The Telecom Regulatory Authority of India on Tuesday proposed a 63 per cent reduction in the tariffs for a 2 mbps bandwidth capacity for domestic leased lines at Rs 820,000 annually, to promote Internet and broadband usage.

The proposed rates are for a distance beyond 500 km.

Using a bottom-up approach, the revised ceiling tariff for capacities of two mbps and 64 kbps for beyond 500 km distance comes to Rs 820,000 and Rs 24,000, respectively, reflecting a reduction of about 63 per cent and 75 per cent from the existing ceiling tariff in these categories, TRAI said in its consultation paper on revision of tariff of domestic leased circuits.

It is expected that higher capacities above two mbps would dominate the demand structure in future and price multiple of DS-3 and STM1 capacities have been proposed as eight times and 23 times, respectively, the price of E1 capacity.

This is based on the fact that there are scale economies arising out of higher capacities and also based on the prevailing price-capacity multiples observed elsewhere in the market.