COAI
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Monthly Bulletin, April 2004
April 30, 2004, New Delhi COAI Response to TRAI Consultation Paper No. 6/2004 on Unified Licensing Regime
COAI submitted its response to the TRAI Consultation Paper on Unified Licensing vide letter No. TVR/COAI/063 dated April 30, 2004. The highlights of COAI’s response were as below: a. Framework - COAI is in favour of the Unified License & Class License framework proposed by TRAI. All types of telecom services should be permitted under a Unified License. A Class License may cover Radio Paging, PMRTS, ISP, IP-I, IP-II and any non-facility based application service. A Unified License should also include a Class License. b. Internet Telephony may be permitted, but on the same terms & conditions as other operators. If Internet Telephony is to be allowed, ISPs may be moved from the Class License category to the Unified License category, so as to prevent issues of enforcement. c. Process of Licensing - ULR should be implemented through a system of automatic Licensing / Authorization subject to notification to TRAI and compliance with published guidelines d. Migration - Existing licensees must have the option whether or not to migrate to new regime. Principles of level playing field & No worse-off must be adhered to. e. Stages - Second phase of ULR should be completed in one-go. f. Surrender of in-fructuous licenses - a suitable mechanism may be proposed by TRAI. The approach taken by the United Kingdom upon introduction of the Communications Act 2003 may be considered. Fitting the UK approach to the Indian scenario, if a licensee has paid say Rs. 100 crores for a 20-year license and that license becomes in-fructuous after say 10 years, then the pro-rata entry fee for the period of 10 years should be refunded / adjusted against the future dues of the licensee. A similar approach could be adopted for adjustment of excess entry fees paid by service providers under the existing licensing regime. g. Registration charges - a single one-time charge, to cover only the cost of processing and issuing the License. Registration charges should not be linked to the entry fees paid under present regime; they should be independently determined. h. Direct inter-circle connectivity should be permitted. i. A circle based unified licensees will get the following rights : Access - Right to offer all types of access services within his service area
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National Long Distance - Right to carry long distance traffic of any subscriber within his licensed service area (including subscribers of other operators) Further, he will be able to carry national long distance traffic outside his service area (after entering into appropriate arrangements / agreements with other service providers) for his own subscribers as well as for subscribers of other operators. International Long Distance - Right to set up an International gateway in his licensed service area for catering to ILD calls to & from his licensed service area ii. An all India unified telecom licensee on the other hand will be able to directly interconnect across adjacent and non-contiguous areas (anywhere to anywhere), as right to offer long distance services is part of a unified license. He will be able to pick up the NLD traffic of any subscriber anywhere in the country and carry it to any national or international destination. iii. Fixed, Mobile and UASL operators choosing to stay under the existing regime should be allowed to terminate their own subscriber traffic in the Fixed, Mobile or UASL operators’ network in adjoining / adjacent circles only. i. Introduction of Niche Operators may be considered, but only for Rural SDCAs as defined under the Census. Fixed & Internet telephony services may be provided under a separate Class license, however wireless services should only be provided under a franchise from a unified licensee because of issues related to enforcement and optimal utilization of spectrum. By virtue of operating exclusively in Rural SDCAs, Niche Operators should be entitled to reimbursements from the USO Fund j. Rollout, PBG & FBG - Once the Government moves to a market led policy & licensing regime, rollout should not be stipulated in the license, but rather left to market forces. Accordingly there would be no requirement for a Performance Bank Guarantees under the Unified License. The concept of Financial Bank Guarantees (FBGs) too should be reviewed and done away with as they only add to the costs of the end consumers. k. Service Area - TRAI may adopt a two-tier structure for service area classification - i.e. circle / All India. Charges for an all India license should only be marginally higher so as not to discourage operators for going in for a larger footprint. However Class Licenses may be considered at the SDCA level to ensure better penetration in un-served areas. l. Annual License fee may be prescribed at 6% of AGR (5% USO + 1% administrative cost) subject to a minimum fixed levy to deter non-serious players. The 1st & 2nd Circle Cellular licensees who have been granted a 2% reduction in revenue share license fee for a period of 4 years starting April 1, 2004, must continue to be entitled to a lower revenue share license fee for the stipulated 4 year period, even under the new regime. m. Interconnection should be non-discriminatory and uniform for all access services under a unified license. Cellular Operators Association of India 2
n. Carrier Pre-selection - TRAI must examine the costs and benefits of introducing CAC / carrier pre-selection. If carrier pre-selection is to be introduced, then the cost of implementation must be borne by each individual operator (including BSNL / MTNL) for their own networks. o. Existing numbering plan for each service may be continued under the new regime. All competing operators must have comparable numbering plans including the number of digits that a customer has to dial to access a competing service.
p. Infrastructure sharing should be permitted and encouraged between different operators in
the same service area and between the same operator in different service areas
q. Reselling may be permitted under a unified license. r. The issue of competition safeguards and special provisions for SMP operators under unified
licensing must be addressed by the Authority on a priority basis to address the concerns of smaller / pure-play / new operators.
s. The issue of harmonization of the FDI Limit under unified licensing also needs to be
considered by the Authority. 2. Exemption of Cellular from the Income Tax 1/6 Scheme
In an ongoing attempt to get cellular phone users exempted from the Income Tax 1/6 Scheme, COAI addressed a submission to TRAI vide its Letter No. TVR/COAI/061 dated April 21, 2004 on this subject. COAI pointed out that with the sharp drop in tariffs cellular, the service had penetrated to the very low-income strata of society and could no longer be considered a premium service. It was also submitted that cellular services were an important contributor to national tele density and accounted for almost 44% of all phone subscribers. In such a scenario, the inclusion of cellular service in the Income Tax 1/6 scheme was a serious deterrent to take up of service for the marginal subscribers that were now being addressed by the service providers. This would stunt the growth of a sector that has performed commendably since inception and has the potential to contribute significantly to the national communication objectives and the economic growth of the country. 4. Direct Inter-Circle Connectivity by BSNL between Chennai & Rest of Tamil Nadu
In a submission vide Letter No. TVR/COAI/058 dated April 15, 2004, to Secretary, DoT COAI drew the attention of DoT to BSNL’s announcement of direct connectivity between Chennai & Rest
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of Tamil Nadu – a facility for which permission had been repeatedly denied to the private operators. COAI pointed out that the implementation of this facility had created a non-level playing field between BSNL and the private operators inasmuch as the consumers of BSNL mobile services in Chennai and the Rest of Tamil Nadu would have an advantage over the consumers of private operators as they: Would not have to pay roaming charges Incoming calls would be free Calls to any landline would be a local call ADC would not be levied at inter-circle call rates No ADC would be levied for calls between Chennai & Rest of Tamil Nadu & vice versa COAI submitted that since the above facility was in consumer interest, it would be opportune for the DoT to review the situation and permit direct inter-circle connectivity to all service providers. 5. Submission to Central Board of Excise & Customs (NEW)
In a submission to CBEC dated April 15, 2004, COAI expressed concern about the show cause notices being received by their Members from the Central Excise Department to pay Excise Duty on Transmission Towers for Radio Telephony (TTRT) COAI pointed out that the the service providers were not involved in any manufacturing activity and that the towers installed by the cellular operators were not a “good” and consequently should not attract any excise duty. COAI also drew the attention of the CBEC to the recent favourable Orders that had been received by some of the cellular operators in this regard. 6. Allocation of MNC Codes to CDMA Operators (NEW)
In a submission to DoT vide Letter No. SN/COAI/072 dated April 15, 2004, COAI expressed concern on the allocation of a 3-digit MNC Code to CDMA operators as against the 2-digit MNC code allocated to the GSM operators. COAI apprehended that going forward, this differential numbering could lead to problems in roaming and SMS transactions between GSM and CDMA operators. 7. Reduction in Leased line Tariffs by BSNL
a. In its submission vide Letter No. TVR/COAI/056 date April 12, 2004 to Chairman, TRAI, COAI drew the attention of the Authority to the sharp reduction of 60% in the leased line tariffs by
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BSNL. COAI welcomed the move as it was in consumer interest but urged the Authority to ensure that the reduction in the tariffs was equally and non-discriminately available to retail consumers as well as the service providers who were bulk users of this facility. COAI apprehended that unless this was done, the private service providers would not be able to match the BSNL tariffs and consequently, the retail consumers of the private service providers would be unfairly disadvantaged vis-à-vis the retail consumers of BSNL. b. Simultaneously, vide it Letter No. TVR/COAI/057 dated April 12, 2004 COAI also addressed a submission to Chairman, BSNL urging that in public interest and in order to ensure nondiscrimination and level playing field between all service providers, the benefit of the reduction in leased line tariffs by BSNL should also be made equally available to all private service providers who were bulk users of this facility of BSNL. 8. Billing Issues with BSNL (NEW)
The issue of non-reciprocity in the interconnect billing arrangements between BSNL and the private service providers has been taken up by COAI on an on-going basis with BSNL, TRAI and even DoT to draw attention to the fact that the discriminatory billing approach being adopted by BSNL was causing considerable financial loss to the industry of between 4% to 8%. A proposal was made by BSNL on April 1, 2004 in this regard stating that effective February 1, 2004, BSNL would accept a 4-second billing pulse for calls terminating on CMSPs networks. This matter was discussed by both COAI and ABTO and a conclusion was reached that the BSNL proposal was not acceptable on the following grounds : The data used by BSNL was incomplete as it did not include local calls. The sample data was inadequate as it only included Kolkata city The proposal should be made with effect from May 1, 2003 and not February 1, 2004 Differential billing was in conflict with the principles of reciprocity. In this regard, a submission was made to TRAI vide Letter No. SN/COAI/071 dated April 8, 2004 drawing attention to the above developments and urging TRAI to provide suitable directions in this regard, keeping in mind the principles of reciprocity and fair play. Simultaneously, a submission was also made to BSNL vide Letter No. TVR/COAI/055 dated April 8, 2004 pointing out the inadequacies of the sample data and requesting BSNL to make
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appropriate amendments to arrive at a reasonable weighted average which could be considered by the industry.
Waiver of TEC Testing & Self Certification by CMSPs (NEW) In a submission vide Letter No. TVR/COAI/052 dated April 6, 2004 to Secretary, DoT, COAI requested DoT to consider waiver of TEC testing and permission to allow self-certification by CMSPs. COAI drew the attention of the DoT to Clause 8 of the CMSP license that provided that the operators have to get their networks tested and certified by TEC within one year from the effective date of license, otherwise the same would attract liquidated damages. COAI pointed out that as the TEC testing could only begin after the requisite SCAFA clearances had been obtained by the operators for all the sites, the average time of 9-12 months taken to obtain these clearances resulted in more sites coming up by the time the SACFA clearances had been obtained for the earlier sites. Consequently the operators were unable to offer all the sites for TEST testing as new sites had come up during the pendency of approval for the earlier sites. As a result of the above, the operators were unable to offer all the sites for TEC testing. Consequently, they were neither able to settle their claims for liquidated damages nor were they able to get in reduction in their Performance Bank Guarantees upon fulfillment of rollout obligations. COAI submitted given the intense competition in the marketplace, god coverage and high quality of services were a pre-requisite for the new operators and therefore the DoT could consider waiving the pre-condition of TEC testing for these operators and allow them to provide a selfcertification. COAI submitted that TEC may continue to be involved in random audit checks and also require operators to submit QOS performance reports on a regular basis. 9. DoT Guidelines on Intra-Circle Mergers & Acquisitions – Further Clarifications
a. Based on a media report, COAI sought certain re-clarifications vide letter No. TVR/COAI/049 dated April 2, 2004 to Secretary, DoT on the Intra-circle Merger and Acquisition guidelines notified by DoT.
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Duration of License COAI submitted that although the DoT has clarified vide its letter date March 17, 2004 that the duration of license will be as per the license period of the acquiring company, as per a subsequent media report, DoT was reported to have stated that the effective date would be as per the later effective date of the two entities. Spectrum Cap for GSM & CDMA Further that although DoT had clarified that the spectrum cap specified in the guidelines was technology neutral (2x15 MHz for Metros & Category “A” Circles and 2x12.4 MHz for Category “B” and “C” Circles), the same media report had carried a report that DoT was reported to have stated that the upper limit of spectrum in the case of merger of 2 CDMA players shall be 2x10 MHz subject to the condition that both the players hold 2x5 MHz spectrum on the date of the merger DoT responded to COAI’s submissions on April 8, 2004 stating that the above issues had already been clarified vide its letter dated March 17, 2004 and that no further clarification was considered necessary. b. In a further submission to DoT on the same subject, COAI vide its Letter No. TVR/COAI/062 dated April 22, 2004 urged the DoT to consider the availability of the 2% waiver to the 1st and 2nd Circle CMSPs even after M&A. COAI submitted that the benefit of 2% waiver in license fees was intended to provide some relief to the Circle CMSPs in the light of the financial distress confronting these operators as a result of a change in the operating environment and to help them in facilitating the process of consolidation. These operators were granted this concession for a period of 4 years and should therefore continue to be entitled to the same, irrespective of whether they operate as an independent entity or merge with another service provider. Non-availability of this concession post-merger, will act as a strong disincentive in the successful merger of such entities. To address the issue of limiting the 2% benefit to the applicable entity, DoT could take the actual revenues of the concerned service provider as on date of the merger and apply a growth factor on the basis of the average growth of industry revenues in order to arrive at the revenue quantum on which the 2% waiver may be applied for the applicable period of 4 years. COAI also once again, raised the issue that the higher spectrum charges for incremental spectrum was not only a case of double taxation but would also act as a strong dis-incentive Cellular Operators Association of India 7
for mergers and acquisitions. COAI submitted that since the DoT had stated that it may review the spectrum charges aspect after receiving the recommendations of TRAI in this regard, it may kindly consider deferring the implementation of enhanced spectrum charges either for merged entities or for spectrum above 2x10 MHz until the TRAI recommendations were received and a final Government decision was taken. 10. Reduction in STD / ISD Tariffs by BSNL
In the light of a sharp reduction of 25% in the STD / ISD tariffs by BSNL, COAI made a submission to Chairman TRAI vide its Letter No. TVR/COAI/051 dated April 2, 2004. COAI submitted : That BSNL was able to adopt such aggressive pricing tactics primarily on account of the surpluses built up by it in the last 11 months from the huge ADC levies that were being imposed on the private operators. That BSNL was collecting ADC levies on one hand and reducing long distance tariffs on the other thus belying the claim that BSNL was suffering an access deficit in its operations. The claim of an Access deficit was rendered further unjustifiable in the light of media reports stating that the net profits had doubled in the last fiscal despite only a marginal increase in turnover. That the resources collected by BSNL on account of ADC were nor being used for rural access, but rather for adopting aggressive pricing strategies in an intensely competitive market. That the problem had been further accentuated as for a period of 9-months, BSNL had collected ADC on the inflated figure of Rs. 13,000 crores. That while the ISD rate cut was attributed to a rate cut by VSNL, there was no explanation for a corresponding cut in STD tariffs. That all ILD operators, including VSNL, should extend the same settlement rate to all access providers on a non-discriminatory basis. In the light of the above, COAI sought the urgent intervention of TRAI to review the payment of ADC by private operators and urged that if at all, such levy had to be imposed, it should be done in a transparent manner through a separate fund, which could also be the USO Fund. 11. Subscriber Numbers for March 2004
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The total cumulative all India GSM subscriber base rose by 1.5 million in March 2004, from 24.62
million at the end of February 2004 to 26.13 million by end of March 2004 showing a growth of over 6% in the month under review. The surge in subscriber additions from 0.96 million in February 2004 to 1.5 million in March 2004 can be attributed to the aggressive year end-marketing efforts of the service providers. With the conclusion of this fiscal, the growth achieved by the GSM industry during 2003-04 works out to 106% as compared to 97% growth seen in 2002-03. The average subscriber additions during the year have been around 1.12 Million per month, although in the last 4 to 5 months additions have been at the rate of 1.35 million per month. The year-end position of different companies / Groups on the basis of market share and subscriber number is as below.
Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 12.
Name of Company Bharti BSNL Hutch IDEA BPL Spice Aircel Escotel Reliance MTNL Hexacom All India
Total Subscribers 6,504,314 5,229,145 5,148,048 2,732,689 1,882,754 1,208,890 1,026,377 989,084 790,529 360,550 257,053 26,129,433
% Market Share 24.89% 20.01% 19.70% 10.46% 7.21% 4.63% 3.93% 3.79% 3.03% 1.38% 0.98% 100.00%
Meeting of the ITU’s Regional Working Group, April 26-27, New Delhi
The ITU Regional Working Group for Private Sector Issues for the Asia Pacific Region had its second meeting on April 26-27, 2004 at New Delhi to deliberate on the priority concerns for the private sector and to present the consensus recommendations of the Group to Mr. Hamadoun I Toure, Director of the Telecommunications Bureau (BDT) of ITU.
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The meeting was inaugurated by Shri Nripendra Misra, Secretary, DoT and the Valedictory Address was delivered by Shri Pradip Baijal, Chairman, TRAI. Nearly 140 delegates from both India as well as 15 other Asia Pacific countries participated in the deliberations. The meeting was facilitated by COAI. The Forum had three focused Working Groups who deliberated on and came up with consensus recommendations on the following issues : A. Spectrum Allocation & Pricing
This Working Group was chaired by Mr. Xie Feibo, Deputy Director General, Radio Regulatory Department, Ministry of Information Industry (MII), People’s Republic of China and co-chaired by Mr. PK Garg, Wireless Advisor, Wireless Planning Commission, Government of India. The Group recommended: The first priority of the Asia Pacific countries should be to ensure accessibility and affordability of services, The mechanism chosen by the respective Governments should be one that is best suited to meet their national objectives. As far as possible Spectrum allocated should be in contiguous bands, Quantum of Spectrum should be indicated upfront with a clean road map for its actual assignment to allow for efficient design and planning of networks. As far as possible the ITU band plans for frequency allocation should be followed as this would encourage standards economies of scale, etc. B. Cost of Duties & Levies
This Working Group was chaired by Mr. N. H. Choudhury, National Project Co-Coordinator, Bangladesh Telecommunication Regulatory Commission and co-chaired by Mr. Vijoy Kumar, Senior DDG (PIP), DoT. The Group concluded that : The high cost of duties and levies were ultimately passed down to the consumers in the form of higher tariffs thus retarding growth and adversely impacting the ultimate objective of increased tele density. Governments’ should consider lowering the costs of the operators, which would allow the service providers to lower their tariffs for their consumers. This would ultimately increase usage and the tele density as well as improve the revenues of the Government resulting in a win-win situation for all stakeholders. Cellular Operators Association of India 10
C.
Interconnection
This Working Group was chaired by Mr. Yap Chong Ping, General Manager, Maxis International Behrad, Malaysia and co-chaired by Mr. Rajendra Singh, Advisor (Mobile Networks), TRAI. The Group concluded that : Interconnection should be mandated by the Regulator /Licensor, All service providers, especially the incumbent operators should publish their Reference Interconnect Offer in a time bound manner, based on the principles of cost based prices, non discrimination, transparency, providing level playing field to all new entrants, including the subsidiaries of the incumbent operator. The Regulator could intervene at the request of either party or suo moto on any interconnection related disputes, There was a need for a time bound dispute resolution mechanism On the issue of commercial settlement between operators the principle of reciprocity should be followed. The IUC for all types of calls and networks should be fixed by the Regulator. Desirable to have sharing of infrastructure and collocation of equipment on reciprocal basis. The recommendations of the Working Groups were accepted by Mr. Hamadoun I Toure, Director of the Telecommunications Bureau (BDT) of ITU. The Background Papers, the Presentations by the Speakers and the detailed Recommendations of each of the Working Groups can be viewed at http://www.itu.int/ITU-D/partners/Events/NewDelhi-2004/index.html 13. COAI Meeting with Delegation from FCC
A delegation from FCC visited the COAI office and met some senior industry representatives on April 19, 2004. The delegation comprised of Mr. Pushpinder Dhillon, First Secretary, Economic Affairs, US Embassy, Ms. Anita Dey, Regional Specialist for Asia, FCC and Mr. John Guisti, Assistant International Bureau Chief, FCC. A brief presentation was made to the delegation by the Director General, COAI. The presentation covered the Role of COAI and also dealt with some key issues that needed to be addressed for the Indian telecom sector to perform to its full potential. A copy of the presentation made to FCC can be made available to Members on request Cellular Operators Association of India 11
14.
Special Supplement on GSM 1 billion Consumers
The worldwide GSM subscriber base crossed one billion in February 2004. The Indian GSM industry and COAI celebrated this event by coming out with a 4-page supplement in the Indian Express and Financial Express newspapers. The objective of the supplement was to showcase GSM technology and to make readers aware of the several factors responsible for GSM’s undisputed position as the world’s leading digital mobile standard. The supplement was published on April 26, 2004 in the Indian Express in Delhi, Mumbai and Pune; the New Indian Express in Bangalore and Hyderabad and the Financial Express in Bangalore, Chennai, Chandigarh, Kochi, Kolkata, Mumbai and New Delhi. The supplement can be viewed at the COAI website at www.coai.com
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