The Telecom Regulatory Authority of India (TRAI) has recommended several changes to the licensing policy for access service providers. Keeping in mind the rapid pace of growth in the telecom sector as well as the need for licensing reforms, the Department of Telecommunications (DoT) had sought the regulator’s inputs.
After due consultation, TRAI made its recommendations on key issues such as entry regulation in the access services market; review of guidelines on mergers and acquisitions (M&As), including provisions relating to cross-holding of a licensee company in the same service area; the use of a combination of technologies (CDMA, GSM and/or any other) under the same licence; rollout obligations; and others.
TRAI carefully evaluated the progress achieved in the growth of telecom services, as well as the fast pace of technological change in India since the liberalisation of the sector. In light of this and the target of reaching 500 million subscribers by 2010, it emphasised the importance of reorienting the existing framework of policies to suit the needs of the emerging environment.
The basic intention was to maximise socio-economic benefits ?? by making use of technological developments in the sector; removing barriers to competition and efficiency in the market; making services more affordable; protecting consumer interest; and ensuring efficient usage of radio spectrum. The following recommendations have been made…
Entry limit in access service provision
No cap is to be placed on the number of access service providers in any service area.
In order to frame new spectrum allocation criteria, a multi-disciplinary committee can be constituted, comprising representatives from DoT, TRAI, the Wireless Planning and Coordination Wing, the Cellular Operators Association of India and the Association of Unified Service Providers of India. The committee may be headed by an eminent scientist/technologist from a nationallevel scientific institute.
The present subscriber norms are to be enhanced as an interim measure so that the task of spectrum allocation is not stalled. The suggested revision is given below:
GSM and CDMA operators may be given additional spectrum beyond 2×4.4 MHz and 2×2.5 MHz respectively after they achieve the required subscriber base. Allocation of additional spectrum will be subject to compliance with rollout obligations.
Licensees wishing to get additional spectrum beyond 10 MHz in the existing 2G bands (800 MHz, 900 MHz and 1800 MHz) after reaching the specified subscriber numbers will have to pay a one-time spectrum fee on a pro rata basis for allotment of each MHz, or part thereof for spectrum beyond 10 MHz.
For 1 MHz allotment in Mumbai, Delhi and Category A service areas, the service provider will have to pay Rs 160 million as a one-time spectrum acquisition charge.
All spectrum, excluding that in the 800 MHz, 900 MHz and 1800 MHz bands, should be auctioned in the future in order to ensure efficient utilisation of this scarce resource.Annual spectrum usage charges linked to operators’ revenue are to be revised (as given in Table 3).
M&A guidelines
The relevant service market is to be defined as wireline and wireless services.The wireless service market will include fixed wireless as well. The relevant geographic market will continue to be the licensed service area.
For assessment of a licensee’s market power and determination of the level of dominance, its market share with respect to both subscriber base and revenue in the relevant market will be considered in order to regulate M&A activity.
M&A guidelines should use exchange data records (EDRs) in the calculation of wireline subscribers, and VLR data in the calculation of wireless subscribers for computing market share based on subscriber base.
The duly audited adjusted gross revenue (AGR) will be the basis for computing revenue-based market share for operators in the relevant markets.
The market share of a merged entity in the relevant market should not exceed 40 per cent, either in terms of subscriber base or in terms of revenue.
No M&A activity should be allowed if the number of wireless access service providers falls below four in the relevant market as a result of M&A activity.
The existing caps of 2×15 MHz per operator per service area for the metros and Category A circles, and 2×12.4 MHz per operator per service area in Category B and C circles, which are currently applicable for a post-merger entity, should be removed for purposes of regulating M&A activity.
For the purpose of payment of spectrum charges, the spectrum held by the two licensees would be merged and the annual spectrum charge would be applicable on this total spectrum at the prescribed rate.
Acquisition of equity capital up to 10 per cent of the licensee’s enterprise shall be permitted by automatic route; anything beyond that and up to 20 per cent of the equity holdings of the target licensee company shall be approved on a case-bycase basis. The process of such approvals will be based on the M&A guidelines contained in these recommendations.
Access service using a combination of telecom technologies
In case a new licensee wishes to deploy any other advanced and efficient technology for providing mobile service, DoT should allocate spectrum subject to its availability.
An existing licensee may be permitted to use an alternative technology subject to the following conditions: the licensee shall pay an upfront fee which should at least be equal to the entry fee for a unified access service (UAS) licence; the licensee shall maintain separate details of the subscriber base data for the purposes of spectrum allocation; for the purpose of payment of the spectrum charge, the spectrum held by the two licensees will be added/merged and the annual spectrum charge will be at the prescribed rate applicable to this total spectrum.
The AGR will be the combined AGR of the services rendered through both the technologies. The combined AGR will determine the licence fee.
For the assessment of market power in the context of competition analysis, the combined market share of both the technologies will be taken into account.Obligations, if any, will be imposed on dominant operators as and when necessary with reference to the combined market power of such licensees.
In order to ensure that the additional spectrum is efficiently and properly utilised in a timely manner, the licensee should also be required to fulfil the contingent rollout obligations.
Rollout obligations
The current rollout obligations should not be changed for access service providers.
Telecom Engineering Consultants (TEC) should give the required certificate of compliance, or the report of inadequacy, within 90 days. This time limit should start from the date of submission of the application to TEC. It is necessary that this work is delegated by TEC to other technically qualified organisations. The Vigilance Technical Monitoring Cell of DoT, C-DoT and technical institutions that have the requisite competence, like the IITs, may also be entrusted to carry out verification/certification tests on the basis of a fee that is to be determined by DoT.
The Standing Advisory Committee for Frequency Allocation’s clearance should be given in the stipulated time-frame of 60 days. In case no communication is received within this period, the application will be deemed to be approved.
In case the rollout obligation is not met even after 52 weeks of the period prescribed, TRAI recommends that the performance bank guarantee (PBG) be forfeited. The service provider may be asked to resubmit a PBG of the same amount; no additional spectrum may be allocated to licensees before they fulfil the rollout obligations; such licensees will not be eligible to participate in any spectrum auction, and proposals of permission for M&A from them should not be entertained till the rollout obligation is met.
Existing service providers who are in non-compliance of the rollout obligation and do not possess the requisite TEC certificate, may be given a grace period of six months as one-time relief to comply with the new certification scheme.
Rural rollout by wireless access providers has been recommended for incentivisation using the Universal Service Obligation (USO) Fund.
As per this framework, a licensee who covers 75 per cent of the development blocks in any service area (excluding the four metro service areas) should be eligible for payment of USO fee at a reduced scale. Such a licensee will be required to pay only 3 per cent, as compared to the existing 5 per cent.
