licensing issues in telecom sector

7/28/2019 Licensing Issues in Telecom Sector

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Introduction

The telecommunication industry is the one fastest growing industry in every country. Over the last

decade and particularly over the last five years, India has registered an impressive growth in the

telecommunications sector; India now has a total of 965.52 Million1

Telecom subscribers,comprising of of 934.09 Million mobile subscribers & 31.43 wireline subscribers. The Indian tele-

density now stands at 79.58%. India today has the worlds second largest network which is growing

at a rate which is unmatched by any other country in the world. With the connections now growing

at a faster pace in rural areas as compared to urban, it is expected that as India crosses the 1 billion

mark, the rural tele-density will grow from the current value of 36.02% to 40%. The sector is

expected to grow at 45% per year, which can be attributed to a large extent evolution of the policy

and regulatory framework of the government in recent decade.

At the outset, a License issued by the government is an authority, given to a person upon certain

conditions to do something which would have been illegal or wrongful otherwise. There are three

main types of licence fee which the government charges: (i) initial licence fee, which generally is non-

refundable, (ii) annual licence fee, and (iii) additional fee for allocation of spectrum.

The Licensing framework has been an integral part of Indias telecommunication law. Under the

Indian Telegraph Act, 1885, section 4 gives power to the government to grant licence to any person

to establish, maintain or use a telegraph. However, in the telecom sector, the government hadcomplete monopoly until the early 1990s. In 1992, the government allowed licensing in the telecom

sector.

Evolution of Telecom Regulation

Telecommunications in India started as a state monopoly in the 1980s and telephone services and

postal services came under the Department of Posts and Telegraphs. In 1985, the Department of

Post was separated to create the Department of Telecommunications (DoT). The government

also set up two new public sector undertakings: Mahanagar Telephone Nigam Limited (MTNL)

which provided services in Delhi and Mumbai, and Videsh Sanchar Nigam Limited (VSNL).

VSNL also provided international telecom services in India. The DoT continued to provide

telecommunications operations in all regions other than Delhi and Mumbai.

1 TRAI Report, Indian Telecom Services Performance Indicator Report, June 2012


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In the early 1990s the Indian telecom sector was liberalized and private sector participation was

permitted albeit through a gradual process. The telecom-equipment manufacturing sector was

deregulated and the government allowed private telecom companies to manufacture telecom

switches for telephone exchanges. In 1992, the DoT invited bids for licenses for cellular services

across four metros. However, the bidding process was challenged as unclear and arbitrary in the

TATA Cellular v. Union of India2 case and it was not until three years later that the first mobile

services were launched in Calcutta in 1995. The license fee and tariff was specified by the DoT and it

placed caps on rental and tariff. A minimum license fee was specified in each metro and the

operators paid a license fee per subscriber. The government also allowed private players to provide

value added services (VAS) such as paging services.

In 1994, the National Telecom Policy 1994 (NTP 1994) was announced and it was aimed at

advance the telecommunications sector in India. The policy allowed private investment in the

telecom sector to bridge the resource gap especially in areas such as basic services. As markets and

telecom technologies started converging and the differences between voice (both fixed and wireless)

and data networks started blurring, the need for developing a modern telecom network became an

immediate necessity. Private participation was allowed to provide Basic Telecom Services (BTS

fixed wire-line services) and Cellular Mobile Telephone Services (CMTSmobile wireless services).

Licenses were awarded to eight CMTS operators which were divided among the four metros. From

1995, over a period of three years, thirty-four licenses were granted among fourteen CMTSoperators for eighteen state circles through a competitive bidding process.

A new telecom policy was announced in 1999 (NTP 1999) which largely focused on creating an

environment for attracting continuous investment in the telecom sector and allowed creation of

communication infrastructure by leveraging on technological development.

NTP 1999 allowed private operators providing cellular and basic services to migrate from a fixed

license fee regime to a revenue sharing regime which made it financially viable for such operators to

function in the market. Most importantly, the government recognized the necessity to separate the

government's policy wing from its operations wing so as to create a level playing field for private

operators. Accordingly the NTP 1999 directed the separation of the policy and licensing functions

of DoT from the service provision functions. The Government corporatized the operations wing of

2Tata Cellular v. Union of India, 1994 SCC (6) 651.


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DoT in October 2000 and named it as Bharat Sanchar Nigam Limited (BSNL) which operates as

a public sector undertaking. Thereafter in 2002, the monopoly of VSNL also ended.

Regulatory and Governmental Bodies

Telecom Commission: The Telecom Commission is an inter-ministerial high level government body.

The Commission consists of a Chairman, four full time members, who are ex-officio, Secretary to

the Government of India in the Department of Telecommunications and four part time members

who are the Secretaries to the Government of India of the concerned Departments. The essential

functions of the

Telecom Commission are as under:

policy formulation, licensing and coordination matters relating to telegraphs, telephones,wireless,

data, facsimile services and other similar forms of communications; international cooperation in matters connected with telecommunications; promotion of standardization, research and development in telecommunications; promotion of private investment in telecommunications; preparing the DoT budget and supervising its operations

Department of Telecommunications (DoT): As per the Indian Telegraph Act, 1885 and the

Indian Wireless Telegraphy Act, 1933 the Central Government has the exclusive privilege of

establishing, maintaining and working telegraph and wireless telegraphy equipment and is the

authority to grant licenses for such activities. The Central Government acts through the DoT. Some

of the important

functions of the DoT are as follows:

licensing and regulation international cooperation in matters connected with telecommunications (such as

International Telecommunication Union (ITU), International Telecommunication Satellite

Organization (INTELSAT), etc;


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promotion of private investment in the Indian telecommunications sector; promotion of standardization, research and development in telecommunications. WPC , Spectrum Allocation & Management

Telecom Regulatory Authority of India (TRAI): TRAI is an autonomous statutory body

established under Telecom RegulatoryAuthority of India Act, 1997 (TRAI Act) (discussed In

Chapter 0 of this paper). Liberalization made it necessary for the Government to ensure that there is

an independent communications regulator. TRAI acts as an independent regulator of the

telecommunications industry in the country. One of the main objectives of

TRAI is to provide a fair and transparent policy environment which promotes a level playing field

and facilitates fair competition amongst various telecom players.

TRAIs powers are recommendatory, mandatory, regulatory and judicial.

The important recommendatory powers of TRAI are as follows :

recommendations regarding the need and timing for introduction of new service providers recommendations pertaining to the grant of telecom licenses including their terms and

conditions

recommend revocation of license for non-compliance of terms and conditions of license.TRAI is the sole authority empowered to take binding decisions on fixation of tariffs for provision

of telecommunication services.

Emphasis needs to be placed on the interplay between the recommendatory powers of TRAI and

the policy making powers of DoT. While the DoT is the sole authority for licensing of all

telecommunications services in India, it is mandatory for the DoT to have before it TRAIs

recommendations with regard to matters over which TRAI has recommendatory powers (mentioned

above). Having done so, the DoT has the discretion to either accept or reject the recommendationsof TRAI. TRAI has over the years come out with a number of recommendations; DoT has accepted

some such recommendations either wholly or partially or has rejected such recommendations. Below

is the status of some of the recommendations made by TRAI to the DoT:


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Licensing Framework

National Long Distance Telephony

International Long Distance Telephony

Internet Services

Universal Service Obligation Fund

Cellular Mobile Telephone Service (CMTS)

CMTS operators provide all types of mobile services including voice and non-voice

messages, data services and Public Call Offices (PCOs) within their area of operation.

CMTS operators utilize network equipment, including circuit and/or package switches thatmeet the relevant International Telecommunication Union (ITU) /Telecom Engineering

Centre (TEC) standards.

Unified Access Service (UAS)

In 2001, basic service operators in India were permitted to offer limited mobility services

over wireless local loop (WLL (M)) using CDMA technology in their coverage areas.

Moreover, they were also able to offer all-India mobility using the CDMA WLL (M)

technology. The regime resulted in increasing the popularity of these services, as the prices

of these services were generally lower than that for GSM cellular mobile services.

UAS operators can provide, within their area of operation, wireline (basic) as well as wireless

(cellular) services in a service area. Wireless services include Full Mobile, Limited Mobile

and Fixed Wireless services. Further, UAS operators can also provide voice mail, audiotex

services, video conferencing, videotex, e-mail, Closed User Group (CUG) as Value Added

Services over its network to the subscribers falling within its service area on non-

discriminatory basis.


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The country is divided into 23 service areas consisting of 19 telecom circle service areas and

4 metro service areas for providing UAS and CMTS.

No service can be provided by the UAS operator for which a separate license is required.

However, intimation before providing any other VAS has to be sent to the DoT and TRAI.Basic and Cellular Services Licensees are permitted to migrate to UAS License regime. The

service providers migrating to UAS License will continue to provide wireless services in

already allocated/contracted spectrum and no additional spectrum will be allotted under the

migration process.

In the wake of its popularity, UAS may have created a potential disadvantage for the GSM

cellular operators as they had paid substantial amounts to obtain their licences and WLL

(M) services were increasingly seen as largely substitutable for GSM services. As a result,the government decided to move towards a Unified Access Services Licensing regime for

basic and cellular services, which was introduced in October 2003. The focus of the effort

was on technological advancement. Under the new licensing regime, both basic service

operators and cellular carriers gained freedom to offer basic and/or cellular mobile services

using any technology, which has ensured a fair competitive market for the service providers.

What are the key issues facing the telecom industry in 2013?

Rather than issues, lets focus on the strengths of the telecom sector, particularly around the mobile

ecosystem. The good news is that many issues for telecom in 2013 will revolve around growth

opportunities tied to a dramatic uptick in data consumption. For an increasing number of people,

mobile is no longer a nice-to-have; its embedded in their daily lives and integrated into the

workplace. Moreover, consumers are starting to see beyond the monthly bill and derive more value


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from the features, functionality and applications on their devices. With fourth generation (4G)

technology rolling out, as well as other technologies to enhance broadband access, along with new

devices and services exploiting it, data usage will continue to expand exponentially, and the overall

value equation to consumers should move in the same direction.

Higher speeds and widespread adoption of mobile also are expected to enable additional traction in

vertical markets, especially in banking, mobile payments, automotive telematics and health care.

These incremental services will present new opportunities and also drive even more data needs.

The key challenges for telecom in the near term may be spectrum availability and the continued

hearty capital requirements to build/enhance/upgrade networks. The projected increase in data

usage will outpace the technological advances of 4G, driving toward a potential spectrum shortage in

as early as a year or two. With the appropriate focus, it shouldnt inhibit innovation, but it willrequire technical solutions and also escalate pressure for the government to unlock more spectrum,

on a timely basis, to allow for further mobile broadband network expansion .

licensing issues in telecom sector

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