Trai proposes over 50% cut in entry fee for licenses, rejects telcos call to scrap BGs Read more at: https://economictimes.indiatimes.com

The Telecom Regulatory Authority of India has proposed slashing entry fees for various licences by over 50%, a move aimed at promoting entry of new players in the sector. The authority, however, has proposed to continue with the practice of submitting bank guarantees (BG) for various licences, rejecting telcos' calls to scrap them.

All the three private telecom operators wanted the BGs scrapped, so that more working capital could be freed for expansion of mobile broadband networks. The telcos had highlighted to Trai that BGs should be discontinued as they don’t serve any purpose in securing government revenues but add imposing costs on them.

The regulator, however, felt that it was important to have some sort of a mechanism to guard against the vagaries of the telecom market. “Having bank guarantees has been such a time-tested mechanism,” Trai said in its recommendations on ‘Rationalization of Entry Fee and Bank Guarantees’ released Tuesday.

But the regulator has proposed to merge financial bank guarantee and performance bank guarantee, a move that will reduce the compliance burden of existing firms. “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,” Trai said.

When it comes to BGs, Trai took note of the telecom reforms announced in September 2021, wherein the requirement for submitting BGs was reduced by around 80%. Currently, BGs are submitted to the Department of Telecommunications (DoT) and in case the statutory dues like licence fees and spectrum usage charges are not paid on time, the government has the option to encash the BGs to secure payments.

To enhance the ease of doing business, the process for submission of electronic BGs should be adopted, Trai said.

Regarding entry fees, the telecom operators had proposed to continue with the existing structure, saying any reduction may open the sector to non-serious players and hamper healthy competition.

But the regulator felt the entry fees should be rationalised.

“Entry fee may have positive outcomes by deterring non-serious entry. However, entry fee may also act as a constraint by limiting competition. Therefore, it is desirable that the entry fee is set at a level that balances this trade-off,” Trai said.

Therefore, the regulator has recommended reduction in entry fees for various licences and authorisations. It, however, has decided not to change any entry fee for global mobile personal communication by satellite (GMPCS) and VSAT authorisations as the segments are expected to expand for the provision of satellite broadband services.

“It is expected that reductions in entry fee will lead to the entry of new service providers in the market, increase investment and enhance competition in the telecom sector,” Trai said.

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

Further, the regulator has recommended no entry fee for M2M, audio conferencing and voice mail service, etc. Entry fee for unified licence (UL) authorisation for access service has been reduced to Rs 50 lakh from Rs 1 crore per telecom circle, while NLD and ILD service has been reduced to Rs 50 lakh from Rs 2.5 crore among others.

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