Leased circuits are important not only for e-business, e-governance, internet access, and BPO operations, but also for organisations that need high quality, round-the-clock links between their offices in order to run critical applications. Keeping this in mind, the Telecom Regulatory Authority of India (TRAI) recently brought out the Domestic Leased Circuits Regulations, 2007. It is applicable to all service providers that provide leased circuits under the terms and conditions of their licences to subscribers directly.

According to TRAI, the new regulations will enhance competition, allow consumers a wider choice of service providers, and make domestic leased circuits (DLCs) available at reasonable prices. For service providers, these regulations will open up the possibility of meeting customer demand for end-to-end leased circuits by allowing them to obtain DLCs or local lead from other service providers. Moreover, the regulations will give a sustained fillip to the market, which, according to conservative estimates, will be worth Rs 30 billion by 2008 and Rs 45 billion by 2010.

A regulation on DLCs was much needed to remove the existing glitches.Today, a telecom service provider’s commitment to end-users is largely contingent on the quality and timely availability of leased circuits.

DLCs connect two or more customer sites to their own or other networks. The International Telecommunication Union defines a leased circuit as “a two-way link for the exclusive use of a subscriber regardless of the way it is used by the subscriber”. Leased circuits do not involve central office switching operations. Unlike broadband, a leased line is not contended or shared; it delivers dedicated and guaranteed bandwidth. DLCs can be set up as one or more point-to-point links, or as a virtual private network (VPN). They can use terrestrial or satellite facilities, any medium (copper, fibre, wireless, etc.), and can be provided through passive links, circuit switched networks or packet switched networks.

Competition in all segments of end-toend connectivity is vital to deliver retail products to users at a reasonable price. But TRAI discovered that new entrants find it difficult to compete in the leased circuit market. This stems from the non-availability of vital DLC components such as access, and the financial non-viability of expanding networks in greenfield areas.Existing service providers, on the other hand, have legacy networks and can thereby benefit from the more innovative ideas of new service providers, leading to the induction of new technologies like fibre and wireless in the access network.

Till now, some policy initiatives have been taken by the government, resulting in greater competition in the DLC and IP VPN market. However, according to TRAI, in markets where some service providers rely on other service providers for essential facilities, a framework is required to ensure effective functioning.

The highlights of TRAI’s DLC regulations are as follows:

  • Since access is an essential part of building up a DLC, service providers have to provide not only DLCs to other service providers on request, but also the local lead in the access network in cases where the other service provider can build the entire DLC except the local lead.
  • The regulations cover DLCs/local lead provided on all mediums (copper, fibre, wireless, etc.) using any transmission technology.
  • All service providers who have copper, fibre or wireless capacity, with licences to provide DLCs, are obliged to share the infrastructure with other operators.
  • While sharing the DLC/local lead with other service providers offering equivalent services, a service provider has to provide the services under the same conditions as well as of the same quality as it would have had it been catering to its own customers, unless there are service level agreements that ensure different terms and conditions of service provision.
  • A framework has to be provided to ensure transparency and predictability, allowing the DLC/local lead to be provided in a non-discriminatory manner.
  • When spare capacity is available, it is mandatory for DLCs to be provided utilising that capacity. If not, service providers have the option to provide the DLC/local lead on rent and guarantee/special construction basis under the telecom tariff order that relates to reporting requirement.
  • In the case of resource usage by multiple service providers in a closed user group (CUG) network, the prime service provider, who has the agreement with the customer and arranges end-toend solutions by utilising resources from different service providers, should be responsible for security issues. In case a user/customer procures sources from different service providers to engineer a CUG, then all the operators involved in the CUG having agreements with the users/customers are the prime service providers, and thus responsible for security issues.

    • TRAI is of the opinion that further development must continue in the longterm interests of service providers and consumers.

    On the issue of whether the operator with significant market power (SMP) should be mandated for providing the local lead for the DLC and engineering CUGs to other operators, TRAI, after consulting with the stakeholders, feels that the SMP concept itself is not relevant 10 years after the entry of private operators. Moreover, an incumbent is often not an SMP. In the case of optical/metro Ethernet and long distance bandwidth in lucrative areas, private operators are SMPs. Given the deployment of different technologies, especially in the access network, TRAI feels that narrowing the obligation to select service providers would be a retrograde step.

    While the concept of SMPs may not be very relevant at this stage, TRAI has emphasised that any service provider who has spare copper, fibre or wireless capacity should share it with other service providers. The entire available capacity should be fully utilised for the benefit of consumers.

    The incumbent outlook

  • The two public sector telecom companies Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) are none to happy with the recent TRAI regulations under which all licensed DLC service providers with copper, fibre or wireless capacity have to share infrastructure with other service providers.
  • Their problem stems from the fact that these are the two operators that have laid the maximum amount of cable between exchanges and subscriber premises. The attempts to unbundle this for use by the private operators would lead to the hoarding of last mile connections, rendering BSNL and MTNL uncompetitive. Both companies are considering the possibility of challenging TRAI’s order in the Telecom Disputes Settlement and Appellate Tribunal.
  • According to BSNL and MTNL, TRAI’s latest regulations on DLCs is nothing but a reversal of the government’s stated policy of not unbundling the local loop, that is, the last mile of copper wires that connect individual homes/offices to local exchanges. Therefore, they have the right to question the regulator’s jurisdiction on the issue. BSNL officials claim that unblocking the last mile network had earlier been done through a commercial relationship. But with this regulation, unblocking would become a mandate instead, requiring necessary compliance.
  • Meanwhile, TRAI feels that the regulations would benefit both service providers and consumers by enhancing competition and allowing consumers a wider choice of service providers. But BSNL and MTNL argue that the recent regulations will prevent them from growing and offering competition to private players, thereby working only in favour of the latter.
  • “Once BSNL and MTNL are rendered uncompetitive, the subscriber would be the main loser. Over a period of time, tariffs for most telecom services have fallen only due to the public sector companies’ aggressive strategies,” argues a senior BSNL official. He further notes that these regulations would discourage the rollout of wireline networks by private service providers.