Broadband Services for Indian Households May Get Cheaper as Government Said to Propose a Licence Fee Cut

The government is considering a cut in the licence fee applicable for fixed-line broadband services in India, according to a media report. The change could reduce the cost of household broadband services in the country, and help service providers widen their coverage at lower costs. As per the report, the new proposal will reduce the licence fee on the adjusted gross revenue (AGR) earned by broadband companies for providing Internet connectivity to households in the country — a direct benefit for the service providers. The country has over 1.98 crore fixed-line broadband subscribers, as per the latest data provided by the Telecom Regulatory Authority of India (TRAI).

As per the proposed plan, as reported by Bloomberg, the licence fee on the AGR earned by broadband companies from households will be dropped to Re. 1 a year. The estimated licence fee for the fixed-line broadband services, calculated at a rate of eight percent, is currently about Rs. 880 crore a year, making this a huge change. The proposal in question is yet to receive the cabinet's approval, though it is said to have reached relevant ministries to get their views on the cut.

The report, citing people familiar with the development, said that there wouldn't be any changes for services provided to commercial users. Reportedly, the proposed changes would bring a loss of Rs. 592.7 crores to the government, but at the same time, would result in a 10 percent growth in revenues of broadband companies providing their services to households.

Jio Fiber could get some benefit from the proposed change
Reliance Jio Infocomm's Jio Fiber is likely to be a key recipient of benefits through the proposed changes as it formally launched its broadband services last year but is so far facing a huge competition from existing players, including Airtel and ACT Fibernet. The increase in revenue potentials through the licence fee cut would enable Jio Fiber to accelerate its broadband services in the country.

Apart from Jio, the reduced licence fee, if it gets cleared would help other major broadband service providers. Airtel, ACT Fibernet, and even state-owned Bharat Sanchar Nigam Limited (BSNL) would be able to broaden their revenues and reduce the cost of acquisition through the reported changes.

A TRAI report released in May showed that Jio Fiber captured at the fifth position in the wired broadband market in the country with 8.4 lakh users at the end of January 2020, while BSNL continued its lead with 82.3 lakh subscribers and Airtel stood at second number with 24.3 lakh subscribers. Jio Fiber reported a decline of 20,000 subscribers as compared to 8.6 lakh subscribers previously.

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