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Regulatory Roundup 2010: TRAI focuses on broadband and 2G spectrum allocation

January 21, 2011
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The year saw many of the Telecom Regulatory Authority of India’s (TRAI) initiatives kicking off, including the auction and allocation of 3G and broadband wireless access (BWA) spectrum, increasing rural telecom penetration, launching of mobile number portability (MNP), and fostering competition in the sector. The regulator also drafted the road map for key upcoming services like mobile TV, which required some much-needed regulatory clarifications. It also gave recommendations for the efficient utilisation of numbering resources, and continued to take measures to boost broadband penetration.

However, while it achieved success in some areas, many of its other recommendations addressing key issues did not see the light of day, either because policymakers had yet to take a call on them or due to significant opposition from the industry.

TRAI’s May 2010 recommendations on 2G spectrum pricing and licence allocation, linking the prices of additional 2G spectrum to that of 3G spectrum, which got the national exchequer a hefty Rs 670 billion, met tough resistance from telecom operators. This was mainly because players like Bharti Airtel, Vodafone Essar and Idea Cellular feared they would have a huge outgo if the price for additional 2G spectrum was to be linked to the price of 3G spectrum. The operators then moved the Telecom Disputes and Settlement Appellate Tribunal (TDSAT), where the recommendations have been under scrutiny since.

One of TRAI’s big problems is that it lacks the teeth to enforce regulations and hence, many of its recommendations remain just those. Also, it faces frequent interference as well as external pressures that deter it from taking quick and hard decisions.

Key developments during 2010 

TRAI made several efforts to maintain the growth momentum of the telecom industry.

Internet and broadband: To facilitate the rapid growth of broadband, TRAI brought out a National Broadband Plan (NBP) in December 2010. Under the plan, the minimum broadband speed would be raised from the current 256 kbps to 512 kbps from 2011 and further to 2 Mbps by January 2015.

In the NBP, TRAI has set ambitious targets for the industry. By 2012, it expects the number of broadband connections to touch 75 million and to reach 160 million by 2014. To achieve these targets, TRAI has proposed setting up a national broadband network, which would be an open access optic fibre network connecting all habitations with a population of 500 and above. 

Numbering resources: The existing National Numbering Plan, 2003 (NNP, 2003) that was designed for 750 million connections, including 450 million mobile connections, was supposed to last until 2030. However, the numbering system has come under severe strain with mobile subscribers crossing the 500-million mark in 2009 itself. With the number of subscribers likely to exceed 1 billion by 2014, the situation called for an urgent review to facilitate continued availability of numbers with minimum disruption to services. Therefore, in August 2010, TRAI released its recommendations on “Efficient Utilisation of Numbering Resources in India”.

In these recommendations, TRAI has proposed that the existing 10-digit numbering scheme should be continued to avoid inconvenience to customers. Instead, it has come out with a two-pronged strategy, whereby it has recommended that India should migrate to an integrated numbering scheme for fixed and mobile services by December 31, 2011. In other words, both fixed line and mobile phones will have 10-digit numbers. This will make enough numbers available to customers and cater to the expansion of existing services and introduction of new services for the next 30-40 years. This integrated numbering will also facilitate the extension of number portability to fixed lines.

Till the integrated scheme is implemented, the dialling of intra-circle calls from fixed lines to mobiles will be prefixed with a “0”. This will enable exploitation of spare capacity available in the sub-levels of existing short distance charging area (SDCA) codes, to the extent of about 1 billion numbers without affecting any telephone number or STD code. To allocate numbers more efficiently, TRAI has also recommended automation of the allocation process. This should help service providers in getting allocations online. Once the recommendations are accepted, TRAI proposes to go ahead with the work of preparing a detailed plan for migration to the integrated numbering scheme. 

Spectrum management and licensing framework: These recommendations were released in May 2010, just before the auction of 3G spectrum. As per the recommendations, 2G spectrum should be priced at par with that of 3G spectrum. Moreover, operators whose licences are up for renewal, should be charged for spectrum at rates based on 3G prices.

TRAI had further proposed that the licence fee paid by operators should be reduced in the next four years to a uniform 6 per cent of adjusted gross revenue from the current 6-10 per cent. To promote mergers and acquisitions, and facilitate consolidation in the fast growing telecom sector, the regulator suggested ending restrictions that currently prevent telecom firms from selling majority stakes in the first three years of getting a licence. It also favoured sharing of 2G spectrum between operators for five years.

While most of these recommendations have been opposed by the industry, the Department of Telecommunications (DoT) itself has had reservations in accepting some of these. TRAI is, therefore, reworking these recommendations and will soon release a fresh set of suggestions on the issues.

Mobile TV licensing: Considering the proposition of better service to consumers, TRAI, in its recommendation on mobile TV, reiterated that telecom service providers should be allowed to bid for mobile TV licences. The Ministry of Information and Broadcasting had earlier stated that there could be an issue of a level playing field among bidders, namely, broadcasters and telecom operators. In its April 2010 recommendations, the regulator has also proposed a three-phase service rollout mechanism.

However, it is not clear as to when the process of spectrum allocation will be cleared. According to TRAI’s recommendation, mobile TV service providers will be allocated one slot of 8 MHz to provide the service. The frequency band on which this spectrum has to be allocated is yet to be discussed. A frequency band from 585 MHz-806 MHz has been identified to run mobile TV services; this band is with Doordarshan and is lying unutilised till today.

In the long run… 

Going forward, TRAI has many unresolved issues to sort out. These include the future allocation of spectrum and submission of recommendations for the National Telecom Policy, 2011. The consultation papers that were released through 2010 will, in all likelihood, materialise in the coming year. Foremost among them are issues relating to telecom tariffs, revenue sharing arrangements for intelligent network services, encouraging telecom equipment manufacturing in India, and formulating collocation charges.

In an attempt to enhance transparency, check misleading advertisements and help customers make informed choices about their mobile plans, in October 2010, TRAI issued a consultation paper, “Certain Issues Relating to Telecom Tariffs”, which discusses several matters that have a bearing on telecom tariff offers.

TRAI has also invited opinions from stakeholders on the collocation charges that telecom operators pay to each other. Collocation is needed wherever one operator interconnects its network with another operator’s. At present, private operators mutually agree upon the terms and conditions for collocation in most cases. The main purpose of this consultation paper is to examine the issues of collocation with a view to frame guidelines that will help service providers mutually negotiate and agree on reasonable terms and charges for collocation for the establishment of effective interconnection.

Further, TRAI expects 4G to come to India by 2012. Its recommendations on 4G services are likely to be ready by mid-2011. TRAI will look into the various aspects of 4G, including spectrum band allocation and quantum/modes of allotment to the operators, before coming up with questions for the telecom industry and eventually deciding the regulating guidelines. 

All in all, it was a busy 2010 and promises to be an even busier 2011 for the regulator of the fastest growing mobile market in the world.

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