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Tag: AGR

  • TRAI asks stakeholders to give views on AGR

    TRAI asks stakeholders to give views on AGR

    NEW DELHI: The Telecom Regulatory Authority of India (TRAI) has asked the stakeholders to give their views on their definition of adjusted gross revenue (AGR).

     

    In a pre-Consultation Paper on ‘Delinking of license for networks from delivery of services by way of virtual network operators,’ TRAI has also sought the views by 17 September on what will the model of agreement be between Network Service Operator (NSO) license and Service Delivery Operator license created under the draft National Telecom Policy 2011.

     

    It has asked if this would be left to the market or regulated like mandating NSOs to provide services to SDO licensees and mandating charges etc.

     

    In its Policy, Department of Telecom had said NSOs would be licensed to set up and maintain converged networks capable of delivering various types of services e.g. voice, data, video, broadcast, IPTV, VAS etc. in a non-exclusive and non-discriminatory manner.

     

    SDOs would be licensed to deliver the services e.g. teleservices (voice, data, video), internet/broadband, broadcast services, IPTV, Value Added Service and content delivery services etc.

     

    In its latest reference to TRAI, the DoT has envisaged the entry of Virtual Network Operators (VNOs) for delivery of services by delinking them from licensing of networks.

     

    Virtual Network Operators (VNOs) are SDO licensees who do not own the underlying network(s) but rely on the network and support of the infrastructure providers, telecommunications operators (who are owner(s) of towers, radio access networks, spectrum etc.) for providing telecom services to end users/customers. As these operators do not have their own networks, they are termed as Virtual Network Operators. VNOs can provide any telecom service being provided by the network providers viz. tele-services (voice, data, video), internet/broadband, IPTV, Value Added Services, content delivery services etc. The most popular among VNOs are Mobile Virtual Network operators(MVNOs).

     

    India is a diverse country, large in size and had very poor telecom networks when the government decided to open the sector to private participation.

     

    Therefore, in order to ensure development and proliferation of telecom infrastructure across the length and breadth of the country, the government took a conscious decision that all TSPs would have their own network for providing services to their customers. To meet this end, each TSP was mandated to comply with certain roll-out obligations and even sharing of infrastructure was not permitted initially. To encourage tower sharing amongst operators, the government initiated a project ‘Mobile Operator Shared Tower (MOST)’ in March 2006, and later on, in April 2008 sharing of active infrastructure, except spectrum, was also permitted.

     

    At present, most access providers are integrated operators who have their own infrastructure for both access and long distance services. Having already established their networks, the issue to deliberate upon is whether delinking the network from service delivery will have any effect on the working of these TSPs. The new licence regime has come into existence only about a year back.

     

    In the proposed licencing framework, based on the VNO model, one issue could be whether the existing TSPs, will have to obtain a NSO licence or both NSO & SDO licences on migration to the new licensing regime.

     

    A linked issue for deliberation will be about the necessity of changing the licensing regime at all, at such a short interval since UL was introduced.

     

    At present, there are 7-13 licensees in various service areas. Therefore, another issue for deliberation could be about the need for introduction of more competition in the form of VNOs.

     

    Apart from access services, for other services like V-SAT, PMRTS/CMRTS, GMPCS, it needs to be deliberated whether any business case/revenue potential exists for a standalone Virtual Operator for these services.

     

    In India, the TSPs have infrastructure, including spectrum, which is just about sufficient to cater to their own requirements. Would they really be able to spare their infrastructure for new SDOs, TRAI wants to know.

     

    It can also be deliberated whether the reference of DoT envisaged an entirely new licensing regime or could be considered to mean that a chapter may be added to the existing UL for facilitating licenses to the VNO.

  • One more week to respond to TRAI paper on resolving issue of the controversial AGR for broadcast, telecom

    One more week to respond to TRAI paper on resolving issue of the controversial AGR for broadcast, telecom

    NEW DELHI: The Telecom Regulatory Authority of India (TRAI) has decided to give one last opportunity to stakeholders to respond to its consultation paper on a review of the definition of Gross Revenue (GR) and the permissible deductions to arrive at Adjusted Gross Revenue (AGR) in the context of the National Telecom Policy 2012 in view of a multitude of cases by both telecom and broadcast operators.

     

    Stakeholders have been given one extra week and can respond to the 24 questions raised by the Authority by 8 September with counter comments if any by 15 September. This is being done in view of the important issues involved, but TRAI said no further opportunities would be given.

     

     The Authority will also examine the components of GR, AGR and minimum presumptive AGR, rates of licence fee and spectrum usage charges, formats of statements of revenue and licence fee, and audit and verifiability of revenue and licence fee.

     

    The paper on ‘Definition of Revenue Base (AGR) for the Reckoning of Licence Fee and Spectrum Usage Charges’ will also examine the changes made in the licensing regime, the transition from the administrative allocation regime towards market-determined prices for spectrum, and the conclusion of tenure of many licences. The paper provides the relevant background information on the subject covering various issues involved.

     

    On the definition of AGR specifically, the Authority had in 2012 recommended that only the revenue from the wireless services shall count towards AGR calculation for the limited purpose of calculation of Spectrum Usage Charges (SUC) that would continue to be determined on service area basis, and should be levied only in respect of those service areas where the Licensee holds any access spectrum.

     

    TRAI wants to know whether there is a need to review/revise the definition of GR and AGR in the different licences at this stage; the guiding principles for designing the framework of the revenue sharing regime; and whether the rate of licence fee (LF) be reviewed instead of changing the definitions of GR and AGR, especially with regard to the component of USO levy In the interest of simplicity, verifiability, and ease of administration.

     

    The paper also wants to know whether the revenue base for levy of licence fee and spectrum usage charges include the entire income of the licensee or only income accruing from licenced activities if the definitions are to be reviewed/revised.

     

    It has asked whether LF be levied as a percentage of GR in place of AGR in the interest of simplicity and ease of application, and should the revenue base for calculating LF and SUC include ‘other operating revenue’ and ‘other income’.

     

    The government prepared a draft licence agreement for International Long Distance (ILD) services in September 2000 containing a provision that LF was payable as a percentage of revenue. For the Public Mobile Radio Trunk Service (PMRTS) too, the revenue share regime was made applicable from 1 November 2001.

     

    The definition of AGR has been litigated since 2003. TSPs questioned the inclusion of various components of revenue in the reckoning of AGR as well as the legality of the definition before TDSAT. In 2006, TDSAT, after noting that revenue from non-licensed activities needed to be excluded from the reckonable revenue, asked TRAI to make recommendations on the inclusion or exclusion of the disputed items in the AGR. TRAI made its recommendations on 13 September 2006 and the Tribunal gave its final order in the matter on 30 August 2007 after accepting most (but modifying some) of TRAI’s recommendations.

     

     In the course of finalising the recommendations of the Authority on the reference from TDSAT, the views of DoT were obtained by the Authority through its representative and incorporated in the “Recommendations on components of Adjusted Gross Revenue” dated 13 September 2006. The Authority was informed that the basic rationale adopted by the government while formulating the definition of AGR was that it should be easy to interpret – so as to pose fewer problems in application and less disputes and litigations, and to make it less prone to reduction in LF liability by way of accounting jugglery; and it should be easy to verify.

     

    The TDSAT’s judgment of 30 August 2007 was taken in appeal by DoT to the Supreme Court and was set aside by its judgment on 11 October 2011 on the grounds, among others, that TDSAT had no jurisdiction to decide the validity of the terms and conditions of the licence including the definition of AGR incorporated in the licence agreement. It was for DoT – and not TRAI and TDSAT – to take a final decision on the definition of AGR. The Supreme Court also held that a licensee can raise a dispute about the computation of AGR relating to a particular demand and that TDSAT can then examine whether the demand was in accordance with the licence agreement and the definition of AGR. 

     

    The judgment of the Supreme Court settled important points of law and has clarified the nature of the contractual relationship between the government as licensor and the TSPs. The judgment also laid down the parameters of institutional responsibility in arriving at the contractual terms and conditions; it held that: Litigation regarding the computation of LF continues before the TDSAT in the case of individual demands made on TSPs. It has also been reported that writ petitions re-agitating the revenue share definition have been filed by TSPs in different High Courts.

  • TRAI issues paper aimed at resolving controversial AGR for broadcast, telecom

    TRAI issues paper aimed at resolving controversial AGR for broadcast, telecom

    NEW DELHI: Following a multitude of cases by both telecom and broadcast operators, the Telecom Regulatory Authority of India (TRAI) has initiated a review of the definition of Gross Revenue (GR) and the permissible deductions to arrive at Adjusted Gross Revenue (AGR) in the context of the National Telecom Policy 2012.

     

    In a Consultation Paper on the subject, the Authority has examined the components of GR, AGR and minimum presumptive AGR, rates of Licence Fee and Spectrum Usage Charges, formats of statements of revenue and licence fee and audit and verifiability of revenue and licence fee.

     

    Stakeholders are expected to respond to the 24 questions raised in the Consultation Paper by 1 September and counter-comments by 8 September. TRAI has made it clear that there will be no extension to these dates.

     

    The paper on Definition of Revenue Base (AGR) for the Reckoning of Licence Fee and Spectrum Usage Charges will also examine the changes made in the licensing regime, the transition from the administrative allocation regime towards market-determined prices for spectrum, and the conclusion of tenure of many licences. The paper provides the relevant background information on the subject covering various issues involved.

     

    On the definition of AGR specifically, the Authority had in 2012 recommended that only the revenue from the wireless services shall count towards AGR calculation for the limited purpose of calculation of Spectrum Usage Charges (SUC) that would continue to be determined on service area basis, and should be levied only in respect of those service areas where the Licensee holds any access spectrum.

     

    TRAI wants to know whether there is a need to review/revise the definition of GR and AGR in the different licences at this stage; the guiding principles for designing the framework of the revenue sharing regime; and whether the rate of licence fee (LF) be reviewed instead of changing the definitions of GR and AGR, especially with regard to the component of USO levy, in the interest of simplicity, verifiability, and ease of administration.

     

    The paper also wants to know whether the revenue base for levy of licence fee and spectrum usage charges include the entire income of the licensee or only income accruing from licenced activities if the definitions are to be reviewed/revised.

     

    It has asked whether LF be levied as a percentage of GR in place of AGR in the interest of simplicity and ease of application, and should the revenue base for calculating LF and SUC include ‘other operating revenue’ and ‘other income’.

     

    The Government prepared a draft licence agreement for International Long Distance (ILD) services in September, 2000 containing a provision that LF was payable as a percentage of revenue. For the Public Mobile Radio Trunk Service (PMRTS) too, the revenue share regime was made applicable from 1 November 2001.

     

    The definition of AGR has been litigated since 2003. TSPs questioned the inclusion of various components of revenue in the reckoning of AGR as well as the legality of the definition before TDSAT. In 2006, TDSAT, after noting that revenue from non-licensed activities needed to be excluded from the reckonable revenue, asked TRAI to make recommendations on the inclusion or exclusion of the disputed items in the AGR. TRAI made its recommendations on 13 September 2006 and the Tribunal gave its final order in the matter on 30 August 2007 after accepting most (but modifying some) of TRAI’s recommendations.

     

    In the course of finalising the recommendations of the Authority on the reference from TDSAT, the views of DoT were obtained by the Authority through its representative and incorporated in the “Recommendations on components of Adjusted Gross Revenue” dated 13 September 2006. The Authority was informed that the basic rationale adopted by the Government while formulating the definition of AGR was that it should be easy to interpret – so as to pose fewer problems in application and less disputes and litigations, and to make it less prone to reduction in LF liability by way of accounting jugglery; and it should be easy to verify.

     

    The TDSAT’s judgment of 30 August 2007 was taken in appeal by DoT to the Supreme Court and was set aside by its judgment on 11 October 2011 on the grounds, among others, that TDSAT had no jurisdiction to decide the validity of the terms and conditions of the licence including the definition of AGR incorporated in the licence agreement. It was for DoT – and not TRAI and TDSAT – to take a final decision on the definition of AGR. The Supreme Court also held that a licensee can raise a dispute about the computation of AGR relating to a particular demand and that TDSAT can then examine whether the demand was in accordance with the licence agreement and the definition of AGR.

     

    The judgment of the Supreme Court settled important points of law and has clarified the nature of the contractual relationship between the Government as licensor and the TSPs. The judgment also laid down the parameters of institutional responsibility in arriving at the contractual terms and conditions; it held that: litigation regarding the computation of LF continues before the TDSAT in the case of individual demands made on TSPs. It has also been reported that writ petitions re-agitating the revenue share definition have been filed by TSPs in different High Courts. 

  • DTH ops plea: Exclude content cost from AGR

    DTH ops plea: Exclude content cost from AGR

    MUMBAI: The Telecom Regulatory Authority of India (TRAI), last week, came out with the much needed recommendation paper on new DTH licences. The issue had come into light when India’s oldest DTH operator Dish TV was nearing the end of its 10 year licence that was given to it when it started operating.

     

    While the need for fresh and transparent rules came up, TRAI issued a consultation paper in October 2013 and it was just last week that it came up with its recommendation paper on the same. What most DTH operators were glad about was the reduction in the annual licence fee from 10 per cent of gross revenue (GR) to 8 per cent of adjusted gross revenue (AGR). This would mean that the DTH industry in all will save around Rs 200 crore to Rs 300 crore.

     

    The AGR is calculated after deducting service tax, sales tax and entertainment tax from the GR. TRAI states that since there has been growing convergence of telecom and broadcast, the 8 per cent is aligned to the unified licence (UL) in the telecom field. The recommendation paper states that in the UL, AGR is arrived at by excluding taxes and charges of ‘pass through’ nature. Even though TRAI states that there is no such charge of ‘pass through’ nature for DTH players, the latter disagrees.

     

    “We were hoping for either a 6 per cent of AGR or 8 per cent of AGR with ‘pass through’ of content cost,” says Videocon d2h CEO Anil Khera. When a few months ago, the Ministry had sent notices to all the DTH operators to pay the licence fee dues, they had taken the issue to court. Tata Sky CEO Harit Nagpal had then said that the Ministry of Information and Broadcasting had itself asked the Finance Ministry to reduce the fee from 10 per cent to 6 per cent.

     

    The paper says that two DTH operators had recommended that for calculating AGR, deduction should be made for not just service tax, sales tax and entertainment tax, but also for content costs, transponder costs, hardware sales revenue etc.

     

    Dish TV CEO and soon to be DTH Operators Association president RC Venkateish says that the fight for exclusion of content cost isn’t over yet. He says, “We will approach the Ministry of Information and Broadcasting to press for content cost to be excluded from the AGR. Like we had said, either it should be removed or else the licence fee should be brought down to 6 per cent of AGR instead of the recommended 8 per cent of AGR.”

     

    The parliament was told in April 2013 that six private DTH operators paid Rs 307.8 crore as licence fee to the government for the year 2011-12. According to figures furnished in the reply to the Parliament, Tata Sky paid licence fee of Rs 79.3 crore in 2011-12 as against Airtel Digital’s Rs 61.87 crore and Dish TV’s Rs 30 crore. Sun Direct paid Rs 36 crore, Reliance Big TV paid Rs 9.5 crore, and Videocon d2h paid Rs 5 crore.

     

    For now, the recommendations are pending with the Ministry for approval.

  • Uniform licence fee of 8% of Adjusted Gross Revenue to be applicable for all ISPs

    Uniform licence fee of 8% of Adjusted Gross Revenue to be applicable for all ISPs

    NEW DELHI: The Telecom Regulatory Authority of India (TRAI) has said a uniform licence fee of 8 per cent of the Adjusted Gross Revenue will be applicable for holders of all Internet Service Provider (ISP) license.

     

     

    The revenue for the purpose of licence fee for ISP licences shall include all types of revenue from internet services, allowing only those deductions available for pass through charges and taxes/levies as in the case of access services, without any set-off for expenses. Revenues from internet services shall also be included in the definition of AGR.

     

     

    The recommendations came by way of “Definition of Adjusted Gross Revenue (AGR) in Licence Agreements for provision of Internet Services and minimum presumptive AGR”.

     

     

    The Regulator said minimum presumptive AGR for the purpose of licence fee shall be applicable on the existing ISPs holding the BWA spectrum as applicable to the licensees who obtained access spectrum through competitive bidding.

     

     

    For the existing ISPs who are holding BWA spectrum from the 2010 auction, the value of presumptive AGR shall be equal to 5 per cent of sum of the total bid amount by the licensee for the respective service area, as applicable to the licensees who obtained spectrum in the auctions conducted in November 2012 and March 2013.

     

     

    The Department of Telecommunication had in a letter on 22 October 2012 sought TRAI’s recommendations on (i) the definition of AGR in the ISP License Agreements for provision of Internet Services granted the 1998, 2002 and 2007 guidelines, (ii) the applicability of minimum presumptive AGR and value, if applicable, for BWA Spectrum holders under internet service and (iii) the amendment in the “Format of Statement of Revenue and Licence Fee” to be reported by various categories of Internet Service Licensees.

     

     

    TRAI had thereafter issued a consultation paper on 28 December 2012 seeking the views of stakeholders on the above issues. The written comments received were placed on TRAI’s website www.trai.gov.in. An open house discussion was conducted by TRAI in New Delhi on 21 February 2013.

     

     

    The recommendations have been issued after considering the comments received from the stakeholders and further analyzing the various related aspects. Full details are available on the TRAI website.

  • Cabinet decides spectrum acquired will be charged at 5% of AGR

    Cabinet decides spectrum acquired will be charged at 5% of AGR

    NEW DELHI: The Union Government has approved that spectrum acquired in the current auction will be charged at five per cent of the AGR.

     

     In cases of combination of existing spectrum in this band and spectrum acquired through the auction, the weighted average will apply to the entire spectrum held by the operator in 900 MHz and 1800 MHz band.

     

    The Cabinet also said the licensees who do not acquire spectrum in this auction shall continue to pay spectrum usage charge (SUC) according to the existing slab rate.

     

    As 800 MHz spectrum is not being auctioned in the forthcoming auction and the recommendation of the Telecom Regulatory Authority of India (TRAI) has been sought for the reserve price, the decision in respect of Code Division Multiple Access (CDMA) spectrum will be taken at an appropriate time.

     

    In respect of Broadband Wireless Access (BWA) spectrum acquired through auction in 2010, SUC will continue to be charged, as per present practice, and the operator would be required to report the revenue earned from BWA spectrum separately.

     

    The Cabinet noted that as a matter of policy, it is desirable to move to a flat rate SUC and adoption of a weighted average would provide a path for such transition.

     

    A spokesperson said the decisions are expected to improve the bidding sentiment in the forthcoming auction.