of the cut for effective rates to consumers,'' said Ms. Desai.

Carriers pay the ADC when a call from the cellular network originates or terminates on a fixed line network for usage of the network. Also, ADC is being collected to subsidise the running of the network and will benefit BSNL. Going forward, it must be recognised that BSNL is the only carrier that is fulfilling its Universal Service Obligation (USO) for providing connectivity to unviable areas and anyway, carriers pay 5 per cent of their revenues to a USO Fund which was set up with this explicit purpose.

Vikram Mehmi, CEO, Idea Cellular said, "For us, a large percentage of our revenue is local so we are only marginally affected by the cut. However, I am not in favour of a separate ADC as it is only an incremental burden on the consumer. The TRAI had anyway recommended doing away with it.''

T. V. Ramachandran, Director General, Cellular Operators Association of India (COAI), while welcoming the announcement, lamented that it was "too little, too late. The arbitrage deficit is still continuing.''

Owing to technology, the cost of deploying a fixed line is around Rs. 25,000 compared to Rs. 5,000 for a GSM cellular line and around Rs. 8,000 for a CDMA cellular line. "The cost of network deployment has also come down and so the USO Fund can be used to service the social obligation to run the network,'' said Ms. Desai who added, "For carriers to move away from circles of influence (metro circles), there is a need to have them use the USO to make it more attractive for them.''

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