Cut Fees to Spur Investment, India's Telecom Regulatory Authority Says

Lower the price of some desired product and consumer will buy more; raise the prices and consumers will buy less. That is the economic logic behind zero rating of apps and government taxation and fee policies as well.

So barring zero rating and sponsored apps will reduce demand and usage of the Internet. Likewise, limiting licensing fees for fixed network infrastructure will spur investment in facilities.

In fact, lower prices undoubtedly already have boosted high speed access adoption in India. Entry level tariffs for broadband services have dropped “drastically” (an order of magnitude, or 10 times) from Rs. 1500 per month (US$24) in 2004 to around Rs.500 a month (US$8) in 2014.

Most service providers charge a monthly rental between Rs.200 (US$3) to Rs.1600 (US$26) for a broadband connection (depending on speed), TRAI says.

In an effort to spur adoption by customers and investment by suppliers, the Telecom Regulatory Authority of India has asked the government to exempt fixed line broadband service from license fees for at least five years. That would have the effect of stimulating consumption by enabling lower prices.

But there are other obstacles as well. In a discussion of delivering broadband quickly, TRAI noted that “right of way” charges are the “single biggest impediment to the adoption of wire line technology for access networks.”

Also, “civic authorities have imposed stringent punishment on the erection of towers.”

In other cases, the time required to process applications is an issue. “Procurement of satellite capacity on foreign satellites through Department of Space (DoS) often results in long delay and increase in prices due to some process flaws,” said TRAI.

Similar bureaucratic issues surround the Bharat Braodband Network Limited (BBNL), the entity  set up by the Government of India to create a National Optical Fibre Network (NOFN).

TRAI also recommends allowing cable TV operators to provide high speed access. There are some 97 million Indian homes connected to cable TV networks, and a great proportion of those homes are in rural areas most in need of high speed access.

Perhaps 24 million of those homes are served by networks capable of supporting data services, TRAI estimates. It is possible the incremental cost of upgrading for 50 Mbps could be as low as Rs. 12,500 (US$200).

At least at the margin, the costs of deploying fixed network infrastructure are aided if licenses, permits and other processes are streamlined.

The "cost of laying fiber in some cities is as high as Rs 1.92 crore (about US$308,000 million per kilometer or $493,000 per mile) for a kilometer apart from cost of fiber,” said TRAI Chairman Rahul Khullar. “The fiber itself costs Rs 65,000 a kilometer (about US$1039 per kilometer, or $1662 per mile).”

“This issue needs to be resolved otherwise who will lay fiber," Khullar said.

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