Internet gateways propose 40% tariff cut: How it may benefit broadband users

International Internet Gateways (IIGs), which supply bandwidth to last-mile internet service providers (ISPs), have proposed a tariff cut of around 40% and expressed the hope that the reduction will help lower the retail price of broadband internet.

In a letter to the Bangladesh Telecommunication Regulatory Commission (BTRC) on 29 October, the International Internet Gateway Association of Bangladesh (IIGAB) said the existing tariff effective for private IIGs from September 2021 needs "prudent" changes considering all the prevailing factors.

It proposed reducing its minimum selling price from Tk365 to Tk215 per 1 Mbps per month for ISPs consuming up to 500 Mbps of bandwidth in Dhaka. For ISPs outside Dhaka, the proposed reduction is from Tk399 to Tk265 per 1 Mbps per month.

The more the ISPs buy, their rate comes down gradually. The monthly buying rate for ISPs consuming over one lakh megabit per second (Mbps) or 1 Tbps has been proposed to come down to Tk155 from Tk330 within Dhaka and to Tk205 from Tk355.

IIGAB President Aminul Hakim told TBS that their request for tariff review is for deeper internet penetration and more usage.

"The government wants to reduce internet prices for that and our move is to go inline," he said.

How much broadband internet price reduction is likely?

"The regulatory tariff that fixed floor prices is already much higher than the present market rates. Don't expect retail prices to drop a lot," Emdadul Hoque, president of Internet Service Providers Association of Bangladesh, told TBS.

Some big ISPs real life procurement rates right now are even lower than the proposed tariff, he said.

IIGAB's Hakim, however, said some decent price benefits must be there for the end users.

As the average ISPs procurement rate was still above the highest rate proposed by IIGs — Tk265 per Mbps every month, he said.

ISPs mostly sell internet through shared connections that help them earn higher than the bandwidth cost.

"Our proposed reduction, if approved by the BTRC, will benefit end consumers and it has two aspects — some direct downward pressure on price and less compliance costs in forms of shared revenue and taxes," Hakim said.

If ISPs are worried about their turnover, they can provide more speed at a similar price, he added.

Industry insiders said due to the high floor price, many private IIGs are selling at low prices and creating the invoices at tariff prices for the sake of compliances.

IIGs have to share 10% of their revenue with the BTRC at their disclosed selling rate and the inflated turnover is resulting in them paying a higher revenue share to the BTRC, several IIG officials told TBS seeking anonymity.

Additionally, some IIGs are selling bandwidth beyond books to offset their higher costs derived from the disclosed inflated turnover, they said.

That created a mess within the IIG industry and already resulted in a cumulative industry due of over Tk100 crore to the BTRC in revenue share and interest on top of that, said the Industry insiders.

The floor price set by BTRC is higher for private sector IIGs and lower for state-owned BTCL which further hurt the needed level playing field, said Hakim.

"IIGs went through a very difficult time to survive in the market," IIGAB wrote in its recent letter to the BTRC.

Emdadul said the large players having both forward and backward linkages are in a more advantageous position in terms of scale and competition.

He also said the floor price is applicable for ISPs' procurement, not for the mobile operators and there should be the same regulatory treatment.

BTRC Chairman Major General (Retd) Md Emdad Ul Bari told TBS, "We are working on those so that quality internet becomes more affordable for the sake of a big digital push."

When the tariff was set in 2021, it was based on the then market scenario, he said, adding that now it needs to match the present context.

Not only internet services, the BTRC is also reviewing all other telecom services regimes too, according to Bari.

According to the BTRC, mobile operators had nearly 12.5 crore internet subscribers in the country at the end of September, while ISPs had 1.37 crore cable broadband connections nationwide.