India Mobile Battle Over Revenue Recalls U.S. Battle over Common Carrier Regulation

Adjusted gross revenues taxes represent four percent to eight  percent of India mobile operator gross revenue. But there had been a dispute between mobile operators and the Indian government about the definition of gross revenue, resulting in a 14-year battle that ended in 2019 when the highest Indian court upheld the government’s definition. 

source: Bloomberg

At stake is possible sustainability of Vodafone-Idea, as the firm does not generate enough cash flow to pay the owed amounts. Bharti Airtel owes a sum representing perhaps three full quarters of cash flow. The owed sums also represent something like a fifth of Airtel and Vodafone Idea debt. 

The government said AGR included all revenue, from all sources. Operators sid it applied just to connectivity revenues earned from communications service supplied to customers, and not to any other sources, such as interest income, for example. 

The disagreement is reminiscent of the distinction between regulated, rate-controlled telecom service and non-regulated services supplied by U.S. telcos. That dispute also concerned the regulation--and hence taxes upon--new services, as distinct from legacy services.

That important difference grew in 1960 as then-monopolist AT&T began to offer data processing services, with a Federal Communications Commission decision referred to as Computer I. The decision established a principle that data processing would not be regulated under common carrier rules. 

The issue was further clarified in 1979, when a regulatory distinction was drawn between “basic” service (common carrier regulation) and “enhanced” service (computing or data services, for example, which are unregulated) by the Second Computer Inquiry, generally referred to as Computer II. 

If a service provider offered a pure transmission over a path that is transparent in terms of its interaction with customer supplied information, the FCC considered this to fall into the basic service category. 

Basic service includes processing the movement of information and computer processing, which includes protocol conversion, security, and memory storage. The category of basic service is everything from "voice telephone calls" to a phone company's lease of private line service. 

If a carrier offers services over common carrier transmission facilities that employ computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information; provide the subscriber additional, different, or restructured information; or involve subscriber interaction with stored information, the FCC considered that to fall into the enhanced services category, not governed by common carrier rules.