Trai releases consultation paper on revision of domestic leased circuits' tariffs

NEW DELHI: Telecom Regulatory Authority of India (Trai) has released a consultation paper proposing a downward revision of tariff applicable for Domestic Leased Circuits.

The Authority in its document, Broadband India: Recommendations of Accelerating Growth of Internet and Broadband Penetration (April, 2004) has identified the high prices of domestic leased circuits and international circuits as one of the major hurdles preventing growth of internet and broadband services.

The factors necessitating for such an exercise include the need to bring down the cost of bandwidth in the country to make user industries of bandwidth globally competitive and to promote broadband and internet access, says a Trai release.

The release has listed out some key points in the consultation paper. It says, the cost based leased line tariffs have been calculated using an optical fiber cable system with STM1 as benchmark capacity. The methodology of cost estimation adopted by Trai in this consultation paper is that of a 'bottom-up approach'. The cost of various operators was taken into account for calculating the cost of providing the domestic leased circuit. The revised ceiling tariff for capacities of 2 Mbps and 64 Kbps for 'beyond 500 kms distance' comes to Rs 8,20,000 and Rs 24,000 respectively.

The proposed revision in tariff in respect of 2 Mbps and 64 Kbps for beyond 500 kms distance would mean a reduction of about 63% and 75% respectively from the existing ceiling tariff in respect of these categories.

It is expected that higher capacities i.e. above 2 Mbps will dominate the demand structure in future. Keeping this in view, price multiples for DS-3 and STM1 capacities have been proposed as eight times and twenty three times respectively the price of E1 capacity. This is based on the fact that there are scale economies arising out of higher capacities and also based on the prevailing price-capacity multiples observed elsewhere in other markets.

Towards implementing the initiatives of 'Broadband India', the authority has already issued a consultation paper on 'Fixation of Ceiling Tariff for IPLC'. This consultation paper proposing revision of existing tariff for domestic leased circuits is sequel to the efforts of the authority in reducing the cost of bandwidth in the country, adds the release.

The newly released consultation paper is available on Trai's website ( Trai has requested all stakeholders to submit their comments and views on any or all issues raised in this paper on or before 15 July 2004.

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