ILD: Open Format

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.

"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.

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.

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.

Ch. Srinivas Rao

Viewpoint: ILD Services

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

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

• 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.

Structure of the License Fee

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.