TRAI Unveils Proposals for DTH Service Licensing Fees and Policies

New Delhi, August 21, 2023 – The Telecom Regulatory Authority of India (TRAI) has unveiled a series of recommendations today, addressing critical aspects of “License Fee and Policy Matters of DTH Services.”

The impetus for these recommendations stems from the Ministry of Information and Broadcasting’s (MIB) request, conveyed via letter No. 2/33/2021-BP&L dated February 2, 2022. In response to this request under Section (11)(1)(a) of the TRAI Act, 1997, TRAI has put forth its insights.

The reference made by the MIB pertains to the changes introduced by the Department of Telecommunications (DoT) within the Unified License (UL) Agreement. Notably, DoT’s amendments on October 25, 2021, and October 6, 2021, have strategically redefined the parameters of Adjusted Gross Revenue (AGR) and Bank Guarantee (BG), thus paving the way for structural reform.

Guiding the operations of Direct-to-Home (DTH) services in India are policy guidelines delineating the licensing process. Within this framework, a License Fee (LF) is levied – a non-tax fee which DTH service providers are required to pay as a privilege for conducting licensed activities. These guidelines stipulate that DTH operators should remit an LF, constituting 8% of their quarterly Adjusted Gross Revenue (AGR), to the MIB.

The significance of Bank Guarantee (BG) cannot be underestimated, as it serves as a financial instrument ensuring timely payment of dues by service providers and adherence to license agreement stipulations. The existing DTH guidelines specify an initial BG of Rs 5 crore for the first two quarters, followed by an amount equivalent to LF for two quarters, alongside other unsecured dues.

In response to the aforementioned reference, TRAI presented a Consultation Paper titled “License Fee and Policy Matters of DTH Services” on January 13, 2023. Stakeholders were invited to share their input through written comments and counter-comments by February 27, 2023, and March 13, 2023, respectively. A total of 7 comments and 1 counter-comment were received from diverse stakeholders. These submissions are accessible on the TRAI website, www.trai.gov.in. An Open House Discussion, held via video conferencing on April 20, 2023, further engaged with the issues raised in the Consultation Paper.

Key highlights of the recommendations include:

1. Definition of Gross Revenue (GR): GR encompasses all earnings arising from licensed activities, encompassing various sources of revenue, dividends, rents, and more, without offsetting related expenses.
2. Applicable Gross Revenue (ApGR): This calculation involves reducing the licensee’s total GR by specific items such as DoT-approved activities’ revenue, government reimbursements, and certain other types of income.
3. Excluded Income from GR: The recommendations specify that certain categories of income, like dividend income, interest income, property rent, and more, should be excluded from GR to derive AGR.
4. Adjusted Gross Revenue (AGR): TRAI’s definition of AGR excludes the GST component paid to the government from ApGR.
5. Form-D Revisions: The Ministry of Information and Broadcasting should update Form-D to align with the format prescribed in the recommendations. This form submission process should be digitized and streamlined for convenience.
6. License Fee Evolution: Initially, DTH Licensees are expected to pay an annual license fee equal to 3% of AGR. This fee is projected to diminish over a three-year period until it becomes zero after the financial year 2026-2027.
7. Bank Guarantee Structure: The licensee is advised to submit an Initial Bank Guarantee of Rs. 5 crore for the first two quarters. Following that, the Bank Guarantee should align with the Initial Bank Guarantee or 20% of estimated dues for two quarters, depending on whichever amount is higher.
8. Bank Guarantee Encashment: The licensor holds the right to fully or partially encash the Bank Guarantee if any license condition is breached.
9. Electronic Bank Guarantees: The adoption of electronic Bank Guarantees is encouraged to facilitate smoother business operations.
10. Applicability and Implementation: The recommendations, which include definitions and fee calculation methods, should apply prospectively.

The rapidly evolving landscape of television distribution has accentuated the urgency of measures for the DTH sector. Swift adoption of these recommendations is anticipated to stimulate sector growth and overall progress.

The complete set of recommendations on “License Fee and Policy Matters of DTH Services” is available for reference on the TRAI website, www.trai.gov.in. For further clarifications, inquiries can be directed to Shri Anil Kumar Bhardwaj, Advisor (B&CS), reachable at advbcs-2@trai.gov.in or +91-11-23237922.