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Jio objects to TRAI proposal to give fixed line broadband license fee concessions as DBT

“We are surprised at the need of reviewing a 6-year old recommendation by the Authority, especially when all the conditions precedent and justifications for the recommendation remain equally valid and relevant,” Reliance Jio said in its response to the Telecom Regulatory Authority of India’s supplementary consultation paper on enhancing access to broadband. “A rethink on the issue, at this stage, with an entirely new perspective of evaluating the possibility of misappropriation by Access Service Providers and exploring the possibility of passing the benefits through a Direct Benefit Scheme (DBT), can have no other effect than delaying the implementation of much needed incentives to revitalize the FLB [fixed line broadband] sector.”

The supplementary consultation was announced on May 19 after the Department of Telecommunications raised concerns that if fixed-line broadband players were given license fee exemptions as an incentive to proliferate broadband, there would be “misuse by the licensees,” whence the suggestion that customers be given subsidies for broadband connections like in the case of LPG. “This paper raises altogether new and important policy issues in the areas of extending financial incentives to TSPs, its suitability and robustness of monitoring, and exploring the possibilities of leveraging DBT in proliferating FLB. Since most of these issues are being put up for deliberations for the first time, this consultation paper (CP) should not be treated as a supplementary CP but as a pre-CP to comprehensively deal with the issue,” Jio said in its response (emphasis theirs).

‘No incentives for fixed line broadband’

  • Uneconomical business model even in cities: “In absence of any effective incentives for laying FLB networks, the FLB networks have failed to support the broadband penetration in the country. Consequently, FLB market remains severely underdeveloped in our country due to an unaffordable cost structure that leads to an uneconomical business model, even in the urban/semi-urban areas,” Jio said in its response.
  • Incentive should go directly to service providers: “We do not find any justification for this proposed change in approach and firmly believe that the costs, infrastructure requirements and gestation period of the FLB sector warrant direct and indirect incentivization to service provider only,” Jio said, “as this alone will help to create an environment for investing in fixed infrastructure by ploughing back funds for expanding and upgrading the Fixed Line Network. This was also recognized under the National Digital Communication Policy (NDCP-2018), which clearly envisaged “Reviewing the rationalization of license fees on fixed line revenues to incentivize digital communications” as one of the strategies for ‘Catalyzing Investments for Digital Communications sector’.”
  • Fixed line broadband and mobility are different: In response to a TRAI concern that license fee exemptions to fixed line broadband providers would tilt the level playing field, Jio said, “Fixed line service does not provide mobility to the end-user and hence is not a substitutable service. Further, the fixed-line services do not use spectrum, which is a scarce natural resource, in fact it helps in conserving the same.”
  • OTTs should have been regulated earlier: “When it was most apt and urgently required, the Authority did not impose the ‘same service same rules’ principle, in the case of OTT communication services which are substitutable to carrier services of voice and messaging and can be deployed at a fraction of cost,” Jio argued (read about this argument here). In this consultation, though, Jio was only making this point for a narrow reason: to argue that “same service, same rules” should not be used as a pretext to deny license fee exemptions to telcos.

‘Misappropriation not likely’

  • Jio argued that misappropriation of funds was not likely, as “the nature of FLB and wireless broadband is distinctly differently owing to area of coverage of the two. Hence the concerns of misappropriation do not hold true.” The company added that “segregation of revenue between Fixed Line and Wireless Services is already allowed under the license, assessed by CCAs/DoT, and audited by Government/CAG for the purpose of levying the Spectrum Usage Charge.”
  • FLB DBT not realistic: “The pricing and input costs are entirely different in LPG [cylinder subsidies] and telecom. Direct Benefit Transfer in LPG has a controlled price mechanism and all PSU service providers offer the service at the same subsidized rate and it is easy to fix a DBT rate. This is not possible in the case of FLB, as there will be a lot of variance in the costs due to different technologies or cables such as OFC or copper cables or Right of Way costs which vary across local bodies as well as can also be based on the type of road surface/digging technology, the scale of business etc., leading to different tariffs offered by different service providers under forbearance regime for the tariffs, thereby requiring differential DBT, which would anyways be not acceptable to all,” Jio argued.

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I cover the digital content ecosystem and telecom for MediaNama.

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