Telecom Reforms – bold reforms never seen before

We appreciate the Union Cabinet chaired by Hon’ble Prime Minister Shri Narendra Modi, who approved a mix of structural and procedural reforms to address the short-term liquidity needs as well as long-term issues of the telecom sector last September

All of these reforms in the telecoms sector over the last one year, cumulatively reinforce the vision of the Hon’ble Prime Minister, Shri Narendra Modi, to ensure connectivity to unconnected, far-flung, remote and non-accessible areas and bringing in Ease of Doing Business to the sector.

The Telecom industry has laid the foundations of Digital India and is working to bring state-of-the-art telecommunication services to the customers.

Be it video calls, online payments, watching web series on OTT, ordering food online, or voice commands to Alexa, the list is never-ending, thanks to the technology and the connectivity. The debt-laden telecom sector contributed to making our lives more comfortable. But the sector has been faced with an array of challenges.

We appreciate the Union Cabinet chaired by Hon’ble Prime Minister Shri Narendra Modi, who approved a mix of structural and procedural reforms to address the short-term liquidity needs as well as long-term issues of the telecom sector last September.

The boldness of the reforms are reinforced by the following: In the last financial year, the government was expected to receive approximately INR 53,000 crore SUC and LF, but a huge amount from this corpus will be foregone as operators would opt for a moratorium. No words can convey the boldness to make these decisions that benefits the sector and the country.

While there is a list of nine reforms that were introduced, a few are on top priority and are making a direct & heavy impact on the telcos.

Know Your Customer

e-KYC: The Aadhaar based e-KYC process for issuing mobile connections has been a big benefit as it enabled a faster, more secure, digital way of on-boarding f subscribers – this was in line with the Digital India framework. There were concerns regarding the pricing for these verifications as the charges set by UIDAI in 2020 was a burden. The telecom industry had requested DoT to address this.

The e-KYC rate, was revised, to the great relief of the industry -- to just 1 rupee. This has been bold and a great value for industry and consumer.

Self KYC or S-KYC: The Self-KYC process approved by the Cabinet as enabled individuals to apply for a mobile connection from anywhere -- using a mobile application or a portal. SIM cards are delivered to their location. This is a digital and contact less process and another valuable, safe and convenient service for consumers.

By enabling customers to convert from prepaid to postpaid or vice versa, a big pain point was reduced for users. It eased the process of switching. Customers did not need to submit the documents all over again. Together with S-KYC these reforms have given a huge boost in ease of doing business (EoDB) and being user friendly for susbcribers at the same time.

Bank Guarantee Rationalized

The terms of the license agreement require TSPs to submit a Financial Bank Guarantee (FBG) to securitize their license fee and spectrum usage charges. These were reviewed on half yearly basis. A huge challenge the industry faced: dues related to CAF (Customer Application Forms) and EMF penalties were included and added to the FBG during the reviews. Sometimes these issues were legally under review and sub-judice with interim protection from courts.

Thus the policy to reduce bank guarantee by 80% against license fee and similar levies – demanded by operators for long – was a boon. Operators have already spent Lakhs of crores in setting up networks across the country and are backed by reputed business groups known for delivering on their financial commitments. The Financial and Performance BGs was a huge burden on operators. The new rules make more funds available to operators that can be deployed for expansion of networks.

100% Foreign Direct Investment in Telecom Sector

Though 100% FDI in the telecom sector was permitted -- only 49 percent was through the automatic route while the rest 51 percent was through a government approval route. The policy reform to allow 100 percent FDI under the automatic route was a positive development. And another positive step in Ease of Doing Business. More foreign investments will allow creation of a robust infrastructure for technologies like 5G. Emerging opportunities in the field of IoT, AI, AR, VR etc will also receive a boost.

Interest Rate Rationalized/Penalties removed

Another reform which reduced the financial burden, from October 2021, related to delayed payments of License Fee (LF)/Spectrum Usage Charge (SUC). The interest component rate was reduced to SBI’s MCLR plus 2% -- instead of the MCLR plus 4%. Interest was compounded annually instead of monthly; penalty and interest on penalty was removed. This has also reduced the financial burden on operators.

The RoW Rules of 2022 introduced as amendments in the current guidelines will prove to be a big support for creating 5G infrastructure, both to existing infrastructure and deployment of new infrastructure.

Rationalization of Adjusted Gross Revenue

One of the other major reforms on the financial side related to Adjusted Gross Revenue (AGR). This excluded the non-telecom revenues on a prospective basis from the definition of AGR, for example revenues from activities under a license by the MIB (ministry of information & broadcasting), amount received from USOF, and cash flows from dividends, interest, fluctuations in foreign exchange, sale of property etc were all excluded.

The sector is truly delighted to see this reform as this was one of the longest pending requests. This was indeed a path-breaking step that brought back a catalyzing effect on investments in the sector.

The bigger and more laudable reason for welcoming these reforms is something that was unthinkable in earlier years. So, while operators stand to benefit from these reforms, it is estimated that the government will face some revenue loss in the next four financial years.

The Self-KYC process approved by the Cabinet as enabled individuals to apply for a mobile connection from anywhere — using a mobile application or a portal. SIM cards are delivered to their location.

In the last financial year, the government was expected to receive approx. INR 53,000 crore SUC and LF, but a huge amount from this need to be foregone as operators would have opted for the moratorium. No words can convey the boldness of these decisions and the benefits to the sector.

Facilitating Right of Way (RoW) for Telecom

Infrastructure

The RoW Rules of 2022 introduced as amendments in the current guidelines will prove to be a big support for creating 5G infrastructure, both to existing infrastructure and deployment of new infrastructure. The high costs in getting permissions for laying of cables and access to buildings etc, were a major challenge. This is now eased. The telecom sector also sees the introduction of 5G RoW application form on GatiShakti Sanchar Portal as a positive step by the government which will speed up the installation process of digital infrastructure.

All of these cumulatively reinforce the vision of Hon’ble Prime Minister, Shri Narendra Modi to ensure connectivity to unconnected, far-flung, remote and non-accessible areas.

COAI would also like to make further suggestions to make ROW process and charges quicker and transparent:

• Enforceability by Legal backing for RoW Rules 2016 and any amendment to the rules thereof. All policies for ensuring and delivering Critical Telecom Infrastructure (CTI) should be uniformly implemented across the country. It should be backed by an Act of Parliament as only Acts and Rules under the Act are enforceable. Guidelines seldom have the desired impact. Further, as a first step all central ministries should be mandated to comply with RoW Rules 2016 & any amendment to the rules thereof.

• Implementation of the State RoW policy by Local Bodies/ Municipal corporations/Wards etc. in letter and spirit: Implementation of the State policy at local bodies/ Municipal corporation/Wards remain a challenge impacting Rollout of Underground and Overhead fiber. Clear directions need to be issued to all Local Bodies/ Municipal Corporation/ Wards etc. to adopt and implement the RoW Policy of their State in both letter and spirit.

• The use of Street Furniture for deployment of Telecom Infrastructure i.e. Small Cells and Aerial fiber should be facilitated by State Governments and Local bodies.

• Removal of the Concept of Compensation: The concept of compensation for use of land in connection with the grant of RoW rights should be done away with as utility of land is in no way adversely affected owing the to grant of RoW for Underground Cable (UGC).

No bank guarantees (BGs) for auctions

We would also request that for auctions held henceforth, no BGs should be required to secure instalment payments. Industry has matured and the past practice of BG is no longer required.

By Lt. Gen. Dr. SP Kochhar, Director General, COAI

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