Position Papers/Access Deficit
From Www.india-gii.org
The government has a duty to ensure that people across the country, regardless of where they live, have access to basic telecommunication infrastructure like telephones.
Long before the privatisation of Telecom, the state owned Telephone Department provided telephone lines across the country. While city phone lines and long distance calls got them a lot of money, they also lost money while providing phone connections to rural areas as longer wires had to be laid to each telephone connection and those phones were not frequently used.
After privatising long distance telephone calls by issuing National Long Distance Operator license (NLDO) and International Long Distance Operators licens (ILDO), the state owned MTNL and BSNL were expected to lose substantial chunck of their revenues from their previous monopoly of long distance services.
This loss of revenue for BSNL and MTNL would create a deficit in their budget to continue providing rural phone lines.
As a solution to this problem, Department of Telecom decided to force the NLDOs and ILDOs share their revenues with BSNL/MTNL. This was done by simply demanding a higher rate (upto Rs.4:80) for calls coming into BSNL/MTNL from the NLDOs and ILDOs as opposed to a lower rate (of Rs.0:30) from the other private players. This extra charge that the NDLOs and ILDOs have to pay for calls getting into BSNL/MTNL network is called the Access Deficit Charge.
This is a simple definition of the Access Deficit Charge (ADC).
The ADC created an imbalance in the market as a call had different rate depending upon whether it was declared to be local or a national long distance or an international call. This lead to a lot of legal wrangles as opposing players accused each other of passing long distance calls as local calls and some accused the incumbent carriers of wrongly assessing genuine local calls as long distance calls.
It also gave opening to large number of illegal operators who traded in Indian call minutes over the public Internet. These illegal players are estimated to have taken more than 50% of India's long distance traffic. They are able to compete against the licensed players very easily as they have neither paid the very high (Rs.5 billion) entry fee nor do pay the ADC to the BSNL.
The ADC has had an effect entirely opposite to the intended. the licensees were unable to establish themselves as they were uncompetitive as a result of high ADC. and the illegal operators thrive precisely because of that. completely robbing both BSNL as well as the private long distance players of any reasonable revenues.
