Amid the surge in demand for the high-speed internet in wake of the shift to work from home due to the coronavirus outbreak, the government is considering a reduction in the license fee for fixed-line broadband services in the country. The change could reduce the cost of household broadband services in the country and help service providers expand their coverage at a lower cost. As per the report, the new proposal will reduce the license fee on adjusted gross revenue (AGR) earned by broadband companies for providing Internet connectivity to households in the country — a direct benefit to service providers. The country has over 1,98 crore fixed-line broadband subscribers, according to the latest data provided by the Indian Telecom Regulatory Authority (TRAI).
Pursuant to the proposed plan the license fee for AGRs earned by broadband companies from households will be reduced to as low as Re 1 a year. The estimated license fee for fixed-line broadband services, calculated at a rate of 8 per cent, currently stands at Rs 880 crores per year, making this a huge change. The proposal in question is still to be approved by the Cabinet, although the relevant ministries are said to have reached the point of view on the cut.
The study, citing people who are familiar with developments, reported that there will be no improvement in the services offered to commercial users. It is estimated that the proposed reforms would result in a loss of Rs 592.7 crores to the government, but at the same time would result in a 10 % rise in the revenues of broadband companies offering their services to households.
Mukesh Ambani-owned Jio Fiber’s Reliance Jio Infocomm is one of the prominent beneficiaries that may reap benefits out of the proposed changes as it formally launched its broadband services last year, but is currently facing huge competition from existing players, including Airtel and ACT Fibernet. The increase in revenue potential by reducing the license fee would enable Jio Fiber to accelerate its broadband services in the country.
The changes, if brought into effect will also help other major broadband service providers such as Airtel, ACT Fibernet, and even state-owned Bharat Sanchar Nigam as it will aid them to ramp up their revenues and reduce acquisition costs.