Industry experts discuss the virtues of migrating from a service-specific licence to a unified telecom licence regime as well as issues like what migration path should be adopted, what are the likely challenges, and what should be the scope of the licence. We bring you their views………

Given that the GSM-CDMA issue was sub judice at the time, was it appropriate for the Telecom Regulatory Authority of India (TRAI) to bring out a consultation paper on unified licensing?

S.C. Khanna
There is no harm in taking out a consultation paper since it is not a final judgement. The consultation paper only requires the stakeholders to come across the table and discuss the issue on hand. It is only when the matter has been thoroughly debated that it is taken to the government. Since TRAI itself is not the licensor and only wants to initiate a discussion, there is absolutely no harm in coming out with the consultation paper.

T.V. Ramachandran
The cellular industry expressed grave apprehensions about the timing of the consultation paper, given that the telecom regulatory authority as a party to the litigation was fully aware of the imminent TDSAT decision on the legal permissibility of WLL(M), which could well be pre-empted by the very issues that the authority had chosen for consultation. There is absolutely no rationale for introducing the proposed form of unified licence at this stage, as there is complete deregulation of all sectors in telecom except cellular mobile. Introduction of “unified licensing” at this stage of India’s telecom development will irreparably harm the only performing sector, cellular, which has invested over Rs.250 billion to set up a nationwide world-class network to serve around 16 million subscribers.

Mohit Saraf
The answer is – most certainly – an unequivocal yes. Inherent in this question is an inability to appreciate the special roles of the Telecom Disputes Settlement Appellate Tribunal (TDSAT) and TRAI. The TDSAT is an adjudicating body whereas TRAI is a regulatory body.

The GSM and CDMA dispute would be decided by the TDSAT, which, being an adjudicating body, would decide on the basis of the existing regulatory framework. On the other hand, the consultation paper released by TRAI services the larger purpose of assisting in framing future policy. There is much truth in the observation that problems cannot be solved by the same level of thinking that created them. By analogy, only a new policy on unified licensing for basic and cellular services would assist the telecom industry in emerging from the downward spiral that the existing policy appears to have caused.

TDSAT’s role cannot, in any case, be stretched beyond challenging a TRAI-formulated policy. If the existing policy is struck down by TDSAT, there would be an immediate regulatory/policy vacuum. Therefore, a consultation paper on unified licensing also prepares TRAI to fill a policy vacuum should there be one.

Mahesh Uppal
No, it was not. It created needless questions about why such a step was being taken in the very middle of a bitter legal dispute, literally days before a verdict was due on issues that are closely related to the subject of the consultation.

What challenges are likely to crop up in the implementation of a unified licence?

S.C. Khanna
The implementation process is not likely to pose any challenges, especially once all the parties agree to the unified licence regime. The beneficiary to the regime will ultimately be the consumers since there will be seven operators in the Delhi circle with competition leading to immense benefits for the customers.

However, there are some entities that are not in favour of the regime because they want the licence raj to continue. What needs to be understood is that greater competition will only help boost the growth of the telecom market. The cellular as well as basic service providers will be able to benefit from market expansion. Hence, it is time to stop protecting the licence raj and move on to a regime that will be advantageous for all operators.

T.V. Ramachandran
Apart from there being no perceivable benefits, unified licensing actually poses several serious challenges and drawbacks. The most important issue is that of competition. The present regime of service-specific licensing and service-specific licensing and service-specific regulation encourages full play of market forces as all operators big or small can compete on equal terms. This benefit will be taken away if unified licensing is introduced since it will encourage the creation of monoliths and integrated operators. Another key issue is that of spectrum. Spectrum allocated to cellular mobile service providers (CMSPs) is extremely suboptimal compared to international averages. Trying to spread limited spectrum amongst more players would adversely impact both the cost as well as the quality of mobile services of all the players.

The cellular industry and its stakeholders are deeply concerned about the short time-frame given for responses to this consultation, given the fact this is obviously a crucial and important issue that will require preparation by an industry already confronting complex legal work at TDSAT and the Supreme Court.

In the consultation paper, the authority had stated that the cellular operators have “raised issues relating to level playing field between CMSPs and basic service operators (BSOs) offering limited mobility services” and that this issue was “under consideration” of the TDSAT. This statement is absolutely incorrect, contrary to the COAI’s stand in the TDSAT wherein it has argued that the review is not about a level playing field but about the very legality and permissibility of WLL(M), about violations of licence, policy, statute, etc.

Given the fact that the authority too is a party to the dispute and is fully aware of the nature, including specific allegations that have been levied by the petitioners, this consultation paper is clearly dealing with matters that are completely and undoubtedly sub judice.

Mohit Saraf
A unified licensing policy would have to achieve the delicate task of leveling the uneven surface of past policy. Essentially, this would mean an equitable distribution of risk and reward for the various stakeholders. A simple enumeration of the issues involved (in the creation of a level playing field) is deceptive – it camouflages the intricacies that would have to be considered before a fair and lasting solution is formulated.

The entry fee paid by the cellular and basic operators would have to be compared taking into account the “net present values” of the paid amounts equalized on similar time-frames duly adjusted to factors such as time of entry, first-mover advantage (the fourth cellular operators paid only a fraction of the entry fee that was paid by the earl-ier ones), cost of capital at the time of entry, differences in rollout obligations, and the amount of bank guarantee to be maintained, to name only a few.

Another critical issue that would need careful consideration is that of spectrum allocation and its pricing. Should operators be allowed to carry their spectrum to the new regime or should the exercise be carried out de novo? This actually provides the regulator with an opportunity to set right the issues of spectrum management. Issues relating to allocation and availability of spectrum need careful scrutiny. There is a strong case for bringing these in line with more progressive international practices.

Unless the new policy is fair and equitable to all parties – especially in the context of business plans implemented by them under the earlier policy – and provides for suitable risk allocation, it is likely to face legal challenge. The grounds of challenge would presumably be based on the doctrine of promissory estoppel/legitimate expectations.

Unified licenses would be a likely harbinger of a spate of intra-circle mergers and acquisitions. Competition may be a casualty in such cases. The regulatory would need to be vigilant on this account. It is also conceivable that additional players enter the wireless telephony market by way of acquisition of the smaller operators.

Mahesh Uppal
The migration path to a unified licence is the most critical issue. Unified licenses are easy to conceptualise but killers to implement. For example, will you treat voice telephony based on internet protocol, fixed and mobile on the same terms? Would mobile, dial-up and broadband access to internet services be treated alike? If not, how will you determine the terms for each? Once market definitions blur, so does the nature of competition and market power that regulators must deal with. In a unified licensing regime, how do you decide that IP telephony must be left to the market or be treated like basic telephony? How should spectrum be priced if it is used by multiple services – identically or depending on usage? How would you define universal access and who should universal service provisions apply to? These are some of the rather complex issues to be decided.

What is the migration path to be adopted?

S.C. Khanna
If the parties are willing, the migration can be carried out overnight. Basic and cellular operators are already unified in nine areas – revenue sharing, universal service obligation, mobility, spectrum charges, direct connectivity, tariff forbearance, local termination charges, neutral technology and the provisioning of a PCO. A number of countries are migrating towards the concept of unified/convergent licensing for wireless and wireline. This ha been encouraged due to technological developments, consumer demand and long-term sustainability of service providers and optimum utilization of resources. The cellular operators quote and desire the applicability of international practices only in areas where it suits them. For example, when more spectrum is needed or when the licence fee needs to be reduced. However, they ignore international experiences when the concept of a unified licence is discussed.

T.V. Ramachandran
No comments

Mohit Saraf
The fundamental issue that any migration path has to grapple with is whether the basic service operators under a unified licensing regime should pay a higher entry fee. The answer is clearly in the affirmative.

Surely, the government would have cause to celebrate if the differentials in the entry fee, adjusted to various factors (as explained above) are recovered from the existing basic service providers. The best-case scenario is clearly one where the basic operators are happy, the cellular operators don’t’ cry foul and the government does not get flak on account of loss of revenues. Let us assume that the cellular operators have paid entry fee (adjusted to the factors explained above) of Rs.100 and the basic operators Rs.40, the differential being Rs.60. The simplistic way for the government is to recover Rs.60 from the basic operators and allow them migration to a unified licence.

Alternatively, since the government has invited strong criticism (in the past) for unrealistically high licence fees, it may consider the following: the government fixes a benchmark of Rs.70 as the uniform entry fee, asks the basic operators to pay Rs.30, this goes directly to the cellular operators. The result: both basic service and cellular operators are happy. For WLL (M) operators, this would be a small price to pay to bury the dispute before the TDSAT.

Other policy issues involved in migration to a unified licence are not so volatile and an agreement here is likely to pave the way for a smoother transition to a new regime.

Mahesh Uppal
It seems nobody knows. Or perhaps everyone knows discretion is best for such an explosively commercial issues.