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New Delhi: Internet service providers, or ISPs, have approached the telecom disputes tribunal challenging the government’s decision to bring them under the ambit of the uniform licence fee regime.

The Internet Service Providers Association of India (Ispai), in its petition, said the government’s decision was “unilateral and arbitrary". It challenged the move to increase the percentage of adjusted gross revenue (AGR) payable as licence fee from 6% to 7% from 1 July and to 8% from April next year, including for licence holders currently required to pay a fee of only 1 every year.

Mint has reviewed a copy of the petition submitted to the Telecom Dispute Settlement and Appellate Tribunal.

AGR includes all types of revenue from Internet services that a licence-holder gets.

The only deductions allowed are revenue that don’t accrue to the company. These include pass-through charges that go to another company and taxes that go to the government.

As reported by Mint on 28 June, the department of telecommunications (DoT) issued guidelines imposing a licence fee of 4% of AGR from 1 July and 8% of AGR from 1 April 2013 for ISPs that had got their licences according to the 1998 guidelines.

For ISPs who got their licences according to the 2002 guidelines and after will have to pay a licence fee of 7% of AGR from 1 July and 8% of AGR from April 2013. The government has set a target of 175 million broadband connections by 2017 and 600 million by 2020. In their petition, the ISPs contend that the number of Internet subscribers grew from 5.14 million in September 2004 to only 15.24 million by the end of December 2009. Of this, the number of broadband subscribers was 7.83 million.

The numbers were way below the target of 40 million and 20 million Internet and broadband subscribers, respectively, by the end of 2008, they said.

Further, of the existing 165 active ISPs (as against 375 registered), 95.9% subscribers are covered by the top 10 ISPs, with the state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd having more than 70% of the market share.

The combined annual revenue of ISPs is estimated at 7,000-8,000 crore.

Of this, the revenue from the Internet service providers with Internet telephony amounts to about 1,200 crore. “This amount will be far higher since the deductions allowed from gross revenue for arriving at the AGR are over 90% of gross revenue," the petition said.

The proposal to charge licence fee was announced by communications minister Kapil Sibal in February.

While DoT is still discussing whether to include telecom tower companies within its ambit, almost all other licences given by DoT have been brought under the uniform licence fee regime. DoT is also looking to put in place a minimum presumptive AGR clause, to be announced every year after review by the Telecom Regulatory Authority of India.

Telecom operators will also see a change in the licence fee outgo. Telecom operators currently pay between 6% and 10% of AGR as licence fee, depending on the type of service they offer and the category of circle or mobile operating area applicable. DoT introduced the uniform licence fee to remove the incentive for arbitrage, which lay in the existing revenue share policy. Audits carried out by empanelled auditors hired by DoT had found major discrepancies in revenue reported by telecom operators.

shauvik.g@livemint.com

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