Section 4 of the Indian Telegraph Act of 1885 gives the Central Government the power to grant license on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain or work telegraph within any part of India. Empowered with this clause, progressively, the DoT (Department of Telecommunication) has created multiple suits of licenses – enabling operators to offer telecom services. Treading on this path, the day before yesterday, the TRAI proposed another one called “Access Network Provider”. The purpose of this note is to examine whether such attempts have helped liberate the sector, or is becoming a liability?
What is a license?
License empowers the licensee to offer services either to end the consumers or to another licensee. However, in return for such empowerment, the licensee is obligated to pay fees to the government of India. The bulk of the fees are quantified in terms of a perpetual payment to GOI as a percentage of the licensee’s revenue. This is 8% for the license and approximately 3% for the spectrum – a total of approximately 11%. In other words, a licensee earning Rs 100 as revenue (top line), is obligated to pay Rs 11 to the Government as licensee fees.
