Int’l bandwidth reselling may not lead to price cuts

TRAI’S 6% REVENUE SHARE PLAN FOR RESELLERS IS DOUBLE TAXATION: STAKEHOLDERS

TELECOM regulator Trai’s move to allow the entry of resellers in the international bandwidth segment is unlikely to lead to price cuts. This comes as many stakeholders have pointed out that Trai’s recommendation to impose a revenue share of 6% for resellers amounts to double taxation as the international long-distance operators (from whom resellers buy bandwidth) have already been subjected to the same tax. Currently, only International Long Distance Operators (ILDOs) such as Bharti Airtel, Reliance Communications, BSNL and VSNL are permitted to sell international bandwidth, also known as International Private Leased Circuits. Explains Orange Business Service’s (France Telecom) Country Manager, Avnish Datt: “Overall the proposal to allow resellers is progressive in spirit and theme, but the double taxation factor is regressive. It appears that the objective of the move is to maximise taxation rather than maximise progression, innovation and enable these services to reach a larger base.” Reach (in which Australian telecom major Telstra has a 50% stake), in its communication to Trai’s on the issue has pointed out the importance of low annual fees to the success of the resale market: “In Singapore it is less than US$3,000 (annual), Hong Kong less than US$100 (annual) and Philippines less than US$1,000 (one time),” Reach said. The company has also added that a high licence fee regime will create barriers to market entry in the resale segment, and consequently defeat the fundamental goal of resale, which is to promote competition and service innovation to the benefit of end users. Endorsing the same line, AT&T, replying to Trai’s consultation process on the entry of resellers had said that the authority should establish a consistent methodology to ensure that the 6% AGR licence fee is charged only once, by the final licensee selling a service to an end-user. According to the Asia Pacific Carriers’ Coalition, the entry of IPLC resellers can substantially increase competition in the marketplace, ‘but only if it is not burdened so as to disadvantage the reseller in comparison to the facilities-based entities. “APCC respectfully suggests that double taxation must be avoided and that the Indian marketplace will be best served by avoiding a large annual licence fee on Resellers. Either condition will substantially discourage would-be market entrants,” it said.

CUTS TWICE
International long-distance operators are already in the tax net
Only Bharti Airtel, Reliance Communications, BSNL, VSNL can sell international bandwidth Players view the double taxation factor as being regressive
Their refrain is that the move is aimed at maximising taxation

Courtesy: EconomicTimes
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