Changes to ISP License Agreement in regards to AGR

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Changes to ISP License Agreement in regards to AGR

On 25th October 2021, the Department of Telecommunication vide File No. 820-01/2006-LR(Vol-II) Pt -2 has introduced amendments in Internet Service Provider (ISP) License agreement granted according to the guidelines published on 24.08.2007.

The existing clauses that have gone through the amendments and the changes made to them are given in this blog.

Changes about definition and applicability of Adjusted Gross Revenue

Existing Condition

Part II of the Financial Conditions of the ISP License agreement gives a definition of the Gross Revenue that telecoms can elucidate as below:

Gross revenue includes revenue from  the following sources:

1. Internet Access Service
2. Internet Content
3. Internet Telephony Service
4. Activation Charges
5. Sale, lease or renting of
   • Bandwidth
   • Links
   • R&G Cases
   • Turnkey projects etc.
6. IPTV service
7. Late fees
8. Sale proceeds of terminal equipments
9. Account of interest
10. Dividend
11. Value-added Services
12. Supplementary Services
13. Interconnection Charges
14. Roaming Charges
15. Permissible sharing of Infrastructure
16. And any other revenue from a miscellaneous source without any set-off for the related items of expense etc.

As per the 18.2 of the Financial Conditions given in Part III of the ISP license agreement, Adjusted Gross Revenue is calculated by excluding the following from the Gross Revenue:

1. Service tax paid to the government if the Gross revenue contains components of Sales Tax and Service Tax.
2. Roaming revenue that the licensee passed on to other eligible or entitled telecom service providers.

Amended Condition

As per amendments, part II of financial conditions in the ISP license agreement now redefines Adjusted Gross revenue in addition to adding a new term – Applicable Gross Revenue

Definition of Applicable Gross Revenue: The applicable gross revenue will be equal to Gross revenue minus the revenue from the following sources:

1. Operations other than telecom activities and operations
2. Activities under the permission or license issued by the Ministry of Information and Broadcasting.
3. Receipt of USO fund
4. Income from dividend
5. Income from interest
6. Capital gains on account of Profit of sale of fixed assets and securities
7. Gains from Foreign Exchange rate fluctuations
8. Income from property rent
9. Insurance Claims
10. Recovery of bad debts
11. Excess provisions written back.

Redefinition of Adjusted Gross Revenue: To calculate Adjusted Gross revenue, the DOT will now exclude the following from the Applicable Gross Revenue:

1. Charges to pass through nature paid to other TSPs whose network is interconnected with the licensee’s network.
2. Roaming revenue that the licensee has passed on to other eligible or entitled telecom service providers, and
3. GST – Goods and Services Tax that the licensee has paid to the government if the Applicable Gross Revenue contains the components of the GST.

Conclusion

The goal of introducing these amendments is to make it easy for the telcos to pay their AGR dues. With the introduction of the new Applicable Gross Revenue, the license fee that the telcos have to pay is now far reduced. We will see the larger impact it has on the telecom industry in the future. For now, understand these amendments to better prepare your TSP. 

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