TRAI releases recommendations on "Rationalization of Entry Fee and Bank Guarantees"

The Telecom Regulatory Authority of India (ThAI) has issued the recommendations on "Rationalization of Entry Fee and Bank Guarantees". The Department of Telecommunication (DoT), sent a reference to TRAI seeking, inter alia, the rationalization of entry fees and bank guarantees of the various licenses operating in the telecom sector.

Entry fee is a fixed one-time amount that prospective entrants must pay to enter a market. Entry fees are typically non-refundable and constitute start-up costs for a firm. A bank guarantee is a type of financial instrument to safeguard the interests of the government as it ensures that the licensee pays its dues on time and fulfills their obligations as per the terms and conditions prescribed in the license agreement.

A consultation paper on "Rationalization of Entry Fee and Bank Guarantees" was issued by TRAI on 26th July 2022. Written comments and counter-comments on the consultation paper were invited from the stakeholders by 23rd August and 6th September 2022 respectively.

On the request of the industry associations/stakeholders, the last date for submission of written comments and counter-comments was extended up to 6th September and 20th September 2022 respectively. The authority received 20 comments and 1 countercomment from various stakeholders. An open house discussion was also convened on the issues raised in the consultation paper on 9th December 2022 through video conferencing.

In an environment of rapid technological transformation in the telecommunications sector, in order to facilitate the orderly growth of the telecom sector and ease of doing business, TRAI has made recommendations to the government for reducing the entry fees across various license authorizations and the merging of bank guarantees.

It is expected that reductions in entry fee will lead to the entry of new service providers in the market, increase investment and enhance competition in telecom sector. The merging of bank guarantees will encourage ease of doing business and enable licensees to make investments in the sector thereby ushering the growth in the sector. Both these measures will improve the quality of service and enhance consumer welfare.

The authority has also recommended no entry fee at the time of renewal of license. Such a move will ease the financial burden on existing, as well as new entrants, and will be beneficial for UL (VNO) licensees especially.