The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has ruled (.pdf) in favour of the Internet Service Providers Association of India (ISPAI), in their case against the Department of telecom’s decision to levy a uniform annual license fee for providing pure-play Internet services.

The tribunal, in its verdict said that the clause in the DoT order which said that the license fee would include all types of revenue from Internet services and that revenues from Internet services will also be included provisionally in the definition of applicable AGR provisionally for ISP-IT category till the government takes a final decision, cannot be sustained. The tribunal also said that the Central government should have considered whether UAS service licensess and ISP licensees had a level playing field, and it should have taken appropriate measures in that behalf but the licensees could not have been asked provisionally to pay on the basis of the AGR, when the final decision was to be taken at a later stage.

Recommendations can’t be provisional: It said that the recommendations should not have been provisional and the DoT should have issued the directive,  subject to the recommendations made by the TRAI. It’s noteworthy that in 2007 the DoT had allowed all ISPs to offer internet telephony services and a license fee of 6% of AGR was imposed on ISPs except on the revenue earned from provisioning of pure Internet access services.

DoT Order: In its order dated 29th June 2012, the DoT  had decided to levy a 4% license fee on ISPs’ gross annual revenues, starting 1st July 2012, which might be increased to 8% by next year to bring in a uniform license fee regime and counter the under-reporting which was caused by telecom operators’ differential revenue share payable by them against their multiple licenses (some telcos operated IS businesses under different subsidiaries taking an ISO license). It had said:

‘Revenue for the purpose of licence fee for ISP Category shall provisionally include all types of revenue from Internet services, allowing only those deductions available for pass through charges and taxes/levies as in the case of access services, without any set-off for expenses. Revenues from Internet services will also be included in the definition of applicable AGR provisionally for ISP-IT category till government takes a final decision after obtaining TRAI recommendations in this regard

The ISPAI had then challenged the order in the TDSAT saying that the license fee charged on the AGR should not include revenues from pure Internet services.