UNIFIED LICENSING: The Spirit and the Paper

The TRAI also needs to examine the criteria that will probably adopted for the companies to which the unified license will be granted

To have eyes and fail to see” is what Helen Keller, the wellknown author and advocate for the disabled, thought was the greatest tragedy that could befall a person. Telecom policy makers in India too have been shortsighted enough by having a single license for two services and then trying to integrate others at a subsequent stage. It is this shortsightedness that has plagued the industry at various stages of its development. This has led to the conflict between the BSO and CMSP camps.

Cellular players are vehemently opposing the provision of limited mobility for the BSO using the CDMA technology, and perceive it as an encroachment of their territory. 

The Telecom Regulatory Authority of India (TRAI) has initiated the process of moving towards a ‘unified’ license regime for basic and cellular services, by issuing a consultation paper aimed at gathering the views of stakeholders on migrating from the present service specific regime.

The consultation paper raises several issues that require examination prior to setting in motion the process of moving towards a unified license. The same may inter alia be categorized into licensing and regulatory issues.

Licensing Issues

The basic and cellular operators have been issued a separate license each to operate and provide basic and cellular services in different telecom circles in the country. The terms of the license agreement for a basic and cellular service provider are distinct from one another with respect to the entry fees payable, rollout obligations, spectrum allocation, interconnection charges, etc.

In order to move to a unified licensing system, the regulator will be required to address all these issues and more, such that the interests of the service providers are adequately protected.

Modification of Existing Licensing Agreement: If the telecom industry were to move to a unified license regime, it will become necessary to modify the terms of the existing license agreements entered into between the Department of Telecommunications (DoT) and the basic and cellular service providers such that both sets of service providers can provide wireline as well as wireless services. As per the existing licensing agreements, the licensor (DoT) has the discretion to modify at any time the terms of the license agreement on account of public interest or in the interest of security of the State or to facilitate the conduct of service/telegraph. While modifying the license agreement, the Licensor would be required to determine inter alia a transition period which would facilitate the migration from a service specific license to a unified license.

Entry Fees: A key issue, relating to migration to a unified licensing regime, relates to the kind of entry fees payable by a service provider who is granted such a unified license. If the said license is granted to a basic service operator (BSO), the BSO could be asked to pay a higher entry fee. This is on account of the fact that BSOs paid a lower fee at the time of being granted the license initially. Alternatively, cellular mobile service providers (CMSPs), who paid a substantially higher entry fee, could be compensated by allowing them to share a reduced percentage of revenue with the government. However, what will be the criteria for determining the amount of entry fees? Will it depend on the area/circle for which the unified license will be granted to the service provider or will it depend on the basket of services including value-added services being offered by the service provider? The consultation paper issued by the TRAI does not address this issue. 

Granting of the Single License

The TRAI also needs to examine the criteria that will need to be adopted for the companies to which the unified license will be granted. Certain telecom circles have four CMSPs and two BSOs, each of which is a separate company to which has been granted a license to provide basic or cellular service. How does TRAI propose to select the company that will be granted a unified license? Will that depend on the financial stability of the company, guidelines for which will be required to be clearly specified to avoid any ambiguity at a subsequent stage? One solution could be the use of the bidding process for the grant of a unified license to two or three operators per telecom circle. What will then happen to the service providers who have been operating in that circle and have not been successful in their bid for the unified license? Will they be forced to merge with the company that has been granted the unified license? There are so many open ended issues here that it makes one realize that the process of migrating from a service specific to a unified license regime is going to be long and drawn out. 

It is apparent that for a company that is granted a unified license, it is necessary not only to provide quality telecom service, but also to be financially stable to ensure sustained delivery of the said services. For this reason, a unified license will suit integrated players like Reliance, Bharti, and Tata, who are already providing a whole spectrum of telecom services in various circles in the country and who will greatly benefit from the synergy of their infrastructure, network and services. The Cellular Operators Association of India (COAI) has opined “that the industry is now entering a critically dangerous phase where it is on one hand seeing promising growth by making telephony artificially affordable to millions of consumers, while on the other hand it is facing financial sickness due to the unsustainable environment where policy and regulation, and not market forces, are forcing it to become unviable in order to remain competitive”. Therefore, migration to a unified licensing regime should be accompanied by policy and regulation, which makes provision of basic and cellular services by one service provider a financially viable proposition. 

On the other hand, granting a unified license to a BSO or CMSP may well prove the adage, “between two stools, we come to the ground,” because providing quality services to two different subscriber bases, given the marginal revenue generation and huge financial outlays on infrastructure, support systems, etc. may not be easily sustainable. Moreover, the risks of financial irregularities through mergers and acquisitions, offsetting losses of one company with the profits of another, lowering of customer satisfaction and quality standards, may well leave the shareholder and the customer with not very much to write home about. 

Why Unify Only Basic and Cellular?

The other issue to be considered is: why have a single-license regime for basic and cellular services only? Why not for all kinds of telecom services encompassing basic, cellular, national long distance, international long distance, and Internet telephony as well? While this may give rise to a whole host of issues that TRAI will need to look into, it will at least lead to establishing regulations, policies and systems that will lead to the creation of a fully integrated bouquet of services that telecom operators may offer to their customers. 

BSO versus CMSP 

The dispute relating to the provision of limited mobility by BSOs has culminated in a judgment being delivered by the TDSAT where the majority held that limited mobility services provided by BSO and cellular services provided by the CMSP are not surrogates. The judgment has highlighted the fact that the character and features of cellular and limited mobility services, as provided by a BSO, are different. Can increasing competition and market overlap be sufficient ground for unifying the licenses of the two services?

CMSPs argue that unified licensing will do away with fetters that hold WLL from graduating to full-mobility status. They see it as a ploy to give regulatory sanction for limited mobile services to be fully mobile. 

On the other hand, representatives of BSOs say that a unified license is the only way to resolve the WLL dispute outside the court and that companies like Reliance are already offering synergized services, including roaming and broadband, without a unified license.

Some private BSOs have indicated that they will give their wholehearted support to the proposal for a unified license regime that has been proposed by the TRAI. They have pointed out that due to the technological developments and ability of the infrastructure being used for provision of other services, service-specific licenses have lost their significance and relevance.

They argue that if the infrastructure is not used to provide all the services that it is capable of providing, it would lead to less than optimum use of the infrastructure. 

Spectrum Allocation and USO

The spectrum, as we know, is a scarce resource. Migration to a unified licensing regime will result in BSOs moving into the cellular domain. Where will this additional spectrum come from and will the grant of the same to BSOs result in deterioration in the overall quality of cellular services in the country? 

Additionally, under the unified licensing regime, it will be necessary for the regulator to provide more clarity in terms of the universal service obligations of various service providers who merge into one entity to provide a bouquet of telecom services. 

Regulatory–Level-playing field 

Under the unified licensing regime, it will be necessary for TRAI to ensure that a level-playing field is maintained across all service providers. This will prevent the integrated players from creating a monopoly that existed prior to the National Telecom Policy 1994 when MTNL and BSNL ruled the roost and it took the customer anywhere between two to three years to get a basic phone connection. A unified license could imply that under the proposed new policy, players active in circles like Rajasthan or Uttaranchal could, if they so desire, enter the Delhi or Mumbai mobile markets. This will lead to the reduction in the number of players and greater consolidation in the market.

To prevent the creation of monopolies, which could harm the interest of the consumers more than protect them, due legislation would be required to be brought in by the government. The Competition Bill, 2001 when enacted will prohibit anti-competitive agreements, prohibition of abuse of dominance, regulation of combinations (acquisitions, mergers and amalgamations of certain sizes) and establish a Competition Commission of India (much like the TRAI) to regulate all of the aforesaid. 

It is clear that a sector as dynamic as the telecom industry requires constant evolution in its policies and regulatory framework.

The new proposal put forth by TRAI will raise a host of issues and pose several regulatory challenges for policy makers. The convergence of technology and services will hopefully lead to the creation of a policy that will act as a strong catalyst to the growth of the sector. 

Archana Sasan, partner, Kochhar & Co

GoM not to take Final decision before TRAI submits report

The group of ministers (GoM) on telecom will be finalizing its stand on the unified licensing issue not before TRAI chairman Pradip Baijal has submitted his report on 4 October. The GoM, which is chaired by finance minister Jaswant Singh, is a high-powered body with high-profile members like communications minister Arun Shourie, defense minister George Fernandes, foreign minister Yashwant Sinha, law minister Arun Jaitley, and I&B minister Ravi Shankar Prasad.Â

Speaking at a recently-held function by Telecom Equipment Manufacturers Association, Shourie made no bones about his affirmative stand to the unified licensing issue.Â

The TRAI report will be based on the open house discussion held by the regulatory body on 17 September 2003. The
discussion was well attended by representatives of both GSM and WLL camps. The open house discussion on the proposed introduction of the unified license scheme was fraught with debate and discussion with no consensus appearing in sight.

The Telecom Policy of 1999 provides for the provision of one license for each separate telecom service. Therefore, any change in the Policy, whereby one license could be provided to an operator providing two or more telecom services, would necessarily require a change in the Telecom Policy. We will all agree that the right to change the Telecom Policy vests with the Government. However, the aforesaid is not to suggest that the TRAI cannot make recommendations to the Government on the pros and cons of adopting schemes / practices in the telecom sector that could benefit the sector in the long run. The same was amply demonstrated by the Chairman of TRAI at the open house.Â

As always, the TDSAT judgment was interpreted by the representatives of the cellular operators and the basic service providers to suit their purpose. The representatives of the basic service providers seemed to think that the hue and cry being made by the cellular operators was nothing but a reaction to their turf being invaded.

At the crux of the debate was the issue of the change in the terms of the license agreements entered into between the DoT and the basic and cellular service providers and how any unilateral modification of the terms of a contract by one party to the contract, could lead to more disputes / litigations in the telecom sector. Therefore, the non-partisan participants, at the open house discussion, advised the TRAI to be cautious in the recommendations that the TRAI proposed to make to the Government on the unified license scheme.

Further, it was pointed out to the TRAI that the consultation paper on the unified license scheme was not properly thought through. Any change in the Telecom Policy, especially if it relates to something as significant as the unified license scheme, requires structured thinking and planning on the part of the Government authorities. The Government is required to present a well thought out scheme that takes into account the interests of all concerned parties affected by the proposal.Â

In the current scenario, the fact is that the TRAI is still grappling with the issues of how to justify the provision of limited mobility services by a basic service operator, how to determine entry fees, how to compensate the cellular operators for the high license fees already paid by them to the DoT, etc. The irony being that the TRAI is seeking answers from parties who are immediately affected by the change in the Telecom Policy.