The Telecom Regulatory Authority of India has proposed reducing the entry fee for various licenses and services and rationalising bank guarantees that service providers pay to the government. The entry fee is a one-time payment that companies must pay when entering the Indian telecom market, and varies with the type of service they offer. Bank guarantees act as backups or contingent payments that the government can encash in case a company fails to meet the licence conditions. Mint explains the development.
Why does TRAI want to reduce the entry fee?
The entry fee is usually non-refundable and is part of a firm’s startup costs. It varies with the type of service that the company wants to offer. For instance a unified license, which allows all services including mobile telephony, internet broadband and landline services, has a maximum entry fee of ₹15 crore, while a virtual network operator’s entry fee is ₹7.5 crore.
While some telecom service providers have called for the entry fee to be abolished, the telecom regulator has suggested a 50% reduction, saying it could cause more companies to enter the market as service providers, enhancing competition. A reasonable entry fee would maintain a balance between deterring non-serious players and ensuring adequate competition. Livemint