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Govt should allow Internet voice telephony, says top panel

A blue-ribbon panel advising the prime minister on economic issues has recommended that the government allow voice telephony over the Internet to bring down costs for users.

Voice telephony over the Internet is now banned by the government, and analysts say if allowed, it could seriously threaten revenues of state-run monopoly overseas telephony provider Videsh Sanchar Nigam Ltd (VSNL).

Over 90 per cent of VSNL's revenues currently come from international voice traffic.

The prime minister's Economic Advisory Council (EAC), comprising the Reserve Bank of India (RBI) governor Bimal Jalan and other top economists, has urged the government also to cut the licence fees paid by private telecom firms.

"The existing level of licence fees, levied as revenue sharing fees, will not be sustainable," the panel said.

"The government must make clear that it only expects to meet administration and regulatory costs...and that it is not interested in mopping up rents," it said in a report released this week.

PAY PERCENTAGE

Private operators in the fixed line telephony and cellular businesses pay 12 per cent of revenues as licence fees. The charges were cut from 17 per cent last month for cellular firms.

The panel said a cut in licence fees would not result in a bonanza for private investors as competition would ensure that private firms passed on the benefits to consumers.

The report, submitted to Prime Minister Atal Bihari Vajpayee on Monday, is seen by industry officials as significant as most of the reforms in the telecoms sector have been spearheaded by the PMO.

A new telecoms policy announced by the government in 1999 policy replaced the earlier fixed licence fee system with the revenue sharing system.

Led by the PMO, the government has dismantled a number of controls in the sector. It has thrown open domestic long distance telephony for private operators and also advanced the date for ending VSNL's monopoly over international telephony by two years to April 2002.

The panel added that it would get increasingly tough for the country to continue with its system of cross-subsidising cheaper local calls with high tariffs on long distance calls.

"As the coverage of telecom expands over time, a high proportion of new users would be smaller users. As the sector is unbundled, it will be increasingly difficult to cross-subsidise local services from long distance services," the panel said.

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