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A New Regime: Telecom Commission gives in-principle approval to unified licences

August 26, 2011
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The Telecom Commission has given its in-principle approval to the implementation of the unified licence regime proposed by the Department of Telecommunications (DoT) and the Telecom Regulatory Authority of India (TRAI) in 2003. Twice in the past, the implementation of the unified licence regime was attempted but was unsuccessful. The first time it was recommended, the government settled instead for unified access service licences (UASL). The second time, in 2007, it was vetoed by the then minister for communications, A. Raja.

Under the proposed unified licence regime, an operator will have to pay an entry fee of Rs 200 million, as per indications and TRAI’s recommendation. This will include pan-Indian UASL, STD, ISD, ISP (internet service provider), and IP1 (infrastructure provider Category 1) licences. Spectrum will not be tied with this licence; it will have to be obtained separately.

According to the Telecom Commission, the unified licence regime will offer “class licences” and licences through authorisation. It will be service and technology neutral. The licence will be offered at two levels – national and service area (state). Service area licences will not include STD and ISD.

To provide regulatory safeguards and ensure smooth migration to the unified licence regime, the Telecom Commission has asked TRAI to recommend migration terms for stand-alone and integrated operators. It has also asked TRAI to specify terms and conditions for additional services that are to be included under the unified licence.

Meanwhile, in a departure from TRAI’s recommendation to reduce the licence fee to a uniform 6 per cent, the commission is in favour of imposing an 8.5 per cent uniform licence fee on all telecom operators. Currently, operators pay between 6 per cent and 10 per cent of their annual revenues as licence fee.

The commission also plans to seek legal opinion on the issue of changing the rollout obligations for telecom players. TRAI had suggested framing rollout obligations based on the area’s population, whereby operators would be required to cover all areas with more than 10,000 people within two years and areas with 2,000-5,000 people in four years. However, the commission does not agree with TRAI on this as it believes that most operators would have already fulfilled their obligations under the existing rules, which require them to cover all areas irrespective of the population. Therefore, it would be legally untenable to change the norms.

The commission is also against the idea of establishing a new fund to cover expenses related to spectrum re-farming. It is instead in favour of adopting the unified licence regime, whereby all licences would be unified under a single licence and spectrum delinked from the licence. This is in line with the government’s new agenda of allowing operators to offer all “forms of communication services under a single permit”.

The concept of unified telecom licensing is prevalent in a number of countries, including Singapore, Australia and some European Union countries. The idea behind establishing such a regime is to allow competing telecom operators and service providers to offer various telecom services without having to apply for separate licences. Besides, the unified licence regime is expected to promote more consolidation within the sector, encourage the growth and development of new applications and services, ensure a level playing field for existing service providers and new entrepreneurs, and facilitate service delivery in rural and remote areas.

However, while the Telecom Commission is optimistic about pushing for a unified licence regime, operators are not likely to accept these policy changes easily. The new entrants are opposing the proposed Rs 200 million entry fee stating that TRAI’s May 2010 recommendation did not include any such provision.

Further, according to analysts, the uniform fee of 8.5 per cent of the adjusted gross revenue (AGR) will have little impact for pan-Indian operators. This move will only benefit operators in metro areas where they are currently paying 10 per cent of their annual revenues. However, ISPs and long distance telephony operators are unlikely to be pleased about the move as they will have to pay out more (they currently pay only 6 per cent of their AGR).

Also, the clause delinking spectrum from licence is likely to stir up the industry. This is because companies like Bharti airtel, Vodafone Essar and Idea Cellular, which currently hold up to 10 MHz of 2G airwaves in many areas, will have to renew their permits between 2014 and 2021, and the new permits will no longer come bundled with spectrum. They will be given only 6.2 MHz of spectrum when they renew their permits at market rates.

Telecom minister Kapil Sibal intends to ensure that all the new rules for the sector are cleared before October 2011. Clearly, radical changes in telecom rules are on the cards as part of a larger reworking of the telecom landscape

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