Statement issued by the
Minister conveying the decisions taken
On 15th
February 2012, the Minister of Communications&Information Technology issued
a statement conveying the following decisions taken by the Telecom Department. (The
explanation to certain terms given in italics was added by me. Other than this,
the following is the full text of this statement):
Recommendations of TRAI
on ‘Spectrum Management and Licensing Framework’ of May 11, 2010 along with its
further recommendations of February 08, 2011, clarifications of May 03, 2011
and response dated November 03, 2011 were considered by the Telecom Commission.
After consideration of the recommendations of the Telecom Commission, the
Department of Telecommunications has taken following decisions:
1.
No more UAS licences
linked with spectrum will be awarded (UAS=Unified Access Services--- An Unified Access Services licensee can provide wireline as
well as wireless services in a service area. Wireless services include
Full Mobile, Limited Mobile and Fixed Wireless services. The licensee can
also provide various Value Added Services)
2.
All
future licences will be Unified Licences and allocation of spectrum will be
delinked from the licence. Spectrum, if required, will have to be obtained
separately. A final view on implementation of the Unified License Regime would
be taken after receipt of detailed Guidelines and Terms & Conditions from
TRAI for Unified Licence including migration path for all existing licence(s)
to Unified Licence.(Unified License means the licensee can provide any or
all the telecom services including voice;
data; internet telephony; Internet services including IPTV; broadband
services including triple play i.e voice, video and data; NLD( National Long
Distance) ; ILD(International Long Distance) ; GMPCS(Global Mobile Customer
Service by Satellite); V SAT (Very Small Aperture Terminal) services;
PMRTS; Radio Paging; and voice mail/Audio Tex/ Unified Messaging
Service through wire or wireless.)
3.
In the event of any
auction of spectrum pending finalisation of the Unified Licensing Regime, UAS
licence without spectrum may be issued which could be subject to a requirement
to migrate to Unified licence as and when the regime is put in place. Detailed
guidelines for such UAS licence without spectrum would be finalised after
receipt of recommendations of TRAI in this regard
4.
There
will be uniform licence fee across all telecom licenses and service areas which
will progressively be made equal to 8% of the Adjusted Gross Revenue (AGR) in
two yearly steps starting from 2012-13.(At present the license fee is 6%, 8%
and 10% on AGR depending on the circle)
5.
The licence fee and
spectrum usage charges payable by each such licensee shall be on actual AGR,
subject to a minimum presumptive AGR. This minimum figure would be reviewed by
TRAI every year.
6.
A decision on the
recommendation to bring IP-I Service Providers
under licencing regime, who are currently unlicenced passive
infrastructure providers, has been deferred for further examination.(IP-I
Service Providers means Cell Tower Companies)
7.
A
rapid comprehensive techno-economic study will be carried out by DoT to examine
issues relating to increase in coverage & tele-density in rural areas
while at the same time ensuring sustained quality of service and also to
examine the adequacy of USOF mechanism alone to achieve these objectives and
the need for augmenting USOF schemes with appropriate
direct incentivisation of TSPs for rural rollout.(USOF means
Universal Social Obligation Fund, raised by collecting a certain percentage on
the revenue of the telecom operators. The telecom operators providing services
in rural areas by incurring losses are to be compensated from this fund)
8.
The
validity of existing UAS (& CMTS and Basic services) licences may be
extended for another 10 years at one time, as per the provisions of the extant
licensing regime with suitable Terms & Conditions so as not to imply
automatic continuance of existing license and related conditions including
quantum and price of any spectrum allocated.(The licenses were originally
given for ten years, but later the period was increased to 20 years. For
example, the Airtel was given license for Andhra Pradesh on 12-12-1995. It
would expire on 11-12-2015. Therefore as per this rule, the license of Airtel
can be extended for another 10 years with effect from 12-12-2015)
9.
On extension, the UAS
licensee will be required to pay a fee which will be Rs. 2 crore for
Metro and ‘A’ Circles, Rs. 1 crore for ‘B’ circles and Rs.
0.5 crore for ‘C’ circles. This fee does not cover the
value of spectrum, which shall be paid for separately. While extending the
licence, the licensee shall be assigned spectrum only up to the prescribed
limit or the amount of spectrum assigned to it before the extension, whichever is less. Spectrum assigned by the Government to
the licensee in excess of the Prescribed Limit shall be withdrawn.(The
existing system is that the license is given for each service area(circle) separately.
There are total 22 service areas in India and hence to provide the services
throughout the country, the operator has to take 22 licenses)
10.
The
need for refarming of spectrum is accepted in-principle. Further
steps will be taken after receipt of TRAI’s recommendations in this regard.(Spectrum
refarming means diverting the spectrum of certain bands for utilisation from
one particular kind of service to another particular kind of service—for
example the spectrum of certain bands
being used for 2G services can be diverted to 3G services for better
utilisation. In such case, the holder of the spectrum using it for 2G services
has to be compensated since he has to migrate to a new band of spectrum that
requires change in the technology of the equipment used by the holder. Who has
to bear the cost for this compensation? Lot of differences are there on this
issue.)
11.
The prescribed limit on
spectrum assigned to a service provider will be 2X8MHz/ 2X5MHz for GSM/ CDMA
technologies respectively for all service areas other than in Delhi and Mumbai
where it will be 2X10MHz/ 2X6.25MHz. However, the licensee can
acquire additional spectrum beyond prescribed limits, in the open market,
should there be an auction of spectrum subject to the limits prescribed for
merger of licences.(The existing limit for allotment of spectrum is initial
allotment of 4.4 MHz for GSM operators which could be increased up to 6.2 MHz
on availability and justification of the need. For CDMA operators, initial
allotment was 2.5MHz which could be increased to 5MHz depending on availability
and justification. Now it is decided that for Delhi and Mumbai the limit is 10 MHz/6.25 MHz for GSM/CDMA and
for all other service areas it is 8MHz/5MHz for GSM/CDMA. )
12.
Decisions on all matters relating to One Time
Spectrum Charge including pricing of spectrum in cases of M&A and
Spectrum Sharing will be taken separately.
13.
Spectrum usage charges were revised in 2010 by the Government
and the matter is sub-judice. Further action will be taken
by DoT after the matter is decided by the court.
14.
The broad guidelines in respect of intra-service area
merger of CMTS/UAS licences will, inter-alia, include:
a) For
determination of market power, market share of both subscriber base and
Adjusted Gross Revenue of licensee in the relevant market shall be considered.
The entire access market will be the relevant market for determining the market
share, and will no longer be classified separately as ‘Wire line’
and ‘Wireless’.
b) Merger up to 35%
market share of the resultant entity will be allowed through a simple, quick
procedure. However, there may be a need to consider cases of merger beyond 35%
market share in certain circumstances without breaching the 25% cap on GSM
spectrum/ 10 MHz for CDMA spectrum holding in any service area. Recommendation
of TRAI that such cases will be considered up to a market share of 60% has been
taken note of. In order to ensure clarity on the circumstances and
extent to which merger above 35% limit would be permissible, detailed
transparent criteria will be prescribed/ adopted after receipt of TRAI’s
recommendations and after due consultation with the appropriate authorities.
c) Consequent upon the
merger of licences in a service area, the total spectrum held by the
Resultant entity shall not exceed 25% of the spectrum assigned, by way of
auction or otherwise, in the concerned service area in case of 900 and 1800 MHz
bands. In respect of 800 MHz band, the ceiling will be 10 MHz. In
respect of spectrum in other bands, relevant conditions pertaining to auction
of that spectrum shall apply.
d) If, as a result of
the merger, the total spectrum held by the resultant entity is beyond the
limits prescribed, the excess spectrum must be surrendered within one year of
the permission being granted. Government may prescribe the band which will be
required to be surrendered in accordance with
spectrum refarming policy to be announced separately.
e) The substantial equity
and cross holding of the Resultant entity shall be in conformity with the
provisions of the UAS licence.
f) The duration
of licence of the resultant entity in the respective service area
will be equal to the higher of the two periods on the date of merger. This does
not however entitle the resultant entity to retain the entire spectrum till the
expiry of licence period.
g) In case of renewed
validity beyond the original validity of any of the merged entity, holding of
spectrum in 800/900 MHz band shall be subject to the applicable spectrum refarming guidelines
to be announced in future w.e.f the deemed date of extension of
merging entity having lesser validity of licence at the time of
merger or the date of spectrum refarming guidelines whichever is later.
h) Issues related to
spectrum price, to be paid by the resultant entity, would be decided
separately. The same shall also apply in case of renewal of wireless
operating licence, post merger.
i)
On the merger of the two licenses, the AGR of the two entities
will also be merged and the license fee will be therefore levied at the
specified rate for that service area on the resultant total AGR. Similarly, 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 on this total spectrum. However, in case of holding of spectrum
for various technologies by the entity subsequent to Merger, spectrum charges
& license fee etc. or any other criterion being followed by the licensor
shall be applicable as in case of any other UAS/CMTS licensee.
j)
Existing provisions in the UAS licence relating
to Lock-in period for sale of equity/merger shall continue.
15.
Broad guidelines for
sharing of 2G spectrum (800/900/1800 MHz bands) will, inter-alia, include:
a)
Spectrum sharing will be permitted but in each case, it will be in
the same licence service area and will be with the prior permission
of the licensor. A simple automatic approval process will be put in place for
this purpose.
b)
Permission for Spectrum sharing will be given initially for a
period of 5 years. Government may renew the permission for a further one term
of five years, on terms to be prescribed.
c)
Spectrum can be shared only between two spectrum holders
both of which are holding spectrum either in 900/1800 MHz band or in 800 MHz
band.
d)
Total quantum of spectrum, as a result of the spectrum
sharing, shall not exceed the limit prescribed in case of mergers
of licences.
e)
In respect of spectrum obtained through auction, spectrum
sharing will be permitted only if the auction conditions provide for the same.
f)
Parties sharing the spectrum will be deemed to be
sharing their entire spectrum for the purpose of charging.
g)
Both the parties shall fulfil individually the
roll out obligations as well as the QoS obligations prescribed under
the licence.
h)
Spectrum usage charges will be levied on both the operators
individually but on the total spectrum held by both the operators together. In
other words, if an operator ‘X’ having 4.4MHz of spectrum shares 4.4 MHz of
spectrum of another operator ‘Y’, then both ‘X’ and ‘Y’ will be liable to pay
spectrum usage charges applicable to 8.8 MHz of spectrum.
i)
Spectrum sharing would involve both the service
providers utilising the spectrum. Leasing of spectrum is not
permitted.
j)
Decision on matters related to pricing of spectrum, post
sharing, would be taken separately.
k)
Spectrum sharing will not be permitted among licensees
having 3G spectrum.
16.
Spectrum trading will
not be allowed in India, at this stage. This will be re-examined at a later date.
17.
For
efficient management of available spectrum, TRAI may undertake regular spectrum
audit. TRAI may carry out review on the present usage of spectrum
available. In both the cases, TRAI may make recommendations to the Government.
18.
The judgement of the
Supreme Court pronounced on 2nd February, 2012 cancelling 122
licenses has implications for some of the recommendations of the Telecom
Commission. Such recommendations are being examined further with reference to
legal and other aspects and decisions in this regard will be announced later.”
Implications
of these decisions
The
above is the statement issued by the Minister conveying the decisions of the
DoT. What are its implications?
- Reducing Competition and going against the spirit of the Supreme Court Judgment implied in the decision regarding allotment of spectrum--The old operators who got their licenses before 2008 were allowed to retain their spectrum (6.2 MHz for GSM and 5 MHz for CDMA) at the time of extending their license for another 10 years, without paying any seperate charge. But the new operators who will enter now, after cancellation of the licenses issued in 2008 as per the judgment of the Supreme Court, have to pay for the entire spectrum by participating in the auction and thus it will be a discrimination and against the spirit of the judgment of the Supreme Court. The old operators are allowed to have upto 8 MHz spectrum for no charge over and above the license fee, atleast until the date of future auction of the spectrum, whereas the new operator has to pay for the entire spectrum as per the rate decided in the bidding. In such case, the old operators can bid more compared to those who want to get the license now. It will result in monopoly since the old operators are likely to be successful in the bidding and it will result in reducing the number of operators, thus reducing competition and increasing the tariff.Such discrimination is against the spirit of the judgment of the Supreme Court given on 2-2-2012.
- Old operators being further favoured
It
is understood that although TRAI recommended for collecting additional charge
from the telecom operators for the spectrum held by them beyond 6.2 MHz
retrospectively, the DoT decided to collect it prospectively ownly, on the
basis of bidding. Thus the old operators are relieved of the burden of Rs 17000
crore which would have to be paid by them in case the charge of the spectrum beyond
6.2 MHz is collected retrospectively. This is further encouraging the
monopolistic trend, by granting the benefits to these companies.
- The allowing of merger and acquisition between telecom operators with the allowing of the market share of the combined entity upto 35% automatically and upto 60% on the basis of TRAI,s recommendation, also is nothing but encouraging monopolies in telecom sector. Such monopoly will result in high increase in tariffs. Even in USA, the acquition of T-Mobile by AT&T was prevented on the ground that the market share of the new entity would be 44%(AT&T 27% and T-Mobile 17%). At present, the number 1 company in telecom sector in terms of number of subscribers is Airtel and it has a market share of nearly 20% and even at this stage, these private operators have recently increased the tariffs by coming to mutual untold understanding.
- Spectrum sharing The allowing of spectrum sharing also will result in monopoly in the spectrum and the total amount of spectrum shared can be upto 25% of thee total spectrum. Allowing sharing of the spectrum without examining all the other possibilities for a better and economic and eefficient usage of spectrum and the amount of spectrum that would be additionally available after diversion of spectrum from defence to telecom etc., will result in monopoly.
Therefore,
inspite of the Supreeme Court judgment as per which the State must act transparently
and without discrimination, the Goveernment is encouraging a few companies like
Airtel, Reliance, Vodafone, Idea to become monopolies, which is against the interests
of the people,
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