Introduction Introduction The
The telecommunication telecommunication industry industry is is the the one one fastest growing fastest growing industry industry in in every country. every country. Over Over the lathe lastst decade and particularly over the last five years, India has registered an impressive growth in the 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 Million
telecommunications sector; India now has a total of 965.52 Million11 Telecom subscribers,Telecom subscribers, comprising of of 934.09 Million mobile subscribers & 31.43 wireline subscribers. The Indian 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 world’s second largest network which is growing density now stands at 79.58%. India today has the world’s 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 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 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 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 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.
and regulatory framework of the government in recent decade.
At
At the the outset, outset, a a License License issued issued by by the the government government is is an an authority, authority, given given to to a a person person upon upon certaincertain conditions to do something which would have been illegal or wrongful otherwise. There are three 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 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.
refundable, (ii) annual licence fee, and (iii) additional fee for allocation of spectrum.
The
The Licensing framework has been an integral part of India’s telecommunication law. Under theLicensing framework has been an integral part of India’s telecommunication law. Under the Indian Telegraph Act, 1885, section 4 gives power to the government to grant licence to any person 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 had to establish, maintain or use a telegraph. However, in the telecom sector, the government had complete monopoly until the early 1990s. In 1992, the government allowed licensing in the telecom complete monopoly until the early 1990s. In 1992, the government allowed licensing in the telecom sector.
sector.
Evolution of Telecom Regulation Evolution of Telecom Regulation Telecommunications
Telecommunications in in India India started started as as a a state state monopoly monopoly in in the the 1980s 1980s and and telephone telephone services services andand postal services came under the Department of Posts and Telegraphs. In 1985, the Department of postal services came under the Department of Posts and Telegraphs. In 1985, the Department of Post was separated to create
Post was separated to create the Department of Telecommunications (“DoT”).the Department of Telecommunications (“DoT”). The The governmentgovernment also set up two new public sector undertakings:
also set up two new public sector undertakings: Mahanagar Telephone Nigam Limited (“MTNL”)Mahanagar Telephone Nigam Limited (“MTNL”) which
which provided provided services services in in Delhi Delhi and and Mumbai,Mumbai, and Videsh Sanchar Nigam Limited (“VSNL”).and Videsh Sanchar Nigam Limited (“VSNL”). VSNL
VSNL also also provided provided international international telecom telecom services services in in India. India. The The DoT DoT continued continued to to provideprovide telecommunications operations in all regions other than Delhi and Mumbai.
telecommunications operations in all regions other than Delhi and Mumbai.
In the early 1990s the Indian telecom sector was liberalized and private sector participation was 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 permitted albeit through a gradual process. The telecom-equipment manufacturing sector was deregulated and the government allowed private telecom companies to manufacture telecom 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 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 across four metros. However, the bidding process was challenged as unclear and arbitrary in the TATA Cellular v. Union of India
TATA Cellular v. Union of India 2 2 case and it was not until three years later that the first mobilecase 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 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 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 operators paid a license fee per subscriber. The government also allowed private players to provide value added services
value added services (“VAS”) su(“VAS”) such as paging servicech as paging services.s. In 1994,
In 1994, the National Telecom Policy 1994 (“NTP 1994”)the National Telecom Policy 1994 (“NTP 1994”) was announced and it was aimed atwas announced and it was aimed at advance the telecommunications sector in India. The policy allowed private investment in the 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 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) 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 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 immediate necessity. Private participation was allowed to provide Basic Telecom Services (BTS – – fixed wire-line services) and Cellular Mobile Telephone Services (CMTS
fixed wire-line services) and Cellular Mobile Telephone Services (CMTS – – mobile wireless services).mobile wireless services). Licenses were awarded to eight CMTS operators which were divided among the four metros. From 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 CMTS 1995, over a period of three years, thirty-four licenses were granted among fourteen CMTS operators for eighteen state circles through a competitive bidding process.
operators for eighteen state circles through a competitive bidding process.
A
A new new telecom telecom policy policy was was announced announced inin 1999 (“NTP 1999”)1999 (“NTP 1999”) which largely focused on creating anwhich largely focused on creating an environment for attracting continuous investment in the telecom sector and allowed creation of environment for attracting continuous investment in the telecom sector and allowed creation of communication infrastructure by leveraging on technological development.
communication infrastructure by leveraging on technological development.
NTP 1999 allowed private operators providing cellular and basic services to migrate from a fixed 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 license fee regime to a revenue sharing regime which made it financially viable for such operators to function in the market.
function in the market. Most importantly, the government recognized Most importantly, the government recognized the necessity to the necessity to separate theseparate the government's policy wing from its operations wing so as to create a level playing field for private 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 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 of DoT from the service provision functions. The Government corporatized the operations wing of
DoT in October 2000 and named it as
DoT in October 2000 and named it as Bharat Sanchar Nigam Limited (“BSNL”) which operates asBharat Sanchar Nigam Limited (“BSNL”) which operates as a public sector undertaking. Thereafter in 2002, the monopoly of VSNL also ended.
a public sector undertaking. Thereafter in 2002, the monopoly of VSNL also ended.
Regulatory and Governmental Bodies Regulatory and Governmental Bodies
Telecom Commission: The Telecom C
Telecom Commission: The Telecom Commission is an inter-ministerial high lommission is an inter-ministerial high level government body.evel government body. The
The Commission Commission consists consists of of a a Chairman, Chairman, four four full full time time members, members, who who are are ex-officio, ex-officio, Secretary Secretary toto the Government of India in the Department of Telecommunications and four part time members the Government of India in the Department of Telecommunications and four part time members who
who are are the the Secretaries Secretaries to to the the Government Government of of India India of of the the concerned concerned Departments. Departments. The The essentialessential functions of the
functions of the
Telecom Commission are as under: Telecom Commission are as under:
policy formulation, licensing and coordination matters relating to telegraphs, telephones,policy formulation, licensing and coordination matters relating to telegraphs, telephones,
wireless, wireless,
data, facsimile services and other similar forms of communications;data, facsimile services and other similar forms of communications;
international cooperation in matters connected with telecommunications;international cooperation in matters connected with telecommunications;
promotion of standardization, research and development in telecommunications;promotion of standardization, research and development in telecommunications;
promotion of private investment in telecommunications;promotion of private investment in telecommunications;
preparing the DoT budget and supervising its operationspreparing the DoT budget and supervising its operations
Department of Telecommunications (“DoT”): As per the Indian Telegraph Act, 1885 and the 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 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 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 authority to grant licenses for such activities. The Central Government acts through the DoT. Some of the important
of the important
functions of the DoT are as follows: functions of the DoT are as follows:
licensing and regulationlicensing and regulation
international cooperation in matters connected with telecommunications (such asinternational cooperation in matters connected with telecommunications (such as
International Telecommunication Union (ITU), International Telecommunication Satellite International Telecommunication Union (ITU), International Telecommunication Satellite Organization (INTELSAT), etc;
promotion of private investment in the Indian telecommunications sector;promotion of private investment in the Indian telecommunications sector;
promotion of standardization, research and development in telecommunications.promotion of standardization, research and development in telecommunications.
WPC , Spectrum Allocation & Management WPC , Spectrum Allocation & Management
Telecom
Telecom Regulatory Regulatory AuthorAuthority ity of of India India (“TRAI”): (“TRAI”): TRAI TRAI is is an an autonomous autonomous statutory statutory body body established under Telecom Regulatory
established under Telecom Regulatory Authority Authority of of India India Act, Act, 1997 1997 (“TRAI (“TRAI Act”) Act”) (discussed (discussed InIn Chapter 0 of this paper). Liberalization made it necessary for the Government to ensure that there is 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 an independent communications regulator. TRAI acts as an independent regulator of the telecommunications industry in the country. One of the main objectives of
telecommunications industry in the country. One of the main objectives of
TRAI
TRAI is is to to provide provide a a fair fair and and transparent transparent policy policy environment environment which which promotes promotes a a level level playing playing fieldfield and facilitates fair competition amongst various telecom players.
and facilitates fair competition amongst various telecom players.
TRAI
TRAI‟‟s powers are recommendatory, mandatory, regulatory and judicial.s powers are recommendatory, mandatory, regulatory and judicial.
The important recommendatory powers of TRAI are as follows : The important recommendatory powers of TRAI are as follows :
recommendations regarding the need and timing for introduction of new service providersrecommendations regarding the need and timing for introduction of new service providers
recommendations pertaining to the grant of telecom licenses including their terms andrecommendations pertaining to the grant of telecom licenses including their terms and
conditions conditions
recommend revocation of license for non-compliance of terms and conditions of license.recommend revocation of license for non-compliance of terms and conditions of license.
TRAI
TRAI is is the sole the sole authority empowered authority empowered to take to take binding decibinding decisions on sions on fixation of fixation of tariffs for tariffs for provisionprovision of telecommunication services.
of telecommunication services.
Emphasis needs to be placed on the interplay between the recommendatory powers of TRAI and 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 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 TRAI telecommunications services in India, it is mandatory for the DoT to have before it TRAI‟‟ss
recommendations with regard to matters over which TRAI has recommendatory powers (mentioned 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 recommendations above). Having done so, the DoT has the discretion to either accept or reject the recommendations of TRAI. TRAI has over the years come out with a number of recommendations; DoT has accepted of 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 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:
Licensing Framework Licensing Framework
National Long Distance Telephony National Long Distance Telephony International Long Distance Telephony International Long Distance Telephony Internet Services
Internet Services
Universal Service Obligation Fund Universal Service Obligation Fund Cellular Mobile Telephone Service
Cellular Mobile Telephone Service (“CMTS”)(“CMTS”)
CMTS operators provide all types of mobile services including voice and non-voice 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. messages, data services and Public Call Offices (PCOs) within their area of operation. CMTS operators utilize network equipment, including circuit and/or package switches that CMTS operators utilize network equipment, including circuit and/or package switches that meet the relevant International Telecommunication Union (ITU) /Telecom Engineering meet the relevant International Telecommunication Union (ITU) /Telecom Engineering Centre (TEC) standards.
Centre (TEC) standards.
Unified Access Service
Unified Access Service (“UAS”)(“UAS”)
In 2001, basic service operators in India were permitted to offer limited mobility services 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. 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) 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 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.
of these services were generally lower than that for GSM cellular mobile services. UAS operators can provide, within their area
UAS operators can provide, within their area of operation, wireline (basic) as well as of operation, wireline (basic) as well as wirelesswireless (cellular) services in a service area. Wireless services include Full Mobile, Limited Mobile (cellular) services in a service area. Wireless services include Full Mobile, Limited Mobile and Fixed Wireless
and Fixed Wireless services. services. Further, UAS operators Further, UAS operators can also provide voice can also provide voice mail, audiotexmail, audiotex services, video conferencing, videotex, e-mail, Closed User Group (CUG) as Value Added 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 Services over its network to the subscribers falling within its service area on non-discriminatory basis.
The country is divided
The country is divided into 23 service into 23 service areas consisting of 1areas consisting of 19 telecom circle service areas 9 telecom circle service areas andand 4 metro service areas for providing UAS and CM
4 metro service areas for providing UAS and CMTS.TS.
No service can be provided by the UAS operator for which a separate license is required. 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. 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 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 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 already allocated/contracted spectrum and no additional spectrum will be allotted under the migration process.
migration process.
In the wake of its popularity, UAS may have created a potential disadvantage for the GSM 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 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, (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 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 basic and cellular services, which was introduced in October 2003. The focus of the effort was
was on on technological technological advancement. advancement. Under Under the the new new licensing licensing regime, regime, both both basic basic serviceservice operators and cellular carriers gained freedom to offer basic and/or cellular mobile services 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. using any technology, which has ensured a fair competitive market for the service providers.
What are the key issues facing the te
What are the key issues facing the telecom industry in 2013?lecom industry in 2013? Rather than issues, let’s
Rather than issues, let’s focus on the strengths of the telecom sector, particularly around the mobilefocus 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 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, opportunities tied to a dramatic uptick in data consumption. For an increasing number of people, mobile is no longer a “nice
mobile is no longer a “nice-to--to-have”; it’s embedded in their daily lives and integrated into thehave”; it’s embedded in their daily lives and integrated into the workplace.
from the features, functionality and applications on their devices. With fourth generation (4G) 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 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 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.
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 Higher speeds and widespread adoption of mobile also are expected to enable additional traction in vertical
vertical markets, markets, especially especially in in banking, banking, mobile mobile payments, payments, automotive automotive telematics telematics and and health health care.care. These incremental services will present new opportunities and also dr
These incremental services will present new opportunities and also dr ive even more data needs.ive even more data needs.
The
The key key challenges challenges for for telecom telecom in in the the near near term term may may be be spectrum spectrum availability availability and and the the continuedcontinued hearty capital requirements to build/enhance/upgrade networks. The projected increase in data 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 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 shouldn’t inhibit innovation, but it will as early as a year or two. With the appropriate focus, it shouldn’t inhibit innovation, but it will require technical solutions and also escalate pressure for the government to unlock more spectrum, require 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 .