Unified Licensing: For the Few by the Few of the Few

The Indian regulator, TRAI is once again in the limelight, this time for the
recently released consultation paper on unified licensing.

Unified licensing is good for countries that have high tele-density and have
been operating in a liberalized environment for a long time. It is also good for
countries that can take care of monopolies through fair competition laws. It is
also good for countries that have been operating under stable regulatory regime
for long.

But for a country like India, which has still not tasted in entirety the
seeds of privatization, in spite of privatizing all telecom services in 2002, it
is too premature to talk about unified licensing.

India’s
a country where service providers do not have faith in the regulator and court
cases are increasing because of lack of transparency. It’s a country where one
has not been able to choose the network of one’s choice in long distance
services even after the passage of a year since the launch of service. It’s a
country where operators have problems of interconnect and consumers have QoS-related
issues. In such a country, the priority of the regulator should be to create a
platform that can bring cheer to all–service providers as well as consumers.

It has been more than a year since the second round of basic service
operators started their services. Even the third and fourth cellular operators
commenced their operations a year ago. Still, the level-playing field has not
been there.

The recent TDSAT judgment has given a fair deal for both the parties to cheer
about and TRAI and government should first try to create level-playing field as
per TDSAT verdict within the stipulated time of four months. Only after these
issues are sorted out, TRAI should take up issues like unified licensing.

Unified licensing will help in the unification of licenses and
technology-neutrality, whereby service providers can provide fixed and mobile
service through one service license. It may be noted that the scope of unified
licensing has been increased with the recent TRAI addendum that unified license
will include not only basic and cellular but also national long distance,
international long distance, and Internet services.

The Background

The first phase of licensing in the country started with NTP ’94 where the
focus was on telecommunication for all and telecommunication within the reach of
all. In basic services, the monopoly of BSNL ended and duopoly was created, with
private operators coexisting with BSNL. Six operators received the license for
operating basic services in six state circles. In cellular services, duopoly was
introduced in all 22 circles. Around 37 operators received license for 22
circles (four metro circles and 18 state circles). The private operators were
awarded license through the tendering process and the license was valid for ten
years. To get basic or cellular license, service providers had to pay huge
license fees.

Initially, things looked rosy. Then, with the passage of time, the telecom
privatization got derailed. First, the revenues realized by the companies were
way short of the projections. Second, some of the service providers were not in
a position to arrange finances for continuing the project. Third, the advent of
convergence allowed operators to use their facilities to deliver some services
earlier reserved for other operators. All these factors resulted in the
government taking a re-look at NTP ’94 and a new policy NTP ’99 was created
to enable continuous investment in the sector and to allow creation of
communication infrastructure in the country.

Under NTP ’99, the basic and cellular service providers were offered a
migration package. The service providers moved from a license regime to a
revenue sharing regime. BSNL and MTNL were given the green signal to operate
cellular services as third operators. In cellular services, one more private
operator was allowed in all the circles. Licenses were now valid for an initial
period of twenty years and thereafter for an additional period of ten years.

In the meantime, in 2001, the government introduced Convergence Bill. On 31
August 2001, the bill was referred to the Standing Committee on IT for
consideration. The committee invited memoranda on the bill from public in
general and experts from industry in particular. A sub committee was constituted
on 11 March 2002 to examine the amendments submitted on the Bill and drafted the
report on the Communications Convergence Bill 2001. The sub-committee held nine
sittings and finally adopted the draft report on 17 September 2002. The draft
report was finally considered and adopted by the Standing Committee on IT with
some modifications at its sitting held on 7 November 2002. Thereafter, the
committee authorized the chairman to finalize and present the report to the
House. But nine months have passed since then and yet it has not been tabled in
the Parliament. It seems that Convergence Bill is not in the priority list of
the government.

The Relevance

A close study of the Convergence Bill shows that its purpose was to
establish a regulatory framework for carriage and content of communications in
the scenario of convergence of telecommunications, broadcasting, data
communication, multimedia, and other related technologies and services. The Bill
says: "Commission may grant license to any person (a) to provide or own
network infrastructure facilities (any element or combination of elements of
physical infrastructure, which would be utilized by licensees for providing
networking services; (b) to provide networking services (means a service for
carrying communications by means of guided or unguided electromagnetic waves and
includes bandwidth services, fixed links, and mobile links and such other
services as may be prescribed; (c) to provide network application services; (d)
to provide content application services." So it clearly indicates
convergence, as any service provider can provide fixed as well as mobile links.

So why is TRAI planning to push unified licensing when one can provide
converged services under fixed links and mobile links under Communications
Convergence Bill, 2001, once it becomes an act? Why is TRAI duplicating an
exercise that has already been done through long consultation process involving
all concerned parties? Wouldn’t it be a better idea for TRAI to help the
Convergence Bill become an act, rather than pushing for unified licensing?

Industry observers are of the opinion that unified licensing is a process to
convert limited mobility to full mobility, something that the Convergence Bill
2001 doesn’t provide for. Even the recent TDSAT judgement has clearly stated
that fixed service providers will be allowed to offer WLL (m) services, which
will remain restricted to a SDCA and no handover from one SDCA to another will
be allowed under any circumstances.

Experts feel that given the compulsions imposed by the Convergence Bill and
the TDSAT judgment, unified licensing is the only answer for providing full
mobility to limited mobility players.

The recent TDSAT judgement has also directed TRAI and government to impose
additional entry fee for basic operators for allowing WLL (m) service; provide
relief to cellular operators with regard to interconnection; and increase
retention of 5 percent access charge. As per TDSAT directives, the exercise
should be completed within four months. Until these issues are sorted out, it
will be premature for TRAI to talk about unified licensing.

It seems that TRAI had pre-empted the TDSAT verdict and therefore floated the
consultation paper hurriedly.

The Timing

On 16 July 2003, TRAI floated a consultation paper on unified licensing for
basic and mobile services and asked for written comments to be submitted by 7
August 2003. It looks childish on part of TRAI to keep just 21 days for
receiving written comments from the industry. In countries where unified
licensing is operational or is going to be operational, it has taken more than
two to three years for the process to complete. TRAI, on 23 July 2003, extended
the date of submission of written comments to 30 August 2003, but even this time
frame, industry experts feel, is too short, considering the practice world over.

A more basic question that experts ask is: why are we changing our policy
when the industry is performing well? Yes, it did make sense to move from NTP
’94 to NTP ’99 as telecom privatization in India had got derailed. But there
is no logic for unified licensing as the industry is moving on a fast track and
the Convergence Bill is already there.

More importantly, why do we need to have a patchwork approach? Can’t TRAI
prepare a roadmap for India just as ITU does for the entire world in telecom and
move according to it? Such an approach will benefit everybody in the long run.
Service providers will be aware about the changes that are going to happen over
a period of time. The investors can have a clearer picture of their return on
investment as the uncertainty on the number of players at any point of time is
largely taken care of. It is important that investors feel that they are not
being cheated and there is transparency. All this will lead to a reduction in
the number of litigations that’s on the rise, which in turn will do a lot of
good to the industry and also improve the credibility of the regulator.

The Proposed Beneficiary

According to TRAI, the unified license will help in providing services at a
lower price and will provide a common customer care number. But with telecom
tariffs already at rock bottom one cannot think of further lowering of prices
for telecom services in the country. In fact, any further lowering of prices
from the current price points should happen in a natural manner and not because
of the introduction of unified licensing.

DLD and ILD have long been privatized but one cannot avail the benefits of
competition as the carrier access code is not in place. One cannot connect to
Bharti Telesonic for NLD if one does not subscribe to Bharti on the access
front. Even the incumbent customers do not have access to Data Access and Bharti
Telesonic for ILD services though the services started way back in July 2002. In
this direction TRAI had issued an order on 24 July 2002 directing access
providers (fixed as well as cellular) and national and international long
distance operators regarding implementation of carrier selection in their
respective networks. For national long distance calls, cellular and basic
service providers were supposed to implement carrier pre-selection within six
and nine months respectively. In the case of international long distance calls,
the time frames were six and 18 months, respectively. But more than a year has
passed since the order and nothing has happened so far.

TRAI should ensure that carrier access code is implemented, before pushing
for unified licensing. Otherwise, it will not help customers exercise their
choice of service provider both in terms of quality of service and price.

Quality of service is another matter into which TRAI should look at a
priority basis. At present, TRAI does not have any redressal mechanism whereby
the customers can get at least the minimum guaranteed service for the price that
they are paying.

Actual Beneficiaries

Under the existing circumstances, unified licensing will benefit a player
like Reliance Infocomm, which has an MSC-based architecture and will very much
like to exploit it by providing full mobility. The company has been providing
inter-SDCA roaming using call forwarding and once it gets unified licensing it
can do it under the license agreement. Since Reliance does not have an all-India
cellular license, it cannot provide full mobility as of now.

Tata Teleservices has gone for BSC-based architecture (V5.2) and looks quite
content with limited mobility. However, unified licensing can be a bonus for it.
The company also has a cellular license through Idea Cellular and can provide
full mobility.

For other operators like BSNL, Bharti, MTNL, and Hutch, who have cellular
licenses and have been providing full mobility, unified licensing will not make
any difference.

Unified licensing may be a good concept if the ground has been prepared for
it. Yes, it can remove all regulatory hurdles as it focuses on one license, one
market, and one set of rules. But first TRAI should ensure a level-playing field
for all sets of service providers, and instill a sense of confidence among them
for itself.

Pravin Prashant

The spirit of national telecom policies

Objectives of NTP ’94

"The focus of the NTP ’94 shall be telecommunication for all and
telecommunication within the reach of all. This means ensuring the availability
of telephone on demand as early as possible. Another objective will be to
achieve universal service covering all villages as early as possible. What is
meant by the expression universal service is the provision of access to all
people for certain basic telecom services at affordable and reasonable prices.
The quality of telecom services should be of world standard. Removal of consumer
complaints, dispute resolution and public interface will receive special
attention. The objective will also be to provide widest permissible range of
services to meet the customer’s demand at reasonable prices. Taking into
account India’s size and development, it is necessary to ensure that India
emerges as a major manufacturing base and major exporter of telecom equipment.
The defense and security interests of the country will be protected."

Objectives of NTP ‘99

"Access to telecommunications is of utmost importance for achievement
of the country’s social and economic goals. Availability of affordable and
effective communications for the citizens is at the core of the vision and goal
of the telecom policy. Strive to provide a balance between the provision of
universal service to all uncovered areas, including the rural areas, and the
provision of high-level services capable of meeting the needs of the country’s
economy. Encourage development of telecommunication facilities in remote, hilly
and tribal areas of the country."

"Transform in a time bound manner, the
telecommunications sector to a greater competitive environment in both urban and
rural areas providing equal opportunities and level playing field for all
players. Enable Indian Telecom Companies to become truly global players. In line
with the above objectives, the specific targets that the NTP 1999 seeks to
achieve would be : Make available telephone on demand by the year 2002 and
sustain it thereafter so as to achieve a teledensity of 7 by the year 2005 and
15 by the year 2010. Encourage development of telecom in rural areas making it
more affordable by suitable tariff structure and making rural communication
mandatory for all fixed service providers. Increase rural teledensity from the
current level of 0.4 to 4 by the year 2010 and provide reliable transmission
media in all rural areas. Achieve telecom coverage of all villages in the
country and provide reliable media to all exchanges by the year 2002."

Creating Level Playing Field

The Telecom Dispute Settlement and Appellate Tribunal (TDSAT), by a majority
judgement of 2:1, has ruled that fixed service providers would be allowed to
offer WLL (m) services and the service remains restricted to SDCA and no
handover from one SDCA to another is allowed under any circumstances. The
decision was taken by a three-member bench comprising DP Wadhwa, chairperson,
TDSAT, RUS Prasad and PR Dasgupta.

Justice Wadhwa was against allowing WLL (m) services and was in favor of the
petitioners (COAI). The other two members RUS Prasad and PR Dasgupta were in
unison on the decision to allow basic service providers to offer WLL (m)
services

Justice Wadhwa in his judgment said, "We would hold the issues (except
issue No. 5) in favor of the petitioners. Since it has been held that grant of
limited mobility and use of handsets is not legal, the question of considering
level-playing field would not arise. It is therefore not necessary for us to
answer issue No. 5."

Since WLL service will have an impact on the level playing field conditions,
the other two judges said, "We feel that there is enough justification for
imposing additional entry fee over and above what they are paying as required
under the basic service license agreement."

The modality for determining additional entry fee may be examined and
recommended by TRAI by following a transparent process with due consultation
with all the concerned stakeholders.

The judgment said that further some relief should be given to the cell
operators in regard to the points of interconnection and whether these points
should go beyond Level I and Level II TAX up to Tandem exchange level may be
considered by the TRAI. With regard to the retention of 5 percent access charge
which has been allowed by cellular operators, there is a case for increasing
this percentage to a reasonable level. Higher percentage in this regard could be
recommended by the regulator after due and comprehensive consideration of the
issue in a transparent manner.

The TDSAT has directed the government to immediately initiate action in terms
of what has been stated and complete the exercise in the given timeframe,
preferably within 4 months from the date of this order.

In their judgment, Justice Prasad and Justice Dasgupta said, "We hold
that WLL service with limited mobility will go a long way in increasing tele-density
in the country and make available cheaper and affordable services and benefits
accruing from evolving technology, which is in conformity with the objectives of
NTP ’99. Therefore, allowing WLL service with limited mobility would be in the
best interest of the telecom sector and consumers at large in the country."