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ILD: Open Format

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VoicenData Bureau
New Update

TRAI has formally announced the consultation process on ILD services through

the consultation paper released a couple of months back. This is to focus on a

number of issues that are the key determinants of the policy regime for the ILD

sector. As part of that, we spoke to a number of people mostly, customers and

service providers. One of the key issues raised was the terms and conditions of

license. The feedback started with an omniscient observation. "One of the

strangest things happening in India is the opening up of ILD services for

competition at the end and opening up of basic telephony competition first.

Elsewhere in the world, for very good reasons, international and domestic long

distance were opened for competition first", says Dr TH Chowdary, director,

Center for Telecom Management and Studies, Hyderabad. Nonetheless, we, at least,

have the opportunity to make a good beginning to enter an era of convergence,

briskly.

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"We are opening international telecommunications to compete when

profound changes have already affected the traditional telecommunications to

transform them into an information infrastructure, comprising of terrestrial-

and satellite-based microwave radio highways and optical fiber photonic

highways, on which information could be transported. So on one hand, we have an

electronic-photonic transport system as infrastructure, and various services

which ride on this transportation system, on the other. There could be

competition in the provision of infrastructure and much more competition in the

provision of services", adds Chowdary. True, there is a scenario where a

lot of intelligence is coming into communication devices, and there will be

hardly any distinction among the various services.

Another feature that needs to be considered is the current dynamics in the

industry. "There has been a lot of maturity among the various service

providers and kinds of service providers", says S Ramakrishnan, managing

director, Tata Teleservices Ltd. He further adds, "There is a feeling to

work in collaboration at the backbone and infrastructure level, where ever

possible rather than duplicating it and move to other areas where infrastructure

is not available, and concentrate there on build-up". This augurs good for

both the consumer and the operator, too. The feeling is that there is no meaning

in creating an artificial distinction between mobile and immobile services;

local, intra-state, inter-state, and international services; packet-switched and

non-packet information services. In other words, remove the obstacles, the rest

will fall in place. And the experts prevail that these backdrops need to be considered while ILD services policy is derived.

The most important question is about the terms and conditions. The

consultation paper identifies this issue as an important one to decide what the

license should allow i.e. should it specify a set of services which the licensee

can offer under the license or should it be a license that enables the licensee

to offer carriage services, since ILD is essentially a carriage service. Other

issues being the time-period of the license, principles for tariff fixation and

interconnection charges or revenue-sharing, especially if the kind of

technologies allowed for ILD involve major differences in transporting telecom

traffic, whether to give different licenses for voice and data services, whether

to allow various tele and bearer services.

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Observers opine that distinction between telephone and bearer service is pure

fallacy. Another point that is being talked about is making a distinction

between serious and non-serious players. Points out Ramakrishna, "Today, we

are already seeing the automatic sifting of serious versus the non-serious. The

market will determine who is serious and who is not". The point can be

demonstrated either with the conditions under which the basic telephony as well

mobile telephony or with the conditions under which the ISP licenses were

ordered. The feeling is the that there should be no distinction of one from the

other as today, the market as well as the service providers understand the

implications. And the number of competitors can be best determined by the

players themselves. Another reason cited is that if the competition is intense

then the customer has the choice to decide what is best-suited for him, be it on

the basis of quality of service or the end benefits.

Says Chowdary, "The general conditions should be very

simple. An entry fee to cover costs of licensing and the ongoing

superintendence. Revenue share should not to be put into the bottomless well of

deficits of the government, but to constitute a universal access or service

funds, to be used to reimburse deficits on the obligatory establishment of the

socially-beneficial services like telephones and Internet in villages on a

community basis, in schools and colleges, in public libraries and primary health

centers. When document couriers do not share revenue with post offices, why

should telecom companies share their revenue with the government of India? The

public good and purpose is served by the companies giving a share of their

revenue to the universal access or service fund, which would be used for

investing in rural areas and in the institutions like schools, libraries and

primary health centers. The government will share the prosperity of companies,

by establishing universal access or service fund, and by the service-tax on all

telephone and other bills".

Another important discussion is about the selection criteria.

Should the entry be allowed through an entry fee subject to bidding, to only

those with a proven track record, or to the ones with a strong financial

background, etc? The feeling is that the eligibility criteria should be

transparent and unbiased. The objective should be to promote quick rollout of

services. In such a scenario, it maybe beneficial for service providers to lease

transmission and switching capacities. This is seen as an explanation to have

lower capital investment. Also there should be no obligations on the rollout.

The reason being that there is already an incumbent offering ILD services, so a

company should be allowed its own way to rollout its operations.

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Experience as parameter also does not hold good. The simple

reason being no one except VSNL has prior experience in the country, the rest of

the service providers have only the circle-level or the cellular level

experience and that does not mean that some weightage for the same should be

extended in the ILD sector. The point is to allow an organization to invest the

money at its own risk. Another important question has been the length of the

license period. The general perception is that it should not be for less than

twenty years. This most feel that is an accepted and a tested frame, and will

hold good.

The entry fee, suggests Chowdary, "should be related to

the territory or population for covering the license that is required or given.

Supposing the license seeker is willing to provide international service only in

Mumbai then the entrance fee should be related to the total revenue that the

Mumbai subscribers, of all companies, incur on international service. This is

easily ascertainable for each area from BSNL or VSNL. A proportion of it, say

one or two percent, could be the entrance fee. Since the licensing will be open

if another license is to start after five years, the licensor can ascertain the

international revenue in the previous accounting year, and prescribe two percent

of them as entrance fee". Others too, opine that an entry fee should be

such that it covers cost of licensing, etc.

Further, the observation is that the service provider is

allowed to choose the technology and it need not be regulated by any one. The

choice is a matter of technology, related economics, and the right architecture.

So as the choice of gateways–be it single or multiple. Moreover, the

deployment options be allowed to be decided by ILDO, by a mutual agreement with

the NLDOs or access providers. Customers should be given a choice as to whether

they want call-by-call selection or pre-selection. There could be one-time

charge by the operator who is providing the access for each type of carrier

selection, whenever a change in choice is availed of. Further, billing should be

left to the operator. Clearly, the bottomline is that the consumer needs to

benefit. The liberalization of the ILD sector should accommodate policies,

including tariff re-



balancing and more detailed interconnection regime, and have to be very relevant
due to aspects such as call-back, bypass and the fact that not all revenue is

generated domestically.

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Ch. Srinivas Rao

Viewpoint: ILD Services

Dr TH Chowdary, telecom expert and director, Center for Telecom Management

and Studies, Hyderabad.

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Terms And Conditions of License

  • Please let TRAI not to decide on what configuration

    should be chosen by the telcos. It is a matter of technology,

    techno-economics and appropriate architecture. The contestants know which is

    the best and most economical. The talk of permitting ILDOs to set up

    multiple or single gateways and where, is another mind-set, a hangover of

    permit, license and quota-patronage dispensing system, which wrought havoc

    in the country. The choice and decision must be left to the judgment and

    intelligence of competing companies.

  • The time period of license for ILD service should be for

    not less than twenty years.

  • The distinction between tele and bearer services is

    unnecessary. There is absolutely no need to specify which tele-services,

    etc, the licensee may provide.

  • The architecture for gateways i.e. whether they will be

    like VSNL or not, must be left on to the licensee. TRAI should not act as an

    architect or engineer. TRAI has no stake in the success of the companies

    because it does not invest, but only consume financial resources. Therefore,

    leave architecture for the companies.

  • Leave the deployment options to be decided by the ILDO by

    a mutual agreement with the NLDOs or access providers.

  • There should not be any rollout obligations. It is not

    that there is no international service provider at all; there is an

    incumbent to provide. We are trying to give choice to customers, not a

    service which is not available. If extensive rollout benefits the company,

    there is no reason why it would not rollout. If it does not benefit, there

    is no reason why TRAI should impose a non-benefit giving and loss-causing

    obligation on the company. If there is no second or third competitor, the

    customer does not loose anything.

Level of Competition

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  • There could be (i) a pure bandwidth provider, (ii) a

    service provider who also owns his own bandwidth; and (iii) a service

    provider who can lease or buy bandwidth from bandwidth providers. The

    bandwidth providers could be NLDOs, ISPs or simple infrastructure providers.

  • There could be switch-based resellers who lease

    transmission systems from both international and national infrastructure

    providers.

  • It should not be mandatory for ILDOs to establish

    switching facility. They should be free to lease switching capacity. It is

    just like anybody hosting web services and somebody else providing data

    hotels but the content being supplied by others.

  • It is presumptuous that one can judge infallibly when the

    market is mature and when it is not. When the telecom reforms began in the

    West, tele-density just happened to be high.

  • Reforms were necessitated not because of high tele-density

    but because of changes in technology and the mass need for communications.

    Reselling must be opened up at the initial stage, not after a certain tele-density

    or when competition builds up.

  • It should not be mandatory for ILDOs to establish

    switching facilities in the country. They may buy or lease such a facility.

    The option should be theirs. Similarly, it should not be mandatory for the

    licensee to go in for facilities-based competition.

  • Non-facility based competition should be permitted at the

    option of the licensee. The non-facility based operator or reseller should

    be permitted to purchase switched minutes of call time from ILD and NLD

    operators, on terms and conditions mutually negotiated and agreed upon.

  • There should be an unlimited competition from the

    beginning. Limited competition means subjective selection of a few

    licensees. It means reversion to permit license-quota raj and all the

    attendant evils of patronage and sleaze. Market will determine the right or

    optimum number of operators.

  • There is no right way in which an unlimited competition

    can be introduced in a phased manner; it tantamount to periodically limiting

    the competition with the attendant evil of subjective selection of the

    licenses. Therefore, there should be an unlimited competition from the

    beginning with a nominal entry fee and a need-based (for provision of public

    telephones and Internet kiosks on a community basis in villages, educational

    institutions, libraries and primary health centers) revenue share.

  • The licensee shall have the option of leasing switching

    capacity from NLDOs.

Selection Criteria

  • The talk of serious and non-serious players is nearly

    frivolous, especially if it is to be decided by TRAI. Please leave it to the

    market. Similarly, the eligibility criteria should not be aimed at excluding

    some and facilitating a few preferred ones. The amount of capital required

    when the facilities like transmission and switching capacities are not

    invested in but leased, is not enough. Therefore, the financial parameter

    should refer to the net-worth of the seeker of licenses and should be

    different for those who are resellers and facility-based competitors. Also,

    when once no obligatory rollout is prescribed, the amount of net-worth of a

    company cannot be arbitrarily prescribed.

  • Minimum experience is another arbitrary parameter. Until

    competition was permitted, there is no question of experience for anybody in

    the country except for the incumbent. International dialing was excluded for

    everybody except VSNL. Then what experience are we looking for and how will

    any one get it? Is the experience for providing local service or intra-state

    service or national long distance service, a substantive experience for

    provision of long distance service? And what relative weights would be given

    to the one who has experience only in the intra-state service or who has

    only inter-state service or who has got fixed or cellular mobile telephony?

    There is no point in insisting upon experience. The company which is seeking

    the license is the one which is going to invest the money. Let it take the

    risk.

  • Limited competition is not preferred.

  • There should be no bidding either for the entrance fee or

    for any revenue share. Auction is much of the cause for the havoc that the

    telcos have invited upon themselves for getting 3G licenses in Europe, and

    PCS licenses in the US. Even in India, it is bidding that has led to the

    near-death of the private telephone companies, necessitating the risky

    policy of migrating companies from license fee to revenue-sharing.

  • The entry fee should be related to international revenue

    of all the companies providing service in the area for which a private

    telephone company is seeking a license to provide international telephony.

  • Technical parameters should not figure in the selection

    criteria. It will be presumptuous for TRAI to think that it knows best about

    all technologies. It is for the investing company to find the best

    technology. The only criterion shall be that whatever technology or system

    is chosen, shall be compatible for interconnection to other licensed

    networks and operators.

  • Only those companies which acquire more than 26 percent

    of the VSNL’s equity should be made eligible to seek a ILDO license. It is

    not unusual for investors to have shares in rival companies.

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Structure of the License Fee

  • There should be no license fee. License fee is a cost for

    the company and is completely unrelated to the business of providing ILDO.

    What is the cost for the companies, will be factored into prices for

    consumers. An entry fee and the contribution to the universal access or

    service fund, should be imposed.

  • If at all any license fee is prescribed, then it should

    be a percentage of the revenue. It should be 0.01 percent as in Europe.

  • It is very complicated to decide who is going to impose

    the proportionate return traffic? And this may go on varying. Not only that

    foreign correspondents may not be eager to return any traffic. It is better

    and simpler to relate every levy only to the outgoing traffic.

  • Technical Aspects

    • The ILD operator should be permitted to deploy VoIP

      networks instead of PSTN for carriage of international traffic, not only

      voice but any kind of traffic.

    • You need not regulate the quality of service. When there

      are many competitors and the customers have a choice, they will determine as

      to who is providing an acceptable quality of service, by continuing or

      withdrawing their patronage.

    • Leave it to the subscriber whether he should accept a

      degraded performer. The telephony users may chose whatever quality of

      service they want by paying different prices.

    • Forget about laying down quality standards. This is an

      old mind set. In the era of intense competition and Internet, the acceptable

      quality of service will be chosen by the user, with respect to the price.

    • Who in the licensing or regulatory body knows all the

      issues involved in numbering, routing, addressing, interoperability and

      quality of service? Please, leave it to the network operators. They will all

      come together and resolve the issues about numbering. TRAI should only act

      as an umpire when the negotiating parties cannot come to a conclusion.

    • Leave the choice to the ILD operator regarding whether

      they will have two networks, one like the PSTN and the other with VoIP. The

      quality of interconnection will be negotiated by the parties.

    • Customers should be given a choice as to whether they

      want call-by-call selection or pre-selection. There could be one-time charge

      by the operator who is providing access for each type of carrier selection,

      whenever a change in choice is availed of.

    • The arrangement of billing should be left on to the operator. If he cannot

      bill, he cannot get revenue. The risk is his. The costs and rewards are his.

      The call data record should be generated by the person who is carrying the

      call. ILDO can generate records, provided the calling number is forwarded to

      him. Leave it to ILDO to negotiate the generation of call record for

      subscribers who are with the calling number passed on to him by the access

      and local service provider.
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