Telecommunication Tariff Order 1999 Bare Act

The source publishes this enactment as a single document rather than provision by provision, so the whole text is below and there are no per-section pages for it. Nothing has been shortened.

Type	Order
Year	1997
Jurisdiction	Central
Ministry	Ministry of Communications
Status	In force as published by the source
Text	Published as one document, as the source published it
Subjects	technology

Telecom Regulatory Authority of India Page 1 of 103 http://www.trai.gov.in/order.html 2/25/2003 Telecom Regulatory Authority of India New Delhi March 9, 1999/ Phalguna 18, 1920 In exercise of the powers conferred upon it under sub-section (2) of section 11 of the Telecom Regulatory Authority of India Act, 1997 to notify, by an Order in the Official Gazette, tariffs at which Telecommunication Services within India and outside India shall be provided, the Telecom Regulatory Authority of India hereby makes the following Order.

THE TELECOMMUNICATION TARIFF ORDER 1999 Section I Title, Extent and Commencement

1. Short title, extent and commencement:

i. This Order shall be called "The Telecommunication Tariff Order 1999."

ii. The Order shall cover tariffs for all Telecommunication Services throughout the territory of India as also those originating in India and terminating outside India.

iii. The Order shall come into force on the date of its notification in the Official Gazette.

Section II Definitions

2. In this Order, unless the context otherwise requires:

a. "Act" means the Telecom Regulatory Authority Act of India, 1997.

Telecom Regulatory Authority of India Page 2 of 103 http://www.trai.gov.in/order.html 2/25/2003 b. "Authority" means the Telecom Regulatory Authority of India.

c. "Basic Telecommunication Services" mean services derived from Public Switched Telephone Network (PSTN).

d. "Ceiling(s)" mean(s) the upper limit(s) for tariff for telecommunication services as specified by the Authority from time to time.

e. "Domestic Long Distance Telecommunication Service" means the telecommunication services required to connect one local area of a public telecommunication network to another within the territorial limits of India so as to allow for transmission of voice and non-voice signals across different geographical areas.

f. "Floor" means the lower limit of a tariff for a telecommunication service as specified by the Authority from time to time below which such tariffs may not be offered.

g. "Forbearance" denotes that the Authority has not, for the time being, notified any tariff for a particular telecommunication service and the service provider is free to fix any tariff for such service.

h. "International Long Distance Telecommunication Service" means telecommunication services required to connect a local area of a public telecommunication network within India to a local area of a public telecommunication network in another country so as to allow for the transmission of voice and non-voice signals.

i. "International Subscriber Dialing" means direct interconnection between an end user in India with another end user in another country by means of direct dialing through public networks.

j. "Leased Circuits" mean telecommunication facilities leased to subscribers or service providers to provide for technology transparent transmission capacity between network termination points which the user can control as part of the leased circuit provision and which may also include systems allowing flexible use of leased circuit bandwidth.

k. "Non-discrimination" means that service providers shall not, in the matter of application of tariffs, discriminate between subscribers of the same class and such classification of subscribers shall not be arbitrary.

Telecom Regulatory Authority of India Page 3 of 103 http://www.trai.gov.in/order.html 2/25/2003 l. "Reporting Requirement" means the obligation of a service provider to report to the Authority at least five working days before implementing any new tariff for telecommunication services under this Order and any changes thereafter.

m. "Special Services" mean those support and other ancillary services like phonogram, directory enquiry, manual trunk service, assistance, emergency services such as police, fire and ambulance provided by service providers through special interfaces located at the edge of the PSTN.

n. "Standard package" means a package of tariffs which inter-alia comprises rental, call charges, free calls, deposits and other charges as may be determined by the Authority for specific telecommunication services from time to time.

o. "Subscriber" means an end user of telecommunication services.

p. "Subscriber Trunk Dialing" means direct interconnection between two end users within India by means of direct dialing through public networks.

q. "Supplementary Services" mean services which are provided specific to a subscriber’s directory number and controlled either by the subscriber or by the service provider such as automatic alarm call service, call waiting, call diversion on busy or no reply, and any other such service.

r. "Tariff(s)" mean(s) rates and related conditions at which telecommunication services within India and outside India may be provided including rates and related conditions at which messages shall be transmitted to any country outside India, deposits, installation fees, rentals, free calls, usage charges and any other related fees or service charge.

s. Words and expressions used in this Order and not defined but defined in the Act shall have the same meanings respectively assigned to them in the Act.

Section III Tariffs for Telecommunication Services

3. Tariffs Telecom Regulatory Authority of India Page 4 of 103 http://www.trai.gov.in/order.html 2/25/2003 Tariffs for various telecommunication services and their dates of implementation shall be as set out in Schedules I to IX.

4. Forbearance Where the Authority has, for the time being, forborne from fixing tariff for any telecommunication service or part thereof, a service provider shall be at liberty to fix any tariff for such telecommunication services;

Provided that the service provider shall comply with the reporting requirements in respect of such tariff.

5. Deposits Unless otherwise provided for, no service provider shall seek or obtain from any subscriber in any form any amount as deposit for any telecommunication service in excess of one year’s rental chargeable from the subscriber for the particular telecommunication service as specified in the relevant standard package.

6. Flexibility and Packages i. The service provider shall offer the standard package(s) to all subscribers.

ii. Where a tariff has been specified as a ceiling, no tariff shall be fixed in excess of such ceiling.

iii. Where a tariff has been specified as a floor, no tariff shall be fixed below such floor.

iv. In all other cases, a service provider may, in addition to the standard package, offer alternative combinations of tariff to different classes of subscribers in a non-discriminatory manner.

7. Reporting Requirement Telecom Regulatory Authority of India Page 5 of 103 http://www.trai.gov.in/order.html 2/25/2003

(i) All service providers shall comply with the Reporting Requirement in respect of tariffs specified for the first time under this Order and also all subsequent changes.

ii. No service provider shall alter any tariff of any telecommunication service or any part thereof without complying with the Reporting Requirement.

iii. Unless the Authority intervenes within the mandatory notice period of five working days, the service provider may implement the proposed tariff.

8. Review of Tariffs i. The Authority may, from time to time, review and modify a tariff for any telecommunication service or a part thereof.

ii. The Authority may also at any time, on reference from any affected party, and for good and sufficient reasons, review and modify any tariff.

Section IV Transparency and Consumer Protection

9. Publication of Tariffs i. Tariffs to be charged by service providers from subscribers for telecommunication services along with the conditions thereof shall be published in such manner as the Authority may from time to time direct.

ii. Information of tariff packages that a service provider may choose to offer to subscribers shall be accompanied by a comparison of the financial implications to subscribers under each package vis- à-vis the specified standard package(s).

10. Non-discrimination Telecom Regulatory Authority of India Page 6 of 103 http://www.trai.gov.in/order.html 2/25/2003 No service provider shall, in any manner, discriminate between subscribers of the same class and such classification of subscribers shall not be arbitrary.

11. Terms and Conditions of Service Service providers shall clearly indicate the terms and conditions of the provision of telecommunication services to subscribers which shall not in any manner be inconsistent with the provisions of this Order. Such terms and conditions shall inter-alia include the following:

a. Terms and conditions under which such services may be obtained, utilised and terminated;

b. Terms and conditions relating to the use of service, billing, repair, fault rectification and the like;

c. choice of tariff packages available to a subscriber and the procedure available for revising the choice along with the conditions thereof.

Section V

12. Explanatory Memorandum This Order contains at Annex A, an explanatory memorandum to provide clarity and transparency to the tariffs specified in this Order.

Section VI Residuary Clauses Telecom Regulatory Authority of India Page 7 of 103 http://www.trai.gov.in/order.html 2/25/2003

13. Over-riding Effect In respect of matters covered by this Order the provisions thereof shall have over-riding effect over Rules framed under the Indian Telegraph Act, 1885, as also the terms and conditions of the licence of a service provider and any tariffs or conditions as may have been set by the service providers for provision of telecommunication services to subscribers.

14. Interpretation In case of dispute regarding interpretation of any of the provisions of this Order, the decision of the Authority shall be final and binding.

BY ORDER Harsha Vardhana Singh, Economic Adviser, Telecom Regulatory Authority of India

SCHEDULE I BASIC SERVICES (OTHER THAN ISDN) Telecom Regulatory Authority of India Page 8 of 103 http://www.trai.gov.in/order.html 2/25/2003 ITEM TARIFF

(1) Date of Implementation 01 April, 1999

(2) Registration Charges Prevailing charges as on the date of this Order as ceilings

(3) Installation Charges (3.a) Fixed line telephony service using other than wireless in local loop technology (3.b) Fixed line telephony service using wireless in local loop technology Prevailing charges as on the date of this Order as ceilings Forbearance

(4) Deposits (4.a) Fixed line telephony service using other than wireless in local loop technology (4.b) Fixed line telephony service using wireless in local loop technology Not to exceed twelve months’ rentals as specified from time to time Forbearance

Provided that, Telecom Regulatory Authority of India Page 9 of 103 http://www.trai.gov.in/order.html 2/25/2003 The maximum period for deposit higher than at (a) above (i.e. higher than for fixed line telephony other than using wireless in local loop) is one year. At the end of one year of obtaining a wireless in local loop connection, unless the subscriber specifically demands the continuation of that connection on wireless in local loop, the additional deposit involved shall be refunded to the subscriber or interest paid on such additional deposit at the annual rate of interest for one year deposits prescribed by the State Bank of India.

(5) Monthly Rentals For Rural Subscribers (5.a) Rural Low User Subscribers Exchange System Capacity (Number of Lines) From 1 April, 1999 to 31 March, 2000 (Rs.)

From 1 April, 2000 to 31 March, 2001 (Rs.)

From 1 April, 2001 to 31 March, 2002 (Rs.)

Up to 999 70 70 70 1,000 to 29,999 120 120 120 30,000 to 99,999 180 180 180 1 lakh and above 250 250 250 (5.b) Rural General User Subscribers Exchange System Capacity (Number of Lines) From 1 April, 1999 to 31 March, 2000 (Rs.)

From 1 April, 2000 to 31 March, 2001 (Rs.)

From 1 April, 2001 to 31 March, 2002 (Rs.)

Up to 999 70 95 120 1,000 to 29,999 120 140 160 30,000 to 99,999 180 200 220 1 lakh and above 250 280 310 Telecom Regulatory Authority of India Page 10 of 103 http://www.trai.gov.in/order.html 2/25/2003 (5.c) Rural Commercial User Subscribers Notes:

1. Rural subscribers are those who reside in rural areas. For the purpose of this schedule, the definition of rural area shall be the same as used in conducting the Census of India.

2. Low user subscribers are those making not more than 500 metered calls per month of a billing cycle.

3. General user subscribers are those other than low user subscribers or commercial user subscribers.

4. The procedures for migration of subscribers from one category to another (i.e. low user subscribers to general user subscribers, and vice-versa) on the basis of the extent of usage will be notified before 30 September, 1999, as this issue becomes relevant only with effect from 1 April, 2000.

5. The rules for classifying subscribers as commercial user subscribers will be laid down by the Authority after due consultation. In the interim, commercial user subscribers are those who opt for the rental category specified for "Commercial user subscribers". The classification as commercial user subscriber shall be effective from the commencement of the next billing cycle after the date of option.

Exchange System Capacity (Number of Lines) From 1 April, 1999 to 31 March, 2000 (Rs.)

From 1 April, 2000 to 31 March, 2001 (Rs.)

From 1 April, 2001 to 31 March, 2002 (Rs.)

Up to 999 120 120 120 1,000 to 29,999 160 160 160 30,000 to 99,999 220 220 220 1 lakh and above 310 310 310 Telecom Regulatory Authority of India Page 11 of 103 http://www.trai.gov.in/order.html 2/25/2003

6. Exchange system capacity is the sum of the capacities of all exchanges in a local area, except that for rural subscribers the relevant exchange system capacity to be reckoned for this purpose is the one as existed prior to 15th August 1998, i.e.

before the local call area became co-terminus with the short distance charging area (SDCA) for purpose of local calls. Any augmentation of the exchange capacity after the date of implementation of this Order shall automatically be taken into account for re-classification for purposes of tariffs.

7. Short Distance Charging Area (SDCA) is the area which, with few exceptions, coincide with revenue tehsil/taluk.

(6) Monthly Rentals For Urban Subscribers (6.a) Urban Low User Subscribers (6.b) Urban General User Subscribers Exchange System Capacity (Number of Lines) From 1 April, 1999 to 31 March, 2000 (Rs.)

From 1 April, 2000 to 31 March, 2001 (Rs.)

From 1 April, 2001 to 31 March, 2002 (Rs.)

1,000 to 29,999 120 120 120 30,000 to 99,999 180 180 180 1 lakh and above 250 250 250 Telecom Regulatory Authority of India Page 12 of 103 http://www.trai.gov.in/order.html 2/25/2003 (6.c) Urban Commercial User Subscribers Notes:

1. Urban subscribers are those who reside in urban areas. For the purpose of this schedule, the definition of urban area shall be the same as used in conducting the Census of India.

2. Low user subscribers are those making not more than 500 metered calls per month of a billing cycle.

3. General user subscribers are those other than low user subscribers or commercial user subscribers.

Exchange System Capacity (Number of Lines) From 1 April, 1999 to 31 March, 2000 (Rs.)

From 1 April, 2000 to 31 March, 2001 (Rs.)

From 1 April, 2001 to 31 March, 2002 (Rs.)

1,000 to 29,999 120 140 160 30,000 to 99,999 180 200 220 1 lakh and above 250 280 310 Exchange System Capacity (Number of Lines) From 1 April, 1999 to 31 March, 2000 (Rs.)

From 1 April, 2000 to 31 March, 2001 (Rs.)

From 1 April, 2001 to 31 March, 2002 (Rs.)

1,000 to 29,999 160 160 160 30,000 to 99,999 220 220 220 1 lakh and above 310 310 310 Telecom Regulatory Authority of India Page 13 of 103 http://www.trai.gov.in/order.html 2/25/2003

5. The rules for classifying subscribers as commercial user subscribers will be laid down by the Authority after due consultation. In the interim commercial user subscribers are those who opt for the rental category prescribed for "Commercial user subscribers". The classification as commercial user subscriber shall be effective from the commencement of the next billing cycle after the date of option.

6. Exchange system capacity is the sum of the capacities of all exchanges in a local area.

(7) Tariff per metered call for rural subscribers First 500 metered calls per month of the billing cycle (except for free calls) (Rs.)

Metered calls in excess of the first 500 metered calls per month of the billing cycle (Rs.)

0.80 1.20

(8) Free calls (or uncharged calls) for rural subscribers 75 metered calls per month of a billing cycle

(9) Tariff per metered call for urban subscribers First 500 metered calls per month of the billing cycle (except for free calls) (Rs.)

Metered calls in excess of the first 500 metered calls per month of the billing cycle (Rs.)

1.00 1.20 Telecom Regulatory Authority of India Page 14 of 103 http://www.trai.gov.in/order.html 2/25/2003

(10) Free calls (or uncharged calls) for urban subscribers 60 metered calls per month of a billing cycle

(11) Pulse Rate for local calls (11.a) Exchanges where pulses can be applied to local calls (11.b) Exchanges where pulses can not be applied to local calls 180 seconds Forbearance Notes:

1. Local Area is the area co-terminus with a Short Distance Charging Area (SDCA).

2. Short Distance Charging Area (SDCA) is the area which, with few exceptions, coincide with revenue tehsil/taluk.

(12) Pulse rates for peak hours (12.a) For subscriber trunk dialed domestic long distance calls Radial distance between any two exchanges or between any two charging centres From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) Up to 50 kms 180.0 180.0 180.0 Above 50 kms. and up to 200 kms.

14.0 15.0 18.0 Above 200 kms. and up to 500 kms.

5.0 6.2 6.8 Above 500 kms. and up to 1000 k

3.5 4.1 4.6 Telecom Regulatory Authority of India Page 15 of 103 http://www.trai.gov.in/order.html 2/25/2003 kms.

Above 1,000 kms 2.5 3.0 3.5 These pulse rates imply the following peak hour tariffs for an STD call of 1 minute duration:

(12.a.i) At pulse charge of Rs. 0.80 per metered call Radial distance between any two exchanges or between any two charging centres From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) Up to 50 kms 0.8 0.8 0.8 Above 50 kms. and up to 200 kms.

4.0 4.0 3.20 Above 200 kms. and up to 500 kms.

10.40 8.0 7.20 Above 500 kms. and up to 1000 kms.

14.40 12.00 11.20 Above 1,000 kms 20.00 16.80 14.40 (12.a.ii) At pulse charge of Re. 1.00 per metered call Radial distance between any two exchanges or between any two charging centres From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) Up to 50 kms 1.0 1.0 1.0 Above 50 kms. and up to 200 kms.

5.0 5.0 4.0 Above 200 kms. and up to 500 kms.

13.00 10.00 9.00 Above 500 kms. and up to 1000 kms.

18.00 15.00 14.00 Above 1,000 kms 25.00 21.00 18.00 Telecom Regulatory Authority of India Page 16 of 103 http://www.trai.gov.in/order.html 2/25/2003 (12.a.iii) At pulse charge of Rs. 1.20 per metered call Notes:

1. Charging centres are classified as "Long Distance Charging Centre" (LDCC) and "Short Distance Charging Centre" (SDCC).

2. Long Distance Charging Centre is a particular Trunk Exchange in a long distance charging area as presently defined for the purpose of charging for trunk calls.

Headquarters of a Secondary Switching Area are generally LDCCs.

3. Short Distance Charging Centre is a particular exchange in short distance charging area as presently defined for the purpose of charging trunk calls.

Headquarters of Short Distance Charging Areas are generally SDCCs.

4. Secondary Switching Area (SSA) is a territory, whose boundaries, generally but not necessarily, are co-terminus with those of a revenue District and in which normally one Secondary Trunk Automatic Exchange is located.

Radial distance between any two exchanges or between any two charging centres From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) Up to 50 kms 1.20 1.20 1.20 Above 50 kms. and up to 200 kms.

6.0 6.0 4.80 Above 200 kms. and up to 500 kms.

15.60 12.00 10.80 Above 500 kms. and up to 1000 kms.

21.60 18.00 16.80 Above 1,000 kms 30.00 25.2 21.60 (12.b) Inter-national Subscriber Dialed calls Country Category From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) SAARC and other Neighbouring Countries

2.5 2.8 3.3 Countries in Africa,.

Europe, Gulf, Asia and Oceania

1.5 1.8 2.3 Countries in American Continent

1.2 1.5 1.8 Telecom Regulatory Authority of India Page 17 of 103 http://www.trai.gov.in/order.html 2/25/2003 and Other Places in Western Hemisphere These pulse rates imply the following peak hour tariffs for ISD calls of 1 minute duration:

(12.b.i) At pulse charge of Rs. 0.80 per metered call Call made to: From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) SAARC and other Neighbouring Countries

20.00 16.80 14.40 Countries in Africa,.

Europe, Gulf, Asia and Oceania

32.80 27.20 21.60 Countries in American Continent and Other Places in Western Hemisphere

40.80 32.80 27.20 (12.b.ii) At pulse charge of Re. 1.00 per metered call Call made to: From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) SAARC and other Neighbouring Countries

25.00 21.00 18.00 Countries in Africa,.

Europe, Gulf, Asia and Oceania

41.00 34.00 27.00 Countries in 51.00 41.00 34.00 Telecom Regulatory Authority of India Page 18 of 103 http://www.trai.gov.in/order.html 2/25/2003 (12.b.iii) At pulse charge of Rs. 1.20 per metered call Note: The coverage of country categories shall be used as per the present classification by the Department of Telecommunications.

American Continent and Other Places in Western Hemisphere Call made to: From 1 April, 1999 31 March, 2000 (Seconds) From 1 April, 2000 31 March, 2001 (Seconds) From 1 April, 2001 31 March, 2002 (Seconds) SAARC and other Neighbouring Countries

30.00 25.20 21.60 Countries in Africa,.

Europe, Gulf, Asia and Oceania

49.20 40.80 32.40 Countries in American Continent and Other Places in Western Hemisphere

61.20 49.20 40.80 Telecom Regulatory Authority of India Page 19 of 103 http://www.trai.gov.in/order.html 2/25/2003

(13) Peak hour tariff (13.a) For manual trunk calls (13.a.i) From and to places with STD facilities (13.a.ii) From/to places without STD facilities

(i) Rs. 5 per call Plus

(ii) Tariff for subscriber trunk dialed domestic long distance calls, as applicable,

Provided that, the minimum tariff under this plan may be the amount applicable to a one minute subscriber trunk dialed domestic long distance call.

The above tariffs are ceilings.

Tariffs shall be the same as in (i) above, assuming as if these places have STD facilities.

(13.b) For trunk Forbearance Telecom Regulatory Authority of India Page 20 of 103 http://www.trai.gov.in/order.html 2/25/2003 ( ) calls with special features such as demand call, person to person call, lightning call, etc.

(13.c) For operator assisted international calls (13.c.i) From and to places with ISD facilities

(i) Rs. 5 per call Plus

(ii) Tariff for ISD calls, as applicable, Telecom Regulatory Authority of India Page 21 of 103 http://www.trai.gov.in/order.html 2/25/2003 (13.c.ii) From/to places without ISD facilities

Provided that, the minimum tariff under this plan may be the amount applicable to a one minute ISD call.

The above tariffs are ceilings.

Tariffs shall be the same as in (i) above, assuming as if these places have ISD facilities.

(13.d) For operator assisted international calls, with special features such as demand calls, person to person call, lightning call, etc.

Forbearance

(14) Peak Hours:

(14.a) For domestic long i. For distance slab "Up to 50 kilometers", there need not be any division of the calendar day between peak and off-peak hours.

Telecom Regulatory Authority of India Page 22 of 103 http://www.trai.gov.in/order.html 2/25/2003 g distance calls (14.b) For international calls ii. For all other distance slabs, peak hours shall not exceed 11 hours during a calendar day. Peak hour tariffs specified in this schedule cannot, therefore, be charged for more than 11 hours in a calendar day for distance slabs beyond 50 kms.

iii. Forbearance with respect to the choice of timings for peak hours.

i. For country categories in the Table specifying peak hour pulse rates for international calls, peak hours shall not exceed 11 hours during a calendar day for each of the three country categories. Peak hour tariffs specified in this schedule for international calls cannot, therefore, be charged for more than 11 hours in a calendar day for any of the three country categories.

ii. Forbearance with respect to the choice of timings for peak hours of 11 hours during a calendar day for each of the three country categories.

(15) Off-peak hours (15.a) For domestic long distance calls i. For all distance slabs other than "Up to 50 kms.", off-peak hours shall not be less than 13 hours during a calendar day.

ii. On Sundays and National Holidays (i.e., 26th January, 15th August and 2nd October), all the 24 hours during the calendar day shall be off-peak hours.

iii. Forbearance with respect to the choice of timings for off-peak hours during a calendar day.

iv. Forbearance for off-peak hour tariffs subject to the condition that these tariffs shall Telecom Regulatory Authority of India Page 23 of 103 http://www.trai.gov.in/order.html 2/25/2003 (15.b) For international calls be below the relevant peak hour tariffs specified in this schedule.

i. For country categories in the Table specifying peak hour pulse rates for international calls, off-peak hours shall not be less than 13 hours during a calendar day for each of the three country categories ii. On Sundays and National Holidays (i.e., 26th January, 15th August and 2nd October), all the 24 hours during the calendar day shall be off-peak hours.

iii. Forbearance with respect to the choice of timings for off-peak hours during a calendar day for each of the three country categories.

iv. Forbearance for off-peak hour tariffs, subject to the condition that these tariffs shall be below the peak hour tariffs specified in this schedule.

(16) Franchised Group PBX, or PABX and EPABX with DID Facility (for Multistory Buildings, Other Buildings, Cooperative Housing Societies) (16.a) For the franchisee (16.a.i) Registration and Installation charges (16.a.ii) Monthly Telecom Regulatory Authority of India Page 24 of 103 http://www.trai.gov.in/order.html 2/25/2003 rental per junction line (16.a.ii.1) For outgoing and bothways junctions (16.a.ii.2) For incoming junctions (16.a.iii) Other Matters Relevant to Tariffs (16.b) For extension user (16.b.i) Registration and Prevailing charges as on the date of this Order as ceilings Same rental as for outgoing and both-ways junctions less a minimum rebate of Rs. 50 per month.

Exchange system capacity (Number of lines) Rural Franchisees (Ceilings of Rs.)

Urban Franchisees (Ceilings of Rs.)

Up to 999 lines 120 160 1,000 to 29,999 line 160 160 30,000 to 99,999 lines 220 220 1 lakh and above lines 310 310 Telecom Regulatory Authority of India Page 25 of 103 http://www.trai.gov.in/order.html 2/25/2003 Installation charges (16.b.ii) Monthly Rental (16.b.iii) Security Deposit (16.b.iv) Call Charge (16.b.v) Free Calls (or uncharged calls) (16.b.vi) Other Matters Relevant to Tariffs Forbearance Prevailing charges as on the date of this Order as ceilings Rs. 125 per month Ceiling of twelve months’ rental charged to the extension user Rs. 1.20 per metered call Telecom Regulatory Authority of India Page 26 of 103 http://www.trai.gov.in/order.html 2/25/2003 Nil Forbearance Note: Alternative tariff packages may be offered by franchisees. For explanation of "alternative tariff packages", see Explanatory Notes at the end of this schedule.

(17) Subscriber Owned Group PBX, PABX, EPABX (for Office Buildings, Hotels, and Other Parties) (17.a)Registration and Installation charges (17.b) Monthly Telecom Regulatory Authority of India Page 27 of 103 http://www.trai.gov.in/order.html 2/25/2003 Rental Per Junction Line:

(17.b.i) For outgoing and Both-Ways junction lines (17.b.ii) For incoming junction lines (17.c) Call Charge (17.d) Free Calls (or uncharged calls) (17.e) Other Matters Relevant to Tariffs Prevailing charges as on the date of this Order as ceilings Ceiling of Rs. 620 per month Ceiling of Rs. 620 per month less a minimum rebate of Rs. 50 per month Rs. 1.20 per metered call Nil Forbearance Telecom Regulatory Authority of India Page 28 of 103 http://www.trai.gov.in/order.html 2/25/2003

(18) Service Provider Owned Group PBX, PABX, EPABX (for Office Buildings, Hotels, and Other Parties) (18.a) Registration and Installation charges for junctions (18.b) Monthly Rental Per Junction Line (18.b.i) For outgoing and Both-Ways junction lines (18.b.ii) For incoming junction lines Prevailing charges as on the date of this Order as ceilings Telecom Regulatory Authority of India Page 29 of 103 http://www.trai.gov.in/order.html 2/25/2003 (18.c) Call Charge (18.d) Free Calls (or uncharged calls) (18.e) Other Matters Relevant to Tariffs Ceiling of Rs. 620 per month Ceiling of Rs. 620 per month less a minimum rebate of Rs. 50 per month Rs. 1.20 per metered call Nil Forbearance Forbearance Telecom Regulatory Authority of India Page 30 of 103 http://www.trai.gov.in/order.html 2/25/2003

(19) PCOs/VPTs (19.a) Coin Collection Boxes (CCBs) (19.a.i) Tariff in rural areas (19.a.ii) Tariff in urban areas (19.b) Tariff for local call from PCOs/VPTs (including STD/ISD PCOs/VPTs) (19.b.i) in rural areas (19.b.ii) in urban areas (19.c) Tariff for STD/ISD calls from STD/ISD PCOs/VPTs (19.c.i) in rural areas Re. 1.00 per metered call Re. 1.00 per metered call Ceiling of Re. 1.00 per metered call Ceiling of Rs. 1.20 per metered call Telecom Regulatory Authority of India Page 31 of 103 http://www.trai.gov.in/order.html 2/25/2003 (19.c.ii) in urban areas (19.d) Long distance public telephone with flat rate Ceiling of Rs. 1.20 per metered call plus Ceiling of Rs. 2 for each STD/ISD call (irrespective of duration) Ceiling of Rs. 1.20 per metered call plus Ceiling of Rs. 2 for each STD/ISD call (irrespective of duration) Forbearance

(20) Fascimile

(21) All Other Matters Relevant to Tariffs, including billing cycle, and special and supplementary services not elsewhere specified Forbearance Forbearance Telecom Regulatory Authority of India Page 32 of 103 http://www.trai.gov.in/order.html 2/25/2003 EXPLANATORY NOTES:

(a) Low User Subscriber

(b) General User Subscriber

(d) Rural subscribers

(e) Urban subscribers A subscriber making not more than 500 metered calls per month of a billing cycle.

A subscriber other than low user subscribers or commercial user subscribers. The procedures for migration of subscribers from one category to another (i.e. low user subscribers to general user subscribers, and vice-versa) on the basis of the extent of usage will be notified before 30 September, 1999, as this issue becomes relevant only with effect from 1 April, 2000.

The rules for classifying subscribers as commercial user subscribers will be laid down by the Authority after due consultation process. In the interim commercial user subscribers are those who opt for the rental category prescribed for "Commercial user subscribers".

The classification as commercial user subscriber shall be effective from the commencement of the next billing cycle after the date of option.

Subscribers residing in rural areas. For the purpose of this schedule, the definition of rural area shall be the same as used in conducting the Census of India.

Subscribers residing in urban areas. For the purpose of this schedule, the definition of urban area shall be the same as used in conducting the Census of India.

A standard tariff package provides basic services at the tariffs specified in the schedule, and includes the specified number of free calls. Different rentals prescribed for the three categories of subscribers in (a) to (c) above imply that three different standard tariff packages are specified in this schedule.

Tariff and free call allowance offered to subscribers by service providers, in addition to those offered in the standard tariff packages. In the "alternative tariff packages", items for which tariffs are specified in terms of a ceiling will continue to be subject to the specified ceiling. Items for which a specific amount of tariff is shown in this schedule (e.g. rentals and call charges) may have any alternative tariff in the "alternative tariff package".

Similarly, an alternative free call allowance may be provided in an "alternative tariff package".

Telecom Regulatory Authority of India Page 33 of 103 http://www.trai.gov.in/order.html 2/25/2003

(f) Standard tariff package(s)

(g) Alternative tariff packages

(h) Mandatory provision of standard packages

(i) Exchange system capacity Subscribers must have the option of getting basic services (other than ISDN) at tariffs and free call allowance specified in this schedule. In addition, the service provider may offer alternative tariff packages to the subscribers. The subscriber shall be free to choose among various tariff and free call offers available.

The sum of the capacities of all exchanges in a local area, except that for the purpose of offering tariffs applicable to rural subscribers (including rentals) the relevant exchange system capacity to be reckoned is the one as existed prior to 15th August 1998, i.e.

Short Distance Charging Area (SDCA) is the area which, with few exceptions, coincide with revenue tehsil/taluk. The local area is co-terminus with an SDCA for the purpose of tariffs.

Charging centres are classified as "Long Distance Charging Centre" (LDCC) and "Short Distance Charging Centre" (SDCC).

Long Distance Charging Centre is a particular Trunk Exchange in a long distance charging area as presently defined for the purpose of charging for trunk calls.

Headquarters of a Secondary Switching Area are generally LDCCs.

Short Distance Charging Centre is a particular exchange in short distance charging area as presently defined for the purpose of charging trunk calls. Headquarters of Short Distance Charging Areas are generally SDCCs.

Secondary Switching Area (SSA) is a territory, whose boundaries, generally but not necessarily, are co-terminus with those of a revenue District and in which normally one Secondary Trunk Automatic Exchange is located.

Telecom Regulatory Authority of India Page 34 of 103 http://www.trai.gov.in/order.html 2/25/2003 Schedule II Cellular Mobile Telecom Service (CMTS)

(j) Short Distance Charging Area (SDCA)

(k) Charging Centres

(l) Long Distance Charging Centre (LDCC)

(m) Short Distance Charging Centre (SDCC)

(n) Secondary Switching Area (SSA) ITEM TARIFF

1. Date of implementation

2. Deposit

3. Installation charges 01 April, 1999∗ Prevailing charges as specified in the present licence as ceiling Prevailing charges as specified in the present licence as ceiling Telecom Regulatory Authority of India Page 35 of 103 http://www.trai.gov.in/order.html 2/25/2003

4. Categorisation of hours in a calendar day

5. Duration of Standard Hours and Concessional Hours

6. Timing of Standard Hours and Concessional Hours

7. Pulse rate for calls Standard Hours and Concessional HoursK Standard Hours shall not exceed eleven hours in a calendar day, except as provided otherwise All other hours shall be Concessional Hours Forbearance 20 seconds ITEM TARIFF

8. Rental

(9) Airtime charges Rs. 600 per month Telecom Regulatory Authority of India Page 36 of 103 http://www.trai.gov.in/order.html 2/25/2003 (9.a) Standard Hours (9.b) Concessional Hours Tariff for different category of calls

10. Calls from PSTN to Mobile

11. Calls from Mobile to PSTN

12. Calls from Mobile to Mobile within Metro Licensee Service Areas

(13) Calls from Mobile to Mobile not included in item (12) above Rs. 6 per minute Forbearance;

Provided that airtime during Sundays and three National Holidays (26th January, 15th August, and 2nd October) shall be priced at Concessional rates The called party to pay airtime Tariff to comprise:

i. Airtime; plus ii. PSTN charges for local or long distance as applicable from time to time to the fixed network Both called and calling party to pay airtime Tariff to comprise airtime plus a supplementary long distance charge based on distance The Service Provider shall make the calling party aware of the quantum of the supplementary charge to be paid by the party, by making appropriate technical arrangements Telecom Regulatory Authority of India Page 37 of 103 http://www.trai.gov.in/order.html 2/25/2003 ITEM TARIFF

(14) Additional Items (14.a) Roaming (14.b) Other Supplementary Services (14.c) Value Added Services (14.d) All other matters relevant to Tariff, including billing cycle Forbearance Forbearance Forbearance Forbearance Explanatory Notes a. Standard Tariff Package b. Alternative Tariff Packages The Standard Package provides Cellular services at the tariffs specified in the schedule Tariff offered to subscribers in addition to that offered in the Standard Package Telecom Regulatory Authority of India Page 38 of 103 http://www.trai.gov.in/order.html 2/25/2003 Schedule III Radio Paging Services c) Mandatory provision of standard packages In these Alternative Tariff Packages, items for which tariffs are specified as ceilings cannot be exceeded. Items for which a particular amount is specified in the schedule viz. rental and airtime charge may have a different tariff in the Alternative Tariff Package Subscribers must have the option of getting Cellular services at tariffs specified in this schedule. In addition, the service provider may offer alternative tariff packages to the subscribers. The subscriber shall be free to choose among various tariff packages available ITEM TARIFF

1. Date of implementation

2. Deposit

3. Registration Fee 01 April, 1999 Prevailing charge as specified in the present licence as ceiling Prevailing charge as specified in the present licence as ceiling Telecom Regulatory Authority of India Page 39 of 103 http://www.trai.gov.in/order.html 2/25/2003 Note: The Authority will review the tariff and other conditions specified in this schedule once the detailed study on viability assessment of Radio Paging Services Providers that is currently in progress is complete. If the results of the study warrant, the tariffs will be changed.

SCHEDULE IV LEASED CIRCUITS

4. Rental (4.a) Alphanumeric Service (4.b) Numeric Service

5. All other matters relevant to tariff, including supplementary services, value added services, billing cycle Rs. 300 per month as ceiling Rs. 175 per month as ceiling Forbearance ITEM TARIFF

(1) Date of Implementation 01 April, 1999

(2) Coverage a. All tariffs specified as ceilings b. It is mandatory for leased circuits to be provided through utilization of spare capacity when such capacity is available and when not available, on rent and guarantee terms Telecom Regulatory Authority of India Page 40 of 103 http://www.trai.gov.in/order.html 2/25/2003 c. The tariff for leased circuits shall be calculated either i. As a combination of tariff given under "Ready Reckoner Tariff" and tariffs given under "Other additional costs, as applicable";

Or,

(ii) On rent and guarantee terms

(3) Ready Reckoner Tariff for leased circuits of speed:

(3.a) 64 Kbps (3.b) 2 Mbps (3.c) Below 64 Kbps As specified in Annex 1 to this schedule As specified in Annex 2 to this schedule Forbearance Telecom Regulatory Authority of India Page 41 of 103 http://www.trai.gov.in/order.html 2/25/2003 (3.d) N Times 64 Kbps (3.e) N Times 2 Mbps Ceiling tariffs for capacity ranging from 128 Kbps to 960 Kbps shall be determined by multiplying the ceiling tariff for leased circuits of 64 Kbps by the coefficients specified below:

Capacity (Kbps) Coefficient 960 7.6 768 6.4 512 4.8 384 4.0 320 3.6 256 3.1 192 2.5 128 1.8 Ceiling tariffs for N Times 2 Mbps leased circuits shall be N times the ceiling tariff for leased circuit of 2 Mbps, except that in calculating the ceiling tariffs:

(i) N = 16 for 34 Mbps, and i. N = 64 for 140 Mbps.

(4) Other Additional Costs, As Applicable If these additional items are charged, they must be specified separately and individually in the bill Telecom Regulatory Authority of India Page 42 of 103 http://www.trai.gov.in/order.html 2/25/2003 (4.a) Local leads or end links (4.b) Payment for right of way / way leave charges Tariff for local lead (or end links) to be charged as i. Charge for leasing these local leads, or ii. If such leasing is not possible then

1. On rent and guarantee basis, or alternatively

2. On contribution basis The service provider may also charge for the amount paid, if any

(5) Tariff for leased circuits provided on rent and guarantee terms a. To be based solely upon costs b. Rent and guarantee tariffs under this schedule to apply to prospective leased circuits

(6) Tariffs for circuits leased for short duration Telecom Regulatory Authority of India Page 43 of 103 http://www.trai.gov.in/order.html 2/25/2003 (6.a) For a period up to 3 months (6.b) For a period exceeding three months but less than one year (6.c) Charge for local leads, or end links Double the pro rata rental as specified under the category "Ready Reckoner Tariff" Full year rental as specified under the category "Ready Reckoner Tariff" Costs incurred in addition to the existing local leads and long distance medium, including additional costs incurred for any special constructions, may be added to the short duration rentals specified under items (a) and (b) above

(7) Tariff when capacity addition is required to provide leased circuits Parties providing and renting circuits to share costs based on bilateral negotiations

(8) Other Matters Relevant to Leased Circuits Tariffs Forbearance Telecom Regulatory Authority of India Page 44 of 103 http://www.trai.gov.in/order.html 2/25/2003 (Annex 1 to Schedule IV) READY-RECKONER CEILING TARIFF FOR 64 Kbps LEASED CIRCUITS BASED ON 140 Mbps SYSTEM Distance(km) TOTAL(Rs.) Distance(km) TOTAL(Rs.) Distance(km) TOTAL(Rs.)

5 24,558 205 55,091 405 82,623 10 25,632 210 55,770 410 83,302 15 26,707 215 56,449 415 83,981 20 27,781 220 57,129 420 84,661 25 28,856 225 57,808 425 85,340 30 29,930 230 58,487 430 86,019 35 31,005 235 59,167 435 86,699 40 32,079 240 59,846 440 87,378 45 33,154 245 60,525 445 88,057 50 34,319 250 61,295 450 88,827 55 34,442 255 61,974 455 89,506 60 35,121 260 62,653 460 90,185 65 35,800 265 63,332 465 90,864 70 36,480 270 64,012 470 91,544 75 37,159 275 64,691 475 92,223 80 37,838 280 65,370 480 92,902 85 38,518 285 66,050 485 93,582 90 39,197 290 66,729 490 94,261 95 39,876 295 67,408 495 94,940 100 40,646 300 68,178 500 95,710 105 41,325 305 68,857 Beyond 500 kms Rs.96000 110 42,004 310 69,536 fixed irrespective of distanc 115 42,683 315 70,215 120 43,363 320 70,895 125 44,042 325 71,574 130 44,721 330 72,253 135 45,401 335 72,933 140 46,080 340 73,612 145 46,759 345 74,291 150 47,529 350 61,475 155 48,208 355 75,740 160 48,887 360 76,419 165 49,566 365 77,098 170 50,246 370 77,778 175 50,925 275 78,457 180 51,604 380 79,136 185 52,284 385 79,816 190 52,963 390 80,495 195 53,642 395 81,174 200 54,412 400 81,944 Telecom Regulatory Authority of India Page 45 of 103 http://www.trai.gov.in/order.html 2/25/2003 (Annex 2 to Schedule IV) READY-RECKONER CEILING TARIFF FOR 2 Mbps LEASED CIRCUITS BASED ON 140 Mbps SYSTEM Distance(km) TOTAL(Rs.) Distance(km) TOTAL(Rs.) Distance(km) TOTAL(Rs.)

5 55,820 205 971,810 405 1,797,763 10 88,056 210 992,189 410 1,818,141 15 120,291 215 1,012,567 415 1,838,520 20 152,527 220 1,032,946 420 1,858,899 25 184,763 225 1,053,325 425 1,879,278 30 216,999 230 1,073,704 430 1,899,657 35 249,235 235 1,094,083 435 1,920,035 40 281,471 240 1,114,461 440 1,940,414 45 313,706 245 1,134,840 445 1,960,793 50 348,642 250 1,157,919 450 1,983,872 55 352,345 255 1,178,298 455 2,004,251 60 372,724 260 1,198,677 460 2,024,630 65 393,103 265 1,219,056 465 2,045,008 70 413,482 270 1,239,434 470 2,065,387 75 433,860 275 1,259,813 475 2,085,766 80 454,239 280 1,280,192 480 2,106,145 85 474,618 285 1,300,571 485 2,126,524 90 494,997 290 1,320,950 490 2,146,902 95 515,376 295 1,341,328 495 2,167,281 100 538,454 300 1,364,407 500 2,190,360 105 558,833 305 1,384,786 Beyond 500 kms Rs.22 Lakhs 110 579,212 310 1,405,165 fixed irrespective of distance 115 599,591 315 1,425,544 120 619,970 320 1,445,923 125 640,349 325 1,466,301 130 660,727 330 1,486,680 135 681,106 335 1,507,059 140 701,485 340 1,527,438 145 721,864 345 1,547,817 150 744,943 350 1,163,319 155 765,321 355 1,591,274 160 785,700 360 1,611,653 165 806,079 365 1,632,032 170 826,458 370 1,652,411 175 846,837 275 1,672,790 180 867,216 380 1,693,168 185 887,594 385 1,713,547 190 907,973 390 1,733,926 195 928,352 395 1,754,305 200 951,431 400 1,777,384 Telecom Regulatory Authority of India Page 46 of 103 http://www.trai.gov.in/order.html 2/25/2003 Schedule V ISDN Services ITEM TARIFF

1. Date of implementation

(2) Initial Deposit and Registration Deposit

(3) Installation and Testing Charges (3.a) Wiring charges upto Network Terminal (NT) for Primary Rate Access (PRA) (3.b) Wiring charges upto NT1 for Basic Rate Access (BRA) (3.c) Subscriber Interface Bus (3.d) For ISDN Terminals (3.d.i) Ordinary ISDN Phone 01 April, 1999 Aggregate of all deposits (excluding security deposit for equipment) cannot exceed one year’s rental The registration deposit should be combined with the initial deposit for the purpose of comparing with the maximum limit on deposits Installation and testing charges are one time charges Rs. 4,000 as ceiling Rs. 600 as ceiling Rs. 500 as ceiling Telecom Regulatory Authority of India Page 47 of 103 http://www.trai.gov.in/order.html 2/25/2003 (3.d.ii) ISDN PC Card (3.d.iii) ISDN Feature Phone (3.d.iv) Terminal Adopter (3.d.v) ISDN PBX per port (3.d.vi) G4 Fax Terminal (3.d.vii) Videophone

(4) Monthly Rental for ISDN Equipment (optional) (4.a) Ordinary ISDN Phone (4.b) ISDN PC Card (4.c) ISDN Feature Phone (4.d) Terminal Adopter (4.e) ISDN PBX per port (4.f) G4 Fax Terminal (4.g) Videophone Rs. 275 as ceiling Rs. 400 as ceiling Rs. 550 as ceiling Rs. 475 as ceiling Rs. 800 as ceiling Rs. 6,000 as ceiling Rs. 1,350 as ceiling The rates for monthly rental for individual ISDN equipment are applicable only if the equipment is hired from the service provider Rs. 550 as ceiling Rs. 800 as ceiling Rs. 1,100 as ceiling Rs. 950 as ceiling Rs. 1,600 as ceiling Rs. 12,000 as ceiling Rs. 2,700 as ceiling

(5) Monthly Rental for Access (5.a) For PRA A ceiling of Rs. 5,000 per month upto 3 kms and Rs. 2,000 for each additional km or part thereof Telecom Regulatory Authority of India Page 48 of 103 http://www.trai.gov.in/order.html 2/25/2003 (5.b) For BRA

(6) Usage Charges For every B channel

(7) Rental for supplementary services (7.a) Direct Dialing in (7.b) Calling Line Identification Presentation (CLIP) (7.c) Line Hunting (7.d) Closed User Group (CUG) (7.e) Advice of Charge (7.f) User to User Signalling

(8) Minimum period of hire for temporary ISDN connection Rs. 1,000 as ceiling Rates as applicable to PSTN as ceilings. There shall be no minimum usage charge Any change in the PSTN tariff will automatically imply a corresponding change in the usage rate applicable for every B channel NIL NIL NIL NIL NIL NIL One month Telecom Regulatory Authority of India Page 49 of 103 http://www.trai.gov.in/order.html 2/25/2003 Schedule VI Internet

(9) Rental for temporary ISDN connection (9.a) For PRA (9.b) For BRA

(10) Surrender before provision

11. Security Deposit for equipment hired from the Basic Service Provider

(12) All other matters relevant to tariff, including billing cycle One month A ceiling of Rs. 10,000 per month upto 3 kms and Rs. 4,000 for each additional km or part as thereof Rs. 2,000 per month as ceiling Actual expenses incurred are chargeable The security deposit cannot exceed the equipment's prevailing market price Forbearance ITEM TARIFF

(1) Date of implementation 01 April, 1999 Telecom Regulatory Authority of India Page 50 of 103 http://www.trai.gov.in/order.html 2/25/2003

(2) Tariff for all Internet Services other than Internet Leased Circuits (Port Charges)

(3) Charge for Internet Leased Circuits (Port Charges)

(4) All other matters relevant to Internet Tariff, including billing cycle Forbearance Speed Tariff as Ceiling (Rs. Lakhs per annum)

2.4 Kbps 0.7

9.6 Kbps 2 .5 64 Kbps 5 128 Kbps 7.6 256 Kbps 10.5 512 Kbps 15.1 1 Mbps 25.1 2 Mbps 41.8 Forbearance Telecom Regulatory Authority of India Page 51 of 103 http://www.trai.gov.in/order.html 2/25/2003 Schedule VII Value Added Services Schedule VIII Telex and Telegraph Services ITEM TARIFF

(1) Date of implementation 01 April, 1999

(2) Value Added Services These services include inter-alia, i. Electronic Mail ii. Voice Mail iii. Closed Users Group Domestic 64 Kbps Data Network via INSAT Satellite System iv. Videotex Service v. Video Conferencing

(3) All matters relevant to tariff, including billing cycle Forbearance ITEM TARIFF

(1) Date of implementation

(2) All matters relevant to tariff 01 April, 1999 Forbearance Telecom Regulatory Authority of India Page 52 of 103 http://www.trai.gov.in/order.html 2/25/2003 Schedule IX Global Mobile Personal Communication by Satellite (GMPCS) ANNEX A EXPLANATORY MEMORANDUM A. INTRODUCTION

1. This Order is the culmination of a process, both extensive as well as intensive, which involved two Consultation Papers (one on concepts, principles and methodology, and the other containing tariff proposals for various telecom services), written & oral comments on these papers and Open House Meetings in different parts of the country. The Authority consulted with all stakeholders in the sector, including service providers, consumers, potential investors, Ministry of Communications, and Members of Parliament. On some of the issues involved, other Telecom Regulatory Bodies and international experts were also consulted. In arriving at the decisions contained in this Order, the Authority gave serious consideration to all comments, including those contained in the Report of the Lok Sabha's Standing Committee on Communications (hereinafter "Standing Committee") that addressed the Authority's tariff proposals.

ITEM TARIFF

(1) Date of implementation

(2) All matters relevant to Tariff, including billing cycle 01 April, 1999 Forbearance Telecom Regulatory Authority of India Page 53 of 103 http://www.trai.gov.in/order.html 2/25/2003

2. The purpose of this Memorandum is to lend clarity and transparency to this Order and give reasons for decisions taken with regard to tariffs. The Authority wishes to emphasize that this Order is only a first step in the process of tariff reform which is essential to prepare for competition and for introduction of new services. Without such tariff reform, telecom development, in particular for basic services, is not sustainable. The revised tariffs will not only reduce the vulnerability of the incumbent basic service provider (DOT) to competition, but will also provide adequate resources for the DOT to achieve its network expansion. These tariffs will also sustain the viability of the new entrants in different service areas.

3. Through this Order, the Authority also wants to send a signal to investors in this sector about the direction of telecom pricing reform, the main elements of which will be:

tariffs will be further re-balanced towards costs while emphasizing the social objective of encouraging low users of telecom to get connected and use the system more intensively;

and, service providers, and through them customers, will be provided enhanced flexibility for pricing and giving alternative tariff packages to customers.

1. Universal Service Obligations (USO) will be dealt with separately. The Authority is working on estimating the costs of USO, and ways in which the same could be met. A Consultation Paper on this issue will be released later this year.

2. The various comments and consultations held by the Authority clearly reflected that differing, and sometimes conflicting, objectives were emphasized by different stakeholders. For example, several customer groups felt that the surplus of the Department of Telecommunications (hereinafter "DOT") was inordinately high at about Rs. 7,000 crores in 1997-98, and should be scaled down so as to avert any need for a price increase. In contrast, the DOT, and even the Standing Committee, were not in favour of reduction in this surplus on the grounds that it was needed for expansion of the telecom network. The Authority has examined the various concerns, including mutually conflicting ones, and has come out with what, in its view, is a balanced tariff package which lays the foundation for achieving the main objectives of consumer protection on the one hand, and, network expansion and viability of the industry, on the other.

3. The Authority has addressed the concerns of subscribers, including those raised specifically with regard to rural subscribers. The aim has been to reduce the burden of adjustment on low users of basic telecom in comparison to the proposals contained in the Authority’s Consultation Paper of 9 September, 1998 (Consultation Paper No. 98/3; hereinafter "Second Consultation Paper").

Moreover, the Authority has emphasized the provision of shared access, including through franchisee EPABX, which will imply rentals lower than those specified for Direct Exchange Lines (DELs) in most cases. Further, flexibility has been provided to the service provider to offer any alternative rental, call charge, and/or free call allowance in addition to those specified by the Telecom Regulatory Authority of India Page 54 of 103 http://www.trai.gov.in/order.html 2/25/2003 Authority. Such flexibility will be beneficial to both subscribers and service providers.

4. The tariff re-balancing exercise also has to be seen in the context that:

Tariffs have not increased since early 1993, while consumer incomes and prices have risen substantially since then;

Affordability implies not just a consideration of tariffs for rentals and local calls but also long distance calls;

Tariffs for long distance calls will decrease for three reasons (i.e. extension of the local area to become co-terminus with SDCA as a result of the DOT’s Order implemented on 15 August, 1998, the treatment of calls to adjacent SDCAs as equivalent to local calls under that Order, and the reduction under this Order of STD calls to distances "above 20 and up to 50 kms" so that these calls are charged at the rate for local calls);

The tariff decrease for long distance calls would benefit in particular rural subscribers because a larger portion of their calls are long distance calls;

The reduction of long distance call charge will also benefit those making calls from STD PCOs/VPTs. These are mainly the less well to do users of telecom. It is noteworthy that about 30 per cent of revenues from STD calls are contributed by STD PCOs/VPTs.

1. The Authority believes that the tariffs are fair also to the service providers, and will ensure their viability. It is true that the DOT surpluses are significant but the Authority’s opinion is that at the present stage of India’s telecom development, it is necessary for the DOT to have substantial surpluses for expanding the network and to meet other social obligations.

2. The present exercise was based on information which was not adequate to make detailed estimates of some elements. The process, based on better data inputs, will have to be refined in the future, in particular to determine cost based access or interconnection charges. Such charges need to be decided for a more complete treatment of interconnection, and will be a crucial input also to prepare for any liberalization of the long distance sector.

3. The Authority has begun a process to determine these charges, including an exercise to achieve separation of accounts for service providers to obtain more detailed information on the cost base, and achieve greater transparency of operations, especially with regard to cross-subsidization.

4. There is a major disagreement between the Authority and the DOT on the revenue implications of the tariffs for basic services (excluding ISDN) specified in this Order. The DOT is of the opinion that price decreases in domestic long distance and international calls will not give rise to any increase in volume of these calls, while the Authority expects there to be a substantial volume response to such price decreases. More details on this matter are provided later in this Memorandum.

5. The Authority will monitor and assess the situation regarding revenues after the implementation of the new tariff regime. In particular, the Authority will follow the situation for basic services, and compare the Telecom Regulatory Authority of India Page 55 of 103 http://www.trai.gov.in/order.html 2/25/2003 actual revenues with its own projections of the revenue implications for the DOT. If the actual scenario at the end of first year turns out to be significantly different from the one envisaged by the Authority, the situation will be reviewed and necessary corrective measures taken.

6. Section B of this Memorandum addresses certain general aspects which apply to more than one category of service. This is followed by Section C which addresses the specific items covered in various Schedules of this Order. It begins with a discussion of the Schedule on basic services (excluding ISDN), followed by cellular mobile telecom services, radio paging services, leased circuits, ISDN services, internet, value added services, telex and telegraph services, and Global Mobile Personal Communication by Satellite.

B. GENERAL ISSUES

7. A number of issues addressed in the Order pertain to more than one service, e.g. definition of tariff, reporting requirement, transparency and customer protection, deposits, registration and installation charge, flexibility granted to the service provider in fixing tariffs, and peak and off-peak hours. These are addressed in this scenario.

Coverage of the term "tariff"

8. It may be recalled that the term "tariff" is defined in the Order and includes charges as well as related conditions and free call allowance.

Different types of tariff specifications

9. Broadly, there are three types of tariffs specified in the Order:

An amount or level is specified for certain tariffs (for example, rentals, call charges and free call allowance);

A tariff ceiling for some others, such as deposits or registration charges;

Tariff forbearance for others, i.e. at present, the service provider has the freedom to apply any tariff.

Flexibility of Tariffs, Standard Tariff Package and Alternative Tariff Packages

1. It is mandatory that options offered to a subscriber include a tariff package that is specified in the schedules: such tariff package(s) are defined as "standard tariff package(s)". In addition, a service provider will be free to offer alternative tariff packages in which:

Any alternative tariff is allowed for those items for which the Authority has specified tariffs as amounts or levels;

With regard to items for which tariffs are specified as ceilings, tariffs in the alternative package are also constrained by the specified ceilings;

Service providers are free to offer any tariff for items subject to forbearance;

Telecom Regulatory Authority of India Page 56 of 103 http://www.trai.gov.in/order.html 2/25/2003 Subscribers shall have the freedom to choose among the available tariff packages, including the standard tariff package.

1. Forbearance has generally been applied to tariffs for:

Value added services, and other services with competitive markets;

New or emerging services; and, Services which require to be studied further.

Reporting Requirement and Intervention by the Authority

1. Tariff flexibility provided to service providers is subject to two types of safeguards in the Order:

the requirement that all tariffs (including in the alternative tariff packages or those subject to forbearance), and any subsequent changes in them, are notified to the Authority five working days prior to implementation;

the Authority’s right to intervene and alter any tariff at any time, either suo moto or on the basis of a reference to it from any affected party.

Transparency for the Customer

1. The Order also provides that subscribers (including potential subscribers) are provided information on tariffs (including terms and conditions) through publication of these tariffs in a specified format(s). These publications should also include a comparison of the standard and alternative tariff packages.

2. In this regard, another significant condition specified in the Order is that service providers shall not discriminate between subscribers of the same class.

Registration Charge, Installation Charge, and Deposits

3. It is important that the conditions of access to the network do not constrain subscribers from getting connected to the network, in particular those providing relatively low revenues. To address the possibility of segmentation of the market in this manner, the prevailing charges for registration and installation have been specified as ceilings.

4. A similar concern has led the Authority to specify that deposits must not exceed twelve months’ rentals, as applicable. In the Second Consultation Paper, the Authority had recommended that interest be paid on these deposits. This Order has not done so for two reasons. One, for a large proportion of subscribers, i.e. those making 1,000 metered calls bi-monthly and which account for above 70 per cent of the total, the specified rental is much lower than that proposed in the Consultation Paper. Hence, there is already a considerable reduction in rentals compared to the proposed rentals for these subscribers.

Secondly, payment of interests will impose substantial financial burden on the service providers. An alternative way of providing financial return on deposits is to lower the price of access or use for the subscriber. Such a policy has been adopted in the Order.

Telecom Regulatory Authority of India Page 57 of 103 http://www.trai.gov.in/order.html 2/25/2003

5. There are certain exceptions to the policy enunciated above:

tariff forbearance has been specified regarding installation charge and deposit for fixed line telephony using wireless in local loop technology. For this technology, the installation charge could involve a higher cost than for other technologies, and hence flexibility for the service provider. For deposits, the flexibility is to help offer quick connections to those subscribers who wish to get linked quickly, but such flexibility is provided in effect for only one year;

tariff forbearance has been specified for deposits for STD/ISD calls. These calls are likely to provide high revenues for service providers and they would therefore not fix too high an amount for such deposits. In any event, the deposits are also subject to reporting requirements and the possibility of review by the Authority.

1. The Authority recognizes that the above-mentioned safeguards could be diluted by tariffs specified for items for which tariff forbearance has been specified. However, the two safeguards, including the reporting requirement, will be used to address any such situation.

Peak hours/Off-peak hours

2. The Authority has specified tariffs only for peak hours and not off-peak hours. Thus, it is necessary also to clarify the duration and timing of peak and off-peak hours.

3. In the Second Consultation Paper, for basic and cellular mobile services, the Authority had proposed peak hours for 8 hours during a calendar day, leaving the service providers free to decide the timings thereof. During consultations, basic service providers sought at least 11 hours as peak hours for domestic long distance calls (i.e. the present situation), and pointed out that at present the duration of peak hours for international calls was 17 hours. Cellular mobile service providers asked for 12 hours as the duration of peak hours.

4. Based on these consultations and to foster higher usage, a total of 11 hours per calendar day has been specified as peak hours for domestic long distance and international calls, and for cellular mobile service.

5. In the case of domestic long distance, an exception is made for the first distance slab, i.e. 0 to 50 kms., for which the call charge is same as for local calls. Service providers have the option of not giving any off-peak hours for this distance slab, similar to the situation for local calls.

Telecom Regulatory Authority of India Page 58 of 103 http://www.trai.gov.in/order.html 2/25/2003

6. Further, the service provider is given flexibility to decide which hours of the day will be treated as off-peak hours. Any such decision on the timings for peak hours shall apply to all the distance slabs other than 0 to 50 kms.

7. For international calls also, the service provider has been provided with the flexibility of choosing the timings of peak hours. In addition, the service provider may have separate timings for peak hours for each of the three country categories mentioned in the Schedule.

8. For domestic long distance (except distance slab 0 to 50 kms.) and international calls, and for cellular mobile service, off-peak tariffs have to be provided for the entire calendar day on Sundays, and on three national holidays, i.e. 26th January, 15th August, and 2nd October.

9. Tariffs for off-peak hours have to be less than the corresponding tariffs for peak hours. The exact level of such tariffs has been left to the service providers to decide.

C. ISSUES SPECIFIC TO SERVICE SECTORS

(1) Certain General Issues Relating to Basic Services (Excluding ISDN)

10. In addition to the general issues mentioned above, certain matters were raised regarding basic services (excluding ISDN) with a focus wider than any specific tariff item. These were: whether there is a need to re-balance tariffs for basic services, affordability of the revised tariffs, and revenue implications for basic service provider.

(a). Whether there is a need to re-balance tariffs Telecom Regulatory Authority of India Page 59 of 103 http://www.trai.gov.in/order.html 2/25/2003

11. Re-balancing of tariffs involves reducing tariffs which are above costs while increasing those below costs.

Thus, re-balancing implies a reduction in the extent of cross-subsidization within the basic services sector. Such a rationalization is required as a condition precedent to conversion of a single operator system into a multi-operator one. This was recognized, inter-alia, even in the initial phase of the Authority’s consultations on telecom tariffs. The views expressed in these consultations showed a consensus in favour of re-balancing tariffs for basic services.

12. Subsequently, when specific proposals on re-balancing were made by the Authority in its Second Consultation Paper, there were some who opposed any re-balancing at present. Several comments were in favour of re-balanced tariffs provided improvements were made in the quality of service. In this regard it is worth noting that the Authority has commenced its consultation process on quality of service parameters, and will in due time specify quality parameters and the process for ensuring that they are implemented.

13. Those opposing re-balancing of tariffs for basic services did so mainly on four grounds:

If tariff re-balancing is required to address the situation of competition, it should not be carried out because for some years there is unlikely to be any competition in basic services;

The DOT was earning huge surplus and this should be passed on in the form of lower tariffs for all services, instead of re-balancing tariffs which involves an increase in certain tariffs;

The reduction in domestic long distance and international call charges adversely affects revenue earnings;

Re-balancing tariffs involves an increase in rentals, which makes it more expensive for subscribers to join the network. This would in turn adversely affect teledensity and growth of telecommunications in India.

1. The Authority has considered the pros and cons of undertaking tariff re-balancing now. It came to the conclusion that tariff re-balancing cannot be achieved in one step, and further that the first step in this regard cannot be postponed if the policy of introducing private service providers has to succeed. In fact, the Authority believes that this should have been undertaken even before introducing competition in this sector. The growth and development of this sector will not be sustainable without this reform (see below).

Presence of competition

2. According to the IXth Plan, the private sector is expected to provide more than 13 per cent of the DELs by 2001-2002. By 2006-2007, this share is expected to be 30 per cent. Even if the estimate of 13 per cent is an optimistic one, private sector share of the DELs will not be insignificant, as shown below, with regard to competitive pressure on the incumbent’s revenues and surplus.

3. The downwards pressure on revenues and surplus of the incumbent service provider will be stronger when the long distance segment of basic services is liberalized. In that situation, the long distance service provider will be exclusively focusing on those subscribers providing relatively high revenues and surplus. To address that situation and to sustain the viability of the established basic service providers after liberalization of the long distance segment, it will be necessary to further re-balance tariffs.

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4. Substantial competition for the incumbent’s market share is also envisaged in the draft Telecom Policy 1999, which indicates that competition to basic service providers will arise not only from other basic service providers but also from those providing other services (including, for instance, internet service providers).

Competition and possibility of maintaining high prices

5. It is not possible to have healthy competition in any market and sustain prices which are substantially above costs, such as India’s tariffs for long distance and international calls. The practical consequence of such pricing regime will be to draw the attention of the competitor towards weaning away subscribers making such high priced calls, and hence to "cream skim" the market. Such a likelihood is particularly high when a very small subscriber base accounts for a large share of call revenues. This is the situation in India, where 2.7 per cent of suscribers account for 46 per cent of the call revenue, and 5.2 per cent subscribers account for about 56 per cent of call revenue (see Table 1). The contribution of these subscribers to surplus is likely to be even larger. This shows that the incumbent is highly vulnerable to loss of these subscribers, and loss of these high revenue subscribers to competitors will seriously affect network expansion.

Table 1. Share of subscribers making total number of calls, 1996-97 Number of bimonthly metered calls à 0 1 to 150 151 to 500 501 to 1,00

(a) Share of total subscribers making calls bimonthly (%)

4.2 12.6 34.9 21.3 Telecom Regulatory Authority of India Page 61 of 103 http://www.trai.gov.in/order.html 2/25/2003 Source: DOT Note: This is based on data from large cities. According to the DOT, the shares are similar for a larger sample of subscribers.

6. Addressing the potential loss of revenue and surplus base due to competition requires reducing the charges for long distance and international calls. In any event, if prices are flexible, competition for this "creamy layer" of subscribers will involve a reduction in these tariffs. If the only tariff change is a reduction in these tariffs, it will imply a loss of revenue and surplus base, mitigated to some extent by the increase in volume due to the price decline. Making up for the revenue loss requires that certain other tariffs have to increase, i.e. those tariffs which are below costs or are not high enough to attract competition from other operators. This is the process of tariff re-balancing.

7. The need for tariff re-balancing arises also for another reason, namely, the ongoing decline in the accounting rates applied to international calls. With reduction in these rates, and the consequent fall in international call charges, pressures will generate for making a compensating increase in local call charge and/or rentals.

8. Two important considerations provide limits to any tariff re-balancing exercise, namely, affordability of the revised tariffs, and the need to ensure that the revenue base is not reduced so much that the development plans for the sector are jeopardized. Both these limitations, addressed in greater detail below, influenced the Authority’s decision in specifying tariffs in this Order. For example, even after the full implementation of the new tariffs, the ratios of long distance and international calls to local calls for India will remain very high in comparison to those prevailing in certain countries where substantial tariff re-balancing has already taken place (see Table 2 below).

Table 2. Ratio of upper end of charges for domestic long distance calls and international calls to local calls

(b) Share of total metered calls by the subscriber categories given in row (a) above (%) 0 0.7 7.4 10 Telecom Regulatory Authority of India Page 62 of 103 http://www.trai.gov.in/order.html 2/25/2003 Source: Tables AII.4 and AII.25 of the Second Consultation Paper; and discussions with the Telecom Regulator for South Africa.

(b). Affordability of Tariffs

9. Specified tariffs have been so devised as to mitigate the effect of adjustment, in particular for low callers, and to continue giving an impetus to increased teledensity. In addition, the Authority would encourage greater promotion of shared access to the network (including through franchisee EPABX), greater promotion of the PCO network, and improving the quality of service available to subscribers.

10. The Authority is of the considered opinion that the specified tariffs will not have any adverse effect on affordability. A number of factors relevant in this context have been mentioned earlier. In addition, since 1993, incomes have risen, and a reduction in long distance call charge increases affordability, particularly for rural subscribers and those using STD PCOs/VPTs. Furthermore, call charges under this Order will remain unchanged (for local calls) or will decline (for STD/ISD) during the next three years, while incomes will continue increasing. For more than 70 per cent of the subscribers, i.e. those at present making up to 1,000 calls bi-monthly, rentals will remain unchanged for the next three years. Affordability will therefore improve for these subscribers during the next three years.

Ratio of: India India UK Present New Charge for highest domestic long distance call to charge for three minute local call 90 (150, with five minute local call) 52 10 Charge for highest international call charge to charge for three minute local call 180 (300, with five minute local call) 101 20 Telecom Regulatory Authority of India Page 63 of 103 http://www.trai.gov.in/order.html 2/25/2003

11. While it is clear from the above that affordability has increased for those using STD PCOs/VPTs, for others an assessment of affordability requires a consideration of the impact on the bills of subscribers, in comparison to their incomes. However, certain complications are introduced in any such comparison because of the extension of local call area and due to this Order specifying that local call charge will apply to STD calls up to a distance of 50 kms. These changes imply that with an average call holding time less than three minutes, a metered call after implementation of this Order will in all likelihood be equivalent to more than one metered call under the present tariffs. For example, previously one call of just less than three minutes for the distance range 36 to 50 kms. counted as five local calls. With the revised tariffs, such a call will be equivalent to only one local call.

Estimates of the Bills Due to the New Tariffs

12. Any comparison of the present bills and those arising due to the new tariffs must also bear in mind the possibility of reducing expenditures for low users through the option of shared access. In addition, the tariff policy under this Order provides for a possibility of different tariff packages that can be used by the service provider to address particular needs of certain low users. The Authority has also kept in view the provision of high quality PCO services.

13. The Tables below give certain illustrative monthly charge for two subscriber categories, i.e., those in rural areas currently paying the lowest rentals, and those in metro areas.

Table 3. Monthly Charges For Rural Subscriber At Present Paying Bi-Monthly Rental of Rs. 100 No. Of Metered Calls Bi- Monthly Equivalent to Number of Metered Calls Per Day (First column divided by 60) Present Monthly Charge (Rs.)

Monthly Charge With New Tariffs (Rs.)

120 2.00 50 70 150 2.50 50 70 200 3.33 50 90 250 4.17 50 110 Telecom Regulatory Authority of India Page 64 of 103 http://www.trai.gov.in/order.html 2/25/2003 Note: Impact of new tariffs on subscriber’s monthly charge is calculated under the assumption that no long distance calls are being made. With such calls, the bill under new tariffs will be lower than shown in the Table. For general subscribers, i.e. those making more than 1,000 metered calls bi- monthly, compared to the estimates in the Table, monthly bills will be Rs. 25 more in second year and Rs. 50 more in the third year of implementation. The charge above does not include service tax.

Table 4. Monthly Charges For Metro Subscribers 300 5.00 65 130 350 5.83 80 150 400 6.67 95 170 450 7.50 110 190 500 8.33 130 210 600 10.00 180 250 700 11.67 230 290 800 13.33 280 330 900 15.00 330 370 1000 16.67 380 410 2000 33.33 1,005 1,010 3000 50.00 1,705 1,610 4000 66.67 2,405 2,210 5000 83.33 3,105 2,810 Telecom Regulatory Authority of India Page 65 of 103 http://www.trai.gov.in/order.html 2/25/2003 No. Of Metered Calls Bi- Monthly Equivalent to Number of Metered Calls Per Day (First column divided by 60) Present Monthly Charge (Rs.)

Monthly Charge With New Tariffs (Rs.)

120 2.00 190 250 150 2.50 190 265 200 3.33 210 290 250 4.17 230 315 300 5.00 250 340 400 6.67 290 390 450 7.50 310 415 500 8.33 330 440 600 10.00 380 490 700 11.67 430 540 800 13.33 480 590 900 15.00 530 640 1000 16.67 580 690 Telecom Regulatory Authority of India Page 66 of 103 http://www.trai.gov.in/order.html 2/25/2003 Note: Impact of new tariffs on subscriber’s monthly charge is calculated under the assumption that no long distance calls are being made. With such calls, the bill under new tariffs will be lower than shown in the Table. For general subscribers, i.e. those making more than 1,000 metered calls bi-monthly, compared to the estimates in the Table, monthly bills will be Rs. 30 more in second year and Rs. 60 more in the third year of implementation. The charge above does not include service tax.

14. As expected in a tariff re-balancing exercise with high long distance and international call charges and low rentals and local call charges, subscribers making fewer number of metered calls experience an increase in bills and subscribers making larger number of calls, reduction in their bills.

15. The above estimates of monthly bills due to new tariffs can be considered together with the estimates of the proportion of households which can afford specific levels of monthly expenditure on telecom. These are given in the next section, where the data and analysis suggests that, for example, 42 per cent of rural households will likely be in a position to afford making up to 300 calls bi-monthly (or 150 calls monthly).

And these calls are in effect larger in number than the equivalent number of calls in the previous situation because of the extension in local call area and reduction in long distance call charges.

Similarly, in the metro area, 37 per cent of the households are likely to be able to afford a telephone, and about 17 per cent likely to be able to afford up to 400 calls bi-monthly (or 200 calls monthly). Since incomes will keep increasing during the next three years but tariffs for these households will remain unchanged, a larger proportion will be able to afford these number of calls. This suggests that with a present teledensity of 2 per hundred in India, there is likely to be adequate demand for basic services under the new tariff regime.

Income Levels of Households

16. Affordability of telecom tariffs depends on income levels, the proportion of income normally spent on telecom (i.e. income "available" for spending on telecom), and the amount of monthly charges in comparison with the income "available" for spending on telecom.

17. The National Council for Applied Economic Research (NCAER) has conducted a survey which, inter-alia, covers changes in Indian rural and urban household incomes over time. This survey brings out that there has been a substantial increase in household incomes over time, both for urban and rural households.

The survey also gives information on the proportion of total households with different income levels.

2000 33.33 1,205 1,290 3000 50.00 1,905 1,890 4000 66.67 2,605 2,490 5000 83.33 3,305 3,090 Telecom Regulatory Authority of India Page 67 of 103 http://www.trai.gov.in/order.html 2/25/2003 Table 5. Average Annual Growth of the Household Membership of Different Income Categories, 1992-93 to 1995-96 Source: From Table 3.3 of I. Natarajan, 1998, India Market Demographics Report, 1998, NCAER, New Delhi.

18. The income levels in the NCAER analysis are in terms of 1995-96 prices. To obtain a more accurate current picture with regard to affordability of tariffs, these levels need to be adjusted by a factor showing an increase in nominal income for 1998-99 or 1999-2000. We consider here a factor of about 25 per cent (an underestimate) to get the equivalent income levels in terms of 1998-99 prices.

Category of Monthly Income at 1995-96 prices Average Annual Growth Rate of Urban Households (%) Average Annual Growth Rate of Rural Households (%) Up to Rs. 2,083 per month - 7.03 % - 3.03 % From Rs. 2,083 to Rs. 4,166 per month + 5.46 % + 10.22 % From Rs. 4,166 to Rs. 6,416 per month + 11.96 % + 3.11 % From Rs. 6,416 to Rs. 8,833 per month + 11.90 % + 12.25 % Above Rs. 8,833 per month + 18.22 % + 15.68 % Telecom Regulatory Authority of India Page 68 of 103 http://www.trai.gov.in/order.html 2/25/2003 Table 6. Proportion of Households in Urban and Rural Areas in Different Income Groups, 1998-99 Source: Based on Table 3.2 of I. Natarajan, 1998, India Market Demographics Report, 1998, NCAER, New Delhi.

19. The income levels for different household categories in the Table above are estimated for 1998-99 prices, but the share of households for these income levels are those for the year 1995-96. Since incomes have been increasing over time, the actual share of households in higher income slabs will be more than the shares depicted in the Table. This underestimation of the share of households in higher income groups would increase if we consider the income levels in terms of 1999-2000 prices, i.e. in terms of the prices in the first year of implementation of the new tariffs.

Affordable Monthly Bills Calculated on the Basis of Share of Income Spent on Telecom

20. To get a better idea about affordability, income levels have to be combined with the proportion of income Monthly income levels (Rs., estimated 1998-99 prices ) Up to Rs.

2,600 per month

27.9 % 57.2 % From Rs. 2,600 to Rs. 5,200 per month

34.9 % 29.0 % From Rs. 5,200 to Rs. 8,000 per month

20.3 % 8.6 % From Rs. 8,000 to Rs. 11,000 per month

9.6 % 3.1 % Above Rs. 11,000 per month

7.3 % 2.0 % Telecom Regulatory Authority of India Page 69 of 103 http://www.trai.gov.in/order.html 2/25/2003 spent on telecom. Specific information on this aspect is not available for India. The International Telecommunications Union has estimated that on average households spend 5 per cent of their incomes on telecom in developing countries (see for example, page 36 of ITU, "World Telecommunication Development Report 1998"). This provides us with a basis to calculate the amount of monthly expenditure on telecom by the income categories given above. Alternatively, five per cent of the monthly income levels in the Table above shows the amount of monthly bills that households with the above income levels are likely to find affordable (see Table below for this estimate). However, since income levels are increasing, the estimates of households with capacity to pay specified levels of monthly telecom bills are likely to be under-estimates of the situation in 1999-2000.

Table 7. Estimated distribution of households with capacity to pay various levels of monthly telecom bills Monthly Telecom Billss (Rs., 1999- 2000 estimates) Share of urban households with estimated capacity to pay the monthly bill (%) Share of rural households with estimated capacity to pay the monthly bill (%) Up to Rs. 130 per month

27.9 % 57.2 % From Rs. 130 to Rs. 260 per month

34.9 % 29.0 % From Rs. 260 to Rs. 400 per month

20.3 % 8.6 % Telecom Regulatory Authority of India Page 70 of 103 http://www.trai.gov.in/order.html 2/25/2003

21. At present, total teledensity in India is estimated at 2 per hundred, while that of the rural areas is about

0.4 per hundred. Taking average household size into consideration, the above estimates and the bills arising from the new tariffs suggests that there is likely to be more than adequate demand for the telephone service provided at present and planned for the near future.

(c). Revenue implications of the specified tariffs

22. With regard to revenue implications, there were two dominant views expressed in various comments.

One, expressed by service operators, most importantly the DOT, was that there will be a decline in revenues due to the tariffs that were proposed by the Authority. The other view, expressed mainly by consumers, was that there should be a decrease in revenues of the DOT because it had a high surplus and some of it should be passed on to the subscribers. In contrast, the DOT argued that in effect there is no surplus because all its funds are re-invested to extend the network.

23. The Authority is of the view that one must distinguish between a surplus and its use. Thus, the DOT has a particular surplus, which it then utilizes for specified expenses. The Authority recognizes that the DOT has to play a major role in the development of India’s telecom network , and it should have sufficient resources for that purpose. According to the Authority’s estimates of the effect of new tariffs, resources available with the DOT will be sufficient to finance, without resort to excessive market borrowing, their expansion programmes which are envisaged in the Perspective Plan for the years 1997-98 to 2006-2007 (see below for details).

24. Before considering the effect of new tariffs on DOT’s revenues, it is necessary to consider the estimates of DOT anticipated revenues if prevailing tariffs were to continue for the next three years. These amounts are estimated as follows, using assumptions similar to those underlying the DOT’s calculations provided to the TRAI.

Table 8. Projected Revenues for DOT Under Prevailing Tariffs (i.e. Current Tariffs Being Maintained Also for Next Three Years) From Rs. 400 to Rs. 550 per month

9.6 % 3.1 % Above Rs. 550 per month

7.3 % 2.0 % Telecom Regulatory Authority of India Page 71 of 103 http://www.trai.gov.in/order.html 2/25/2003 Comparison of DOT’s and TRAI’s estimates of revenue implications of the new tariffs

25. The DOT has provided the Authority with its estimate of the revenue implications of the new tariffs for the next three years. These estimates are based on the premise that the decrease in tariffs for domestic long distance and international calls will not result in any increase in the volume of these calls. Such an assumption tantamounts to suggesting that the Indian subscribers is price insensitive, even when the extent of tariff decline is substantial. Though there is no direct evidence of the price response of Indian subscribers, there is some anecdotal evidence which suggests that the volume response to price decline will be substantial. In fact, even the DOT in its presentation before the Standing Committee had acknowledged that there may be a volume increase of 10 to 25 per cent due to the decline in tariffs proposed by the Authority. In specific, the Report of the Standing Committee states at paragraph 16 that:

"The Committee desired to know the basis for this optimism. In reply representative of the DOT stated in evidence that Demand cannot ri

The Telecommunication Tariff Order 1999

The enactment

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