The digital communications infrastructure and services sector is witnessing unprecedented transformation with the emergence of new technologies, services, business models and players. This brings to the fore the need to review the existing licensing, regulatory and resource allocation frameworks in order to incentivise investments and innovation in the sector.
The National Digital Communications Policy (NDCP), 2018 aims to reform the licensing and regulatory regime to catalyse investments and innovation and promote the ease of doing business. One of the action plans in this regard is the unbundling of different layers (infrastructure, network, services and application) through differential licensing.
Earlier, in December 2019, the Telecom Regulatory Authority of India (TRAI) at the behest of the Department of Telecommunications (DoT) had released a pre-consultation paper to seek inputs from stakeholders on the broad framework for licence unbundling. A total of 18 stakeholders submitted their comments. Based on the inputs received, international practices and TRAI’s internal analysis, the regulator has now released a consultation paper on “Enabling Unbundling of Different Layers through Differential Licensing”, seeking industry’s response.
Existing licensing framework
As per the existing telecom licensing framework in India, a unified licence (UL) authorises the licensee to deploy the network and related infrastructure as well as provide services. Only one UL is required for all telecom services in the entire country. In addition to the UL, there is the UL virtual network operator licence. It is a regime parallel to UL. Virtual netwrok operators (VNOs) are service delivery operators that provide services of network service operators (NSOs) to end customers.
Further, a company registered with DoT as infrastructure provider-1 (IP-1) is permitted to lay telecom infrastructure. As per DoT’s guidelines, IP-1s can provide assets such as dark fibre, right of way, duct space and towers on a lease/rent/sale basis to the licensees of telecom services. In 2009, the scope of IP-1 registration was enhanced to cover active infrastructure such as antenna, feeder cable, Node B, radio access network (RAN) and the transmission system on behalf of telcos. However, IP-1s are not permitted to own and share active infrastructure. These elements should be owned by telcos. TRAI, in March 2020, gave its recommendations to enhance the scope of IP-1s and permit them to own, establish and maintain all such infrastructure items, equipment and systems that are required for establishing wireline access network, RAN and transmission links.
Earlier, in May 1999, the Telecom Commission had introduced the other service provider category under the New Telecom Policy to provide services such as telebanking, teletrading and e-commerce by using infrastructure provided by various authorised access providers for non-telecom services. The Telecom Commission had also given in-principle approval for the registration of call centres, both international and domestic, in the country under the above category. Later, services like network operation centres and vehicle tracking systems were added. As per the Telecom Commission, these application service providers could take telecom resources from authorised telecom service providers, but they were not allowed to provide switched telephony.
Stakeholder comments on TRAI’s pre-consultation paper
In their comments on the pre-consultation paper, many stakeholders have mentioned that the existing licensing regime supports a layered approach. Any further unbundling will make the licensing regime more complex and will impact the ease of doing business. Further, it will be commercially unviable for existing unified licensees to split their functions into different layers. One stakeholder has also mentioned that most of the telcos have now hived off their tower and fibre infrastructure companies into separately established IP-1 companies in order to promote sharing. Further, the sector has witnessed sharing of spectrum and active infrastructure among licensed telcos. Therefore, there is no need for the introduction of a new licensing framework.
In contrast, some stakeholders have favoured the unbundling of different layers (infrastructure, network, services and application) through differential licensing. In the present licensing framework, the infrastructure layer is being serviced by IP-1s, the network (including infrastructure and service) layer by UL holders and the service delivery layer by VNOs. There is still a lack of service delivery operators (SDOs)/ VNOs in the mobile segment. VNOs have been raising their concern about facing difficulty in getting access facilities from access service providers. In their view, it should be mandatory for access service providers to provide network access to them. So far, only one telco has entered into agreements with a few VNOs in India.
Globally, most telecom markets have separate licence categories for NSOs and SDOs. Such countries have a framework or guideline outlining how the resources will be provided by the NSO to the SDO. A few countries have made it obligatory for NSOs to share their resources with SDOs in a transparent and non-discriminatory manner. Countries such as Singapore, Malaysia and Uganda have put in place certain obligations or come out with a framework for wholesale mobile access services. In many other countries, regulators have not prescribed any obligation for network operators, but the wholesale resources of NSOs are easily available to SDOs.
One way to attract investments and strengthen the service delivery segment is the separation of the network service and service delivery layers by introducing a specific licence for the network layer. The NSO would willingly share its network with the SDO, thereby resulting in the reduction of cost and the increased utilisation of resources including spectrum. However, a key issue is whether to allow the network operator to offer services directly to end customers. Since it has to buy spectrum at a market-determined price, it can only monetise its network and spectrum by offering services to end customers directly. If the network operator is allowed to provide services itself, the mere unbundling of licence may not yield the desired results as a company owning the network and providing service may not tie up with other SDOs. Therefore, in order to make unbundling effective, there is need for an efficient framework.
While suggesting different layers and their scope, stakeholders suggested a multi-layered ecosystem with light-touch regulation. If it is decided that the network service and service delivery layers will be unbundled, there would be many issues relating to the scope of service, responsibilities, obligations and regulations. In addition, some stakeholders have suggested that in order to facilitate active infrastructure sharing, the payment made by one telco to another for active infrastructure sharing should be allowed as pass-through for the calculation of adjusted gross revenue.
Issues for consultation
- Whether the network services and service delivery layers need to be separated by introducing specific licences? If yes, what should be the scope in terms of responsibilities, obligations, regulations, incentives of each licence category?
- Whether the existing UL should be mandated to migrate to the unbundled licensing regime or a new regime should be introduced, while continuing the existing regime for existing licensees till the validity of their licence ends, with an option of migration?
- Whether existing VNO licensees should be mandated to migrate to service delivery category licences as per the unbundled licensing regime?
- Whether service delivery category licensees should be permitted to parent multiple network service layer licensees?
- Should the network services layer licensee be permitted to secure the service delivery category licences? If yes, what kind of restrictions and safeguards should be put in place in order to protect competition and innovation in the service delivery segment?
- Whether certain obligations should be imposed on the existing UL, and whether other measures should be taken to encourage UL licensees to provide their network resources to VNO licensees, particularly in the mobile service segment.
With increasing digitalisation, the telecom sector is serving as the backbone for almost all sectors. To carry this out in a cost-effective manner, it is essential that telecom resource sharing happens at a larger scale. To this end, the licensing and regulatory regimes must be reformed to allow inbuilt resource sharing and provide the benefits of technological advancements to all the sectors.
The application market is bound to be huge. As everything cannot be provided and managed by telecom services providers, this will require innovation and field-specific knowledge. The unbundling of different layers will offer opportunities for the sharing of telecom resources and their optimum utilisation, which will help in achieving the objectives defined in the NDCP, 2018. It will also generate an additional source of revenue for infrastructure owners/service providers. This will further catalyse investment and innovation, cost reduction, and effective utilisation of infrastructure.
By Akanksha Mahajan Marwah