The Telecom Regulatory Authority of India (TRAI) has put forth a series of recommendations aimed at phasing out the license fee for Direct-to-Home (DTH) services in the country over a span of three years. These recommendations come as a response to a request from the Ministry of Information and Broadcasting (MIB) and are in line with the TRAI Act of 1997.
Amendments to Unified License Agreement
The reference to these recommendations stems from the amendments introduced by the Department of Telecommunications (DoT) to the Unified License (UL) Agreement. These amendments, implemented on October 6th and October 25th, 2021, focused on rationalizing the definitions of Adjusted Gross Revenue (AGR) and the quantum of Bank Guarantee (BG) under structural reforms.
License Fee and Bank Guarantee Framework
In India, the operations of DTH services are governed by policy guidelines that prescribe a License Fee (LF). As per these guidelines, DTH operators are obligated to pay 8 percent of their Adjusted Gross Revenue (AGR) as LF to the Ministry of Information and Broadcasting on a quarterly basis. Additionally, operators are required to furnish a Bank Guarantee (BG) to ensure compliance with payment and the fulfillment of license agreement terms.
TRAI’s Engagement
TRAI, in response to the reference, issued a Consultation Paper on “License Fee and Policy Matters of DTH Services” on January 13th, 2023. Feedback was solicited from stakeholders through written comments and counter-comments, and an Open House Discussion was conducted on April 20th, 2023. Subsequently, TRAI has issued recommendations on License Fee and Policy Matters for DTH Services.
Key Recommendations
The primary thrust of these recommendations is to enhance transparency and efficiency within the DTH sector. Some of the key recommendations encompass:
- Defining Gross Revenue (GR): Gross Revenue should encompass all revenue sources, including operations, interest, dividends, and rent, without offsetting related expenses.
- Adjusted Gross Revenue (AGR) Calculation: AGR should be calculated by excluding Government Goods and Services Tax (GST) payments from Applicable Gross Revenue (ApGR), with specific exclusions.
- Revised License Fee Structure: DTH Licensees should pay an annual license fee amounting to 3 percent of AGR, with the ultimate goal of phasing it out entirely by the conclusion of the financial year 2026-2027.
- Bank Guarantee Framework: Licensees should furnish both Initial and Performance Bank Guarantees, with electronic Bank Guarantees being encouraged for streamlining business processes.
- Deduction Verification Mechanism: A robust mechanism for deduction verification should be established, and the submission of Form-D should be made exclusively online.
Implementation and Impact
These recommendations, which encompass the definitions of GR, ApGR, AGR, and the formula for calculating the License Fee percentage, are anticipated to have a positive impact on the DTH sector. By addressing the requirements of a competitive television distribution market, these recommendations seek to foster growth and efficiency within the industry.
