SDG 9: Industry, Innovation and Infrastructure | SDG 17: Partnerships for the Goals
Telecom Regulatory Authority of India (TRAI) | Department of Telecommunications (DoT)
The Telecom Regulatory Authority of India (TRAI) has initiated a comprehensive review of the tariff framework for Domestic Leased Circuits (DLCs) through its latest consultation paper. DLCs are dedicated, private telecommunication links that serve as the foundational backbone for secure, high-speed data transmission in sectors such as banking, healthcare, and government services. This review seeks to recalibrate the existing ceiling tariffs, last significantly revised in 2014, to reflect major technological shifts and evolving market dynamics.
Technological Evolution and Market Expansion The DLC landscape is transitioning from traditional point-to-point (P2P) circuits to more flexible, virtualized solutions.
Virtual Private Networks (VPNs): Over the last decade, VPN-based DLCs have surged from a 30% to a 47% market share, prompting TRAI to explore whether they should now be brought under formal tariff regulation.
Next-Gen Infrastructure: Technologies such as SD-WAN, DWDM, and Ethernet over Fibre have significantly lowered transmission costs while enabling “burstable” bandwidth and advanced service-level agreements (SLAs).
ISP Participation: Under the Draft Telecommunications Rules, 2025, Internet Service Providers (ISPs) may soon be permitted to provide managed DLC services, directly competing with National Long-Distance Operators (NLDOs).
Cost Methodologies and Global Benchmarking To ensure fair pricing and affordable access, the Authority is evaluating various costing models for future regulation.
Pricing Models: TRAI is seeking feedback on whether to continue using the Bottom-up methodology with Fully Allocated Cost (BU-FAC) or transition to alternative models like Long Run Incremental Cost (LRIC).
Distance-Based Slabs: With the rise of IP-based networks making tariffs largely independent of distance, the Authority is reviewing the relevance of the 2014 distance-based pricing slabs.
Regional Disparities: Special attention is being given to remote and hilly regions, where limited competition often results in persistently high tariffs despite global trends toward lower bandwidth costs.
What are “Domestic Leased Circuits” (DLCs) in the Indian telecom context? A DLC is a private, dedicated telecommunication link leased from a licensed operator to connect two or more locations within India. Unlike standard internet connections, DLCs provide guaranteed, non-shared bandwidth and low latency, making them indispensable for organizations like Global Capability Centers (GCCs) and financial institutions that require secure, real-time data exchange.
Policy Relevance
The restructuring of DLC tariffs is a strategic pillar for India’s digital transformation and economic inclusion goals.
Digital Inclusion: Robust and affordable DLCs are critical for scaling e-governance and e-commerce initiatives to Tier-2, Tier-3, and rural areas.
Support for MSMEs: Permitting smaller ISP Category B & C players to offer DLCs can lower entry barriers for small and medium enterprises (SMEs) that currently lack access to enterprise-grade connectivity.
Global Competitiveness: Ensuring cost-effective, high-capacity links is essential to maintaining India’s status as a premier destination for Global Capability Centers (GCCs) and ITES industries.
Resilient Infrastructure: Transitioning to technology-neutral and service-neutral regulations encourages investment in future-ready technologies like 5G and Quantum AI.
Relevant Question for Policy Stakeholders: How can TRAI design a “staggered” tariff model that encourages investment in rural fiber infrastructure without making high-speed connectivity unaffordable for local cooperatives and educational institutions?
Follow the full news here: Consultation Paper on Review of Tariff for Domestic Leased Circuits (DLCs)