Telecom Policy of India and Its Impact

8/12/2019 Telecom Policy of India and Its Impact

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Project on Telecom Policy of India and

its impact

PRESENTED BY :

AMOL SHELAR-62

ROHNEET ARORA-64

KANCHAN KOSAL-66

SANTU MANDAL-68

ZEENIA PATEL-70


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INDEX

NO. TOPIC PAGE

NO.

1. INTRODUCTION 3

2. NTP 1994 9

3. TELECOM REGULATOR 10

4. NTP OF 1999 115. OBJECTIVES & TARGETS OF NTP 11

6. NEW POLICY FRAMEWORK 12

7. ROLE OF REGULATOR 14

8. NATIONAL LONG DISTANCE AND GUIDELINES 18

9. BROADBAND POLICY 2004 20

10. FDI IN TELECOM SECTOR 2211. GOVERNMENT TARGETS BY 2012 28

12. NTP 2012 31

12 FUTURE PROJECTIONS 34

13. BIBLIOGRAPHY 36


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INTRODUCTION:-

Indian telecom sector is more than 165 years old. Telecommunications was

first introduced in India in 1851 when the first operational land lines were laid

by the government near Kolkata (then Calcutta), although telephone services

were formally introduced in India much later in 1881. Further, in 1883,

telephone services were merged with the postal system. In 1947, after India

attained independence, all foreign telecommunication companies were

nationalised to form the Posts, Telephone and Telegraph (PTT), a body that

was governed by the Ministry of Communication. The Indian telecom sector

was entirely under government ownership until 1984, when the private sector

was allowed in telecommunication equipment manufacturing only. The

government concretised its earlier efforts towards developing R&D in thesector by setting up an autonomous body Centre for Development of

Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication

technology to meet the growing needs of the Indian telecommunication

network. The actual evolution of the industry started after the Government

separated the Department of Post and Telegraph in 1985 by setting up the

Department of Posts and the Department of Telecommunications (DoT).

With over 900 million telephone connections, India remained the

world'ssecond-largest telecommunications market in 2013, recovering from thebumpy ride the year before, but made little progress to jump to the next

generation of services.

The year under review had already equipped the government with a roadmap,

following the release of the National Telecom Policy of 2012. But legal issues,

like the ongoing battle over allotment of airwaves, or spectrum, in 2008, kept

decision-making in check.

Nevertheless, the government did announce some significant initiatives - likethe much-awaited policy on mergers and acquisitions and permitted 100 per

cent foreign investment in the sector - which will drive Indian telecom in the

years to come, analysts feel.

"The onset of 2013 was accompanied with the introduction of NTP 2012 thatbrought forth promise of policy stability for the sector," Rajan S Mathews,

director general, Cellular Operators' Association of India (COAI), told IANS.

"The implementation of the National Telecom Policy of 2012 is a positive step.

But its immediate impact will be limited," said Mahesh Uppal, director of a
http://businesstoday.intoday.in/story/india-telecom-sector-rahul-khullar-spectrum-pricing-cheer/1/200614.htmlhttp://businesstoday.intoday.in/story/trai-indicates-hike-in-rates-of-telephone-broadcast-services/1/201269.htmlhttp://businesstoday.intoday.in/story/trai-indicates-hike-in-rates-of-telephone-broadcast-services/1/201269.htmlhttp://businesstoday.intoday.in/story/trai-indicates-hike-in-rates-of-telephone-broadcast-services/1/201269.htmlhttp://businesstoday.intoday.in/story/trai-indicates-hike-in-rates-of-telephone-broadcast-services/1/201269.htmlhttp://businesstoday.intoday.in/story/india-telecom-sector-rahul-khullar-spectrum-pricing-cheer/1/200614.html


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telecom consultancy firm, Com First. "The current controversies of 2G (second

generation) and 3G (third generation) telecom services have less to do with

policy and more with the process. Those disputes cannot be resolved by changes

in policy," Uppal told IANS.

HIGHLIGHTS OF 2013

National Telecom Policy of 2012 introduced

Foreign equity of 100 per cent allowed in telecom

Vodafone evinces interest in buying entire stake of Indian partner

Mergers and acquisition policy approved

Dominant player can hold up to 50 per cent telecom market share

Telecom tower business given infrastructure status

Clearance for unified telecom licences in respect of technology

Total telecom connections at 904.56 million end - October.


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STRUCTURE OF THE TELECOM INDUSTRY

The telecom Industry has been divided into basically two parts i.e Public Sector

and the Private Sector.

PUBLIC SECTOR:-

1.)MAHANAGAR TELEPHONE NIGAM LIMITED (MTNL):- MTNL was set up

on 1st April, 1986 by the Government of India to upgrade the quality oftelecom services, expand the telecom network, and introduce new

services and to raise revenue for telecom development needs of Indias

key metros Delhi, the political capital and Mumbai, the financial capital

of India. MTNL is the largest Broadband service provider in Mumbai.

MTNL Triband is the most sought after broadband service in Mumbai

with more than 500,000 customers. I am thankful to all the esteemed

customers who have helped us in achieving this mark.MTNL will shortly

introduce its Data Centre in technical collaboration of IIT Mumbai with

best possible latency. We are also introducing next generation converged

network providing 1GE/10GE links to the customers on Fiber. We are

providing calls to USA, Canada, China, Singapore, Hong Kong and

Thailand at Rs 2/- per minute across all services. The ecology of telecom

industry has changed significantly and MTNL has positioned to meet

your growing needs in the vibrant progressive Indian economy.

2.)BHARAT SANCHAR NIGAM LIMITED (BSNL):- Bharat Sanchar Nigam

Ltd. was incorporated on 15th September 2000. It took over the businessof providing of telecom services and network management from the

INDIAN

TELECOMINDUSTRY

PUBLIC

MTNL BSNL

PRIVATE

INDIAN

COMPANIES

FOREIGN

INVESTED

COMPANIES


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erstwhile Central Government Departments of Telecom Services (DTS)

and Telecom Operations (DTO), with effect from 1st October2000 on

going concern basis. It is one of the largest & leading public sector units

providing comprehensive range of telecom services in India. BSNL has

installed Quality Telecom Network in the country & now focusing on

improving it, expanding the network, introducing new telecom services

with ICT applications in villages & winning customer's confidence.

Today, it has about 43.74 million line basic telephone capacity, 8.83

million WLL capacity, 72.60 million GSM capacity, 37,885 fixed

exchanges, 68,162 GSM BTSs, 12,071 CDMA Towers, 197 Satellite

Stations, 6,86,644 RKm. of OFC, 50,430 RKm. of microwave network

connecting 623 districts, 7330 cities/towns & 5.8 lakhs villages . BSNL is

the only service provider, making focused efforts & planned initiatives to

bridge the rural-urban digital divide in ICT sector. In fact there is no

telecom operator in the country to beat its reach with its wide network

giving services in every nook & corner of the country & operates across

India except New Delhi & Mumbai. Whether it is inaccessible areas of

Siachen glacier or North-Eastern regions of the country, BSNL serves its

customers with a wide bouquet of telecom services namely Wire line,

CDMA mobile, GSM mobile, Internet, Broadband, Carrier service,

MPLS-VPN, VSAT, VoIP, IN Services, FTTH, etc. BSNL is numero

uno of India in all services in its license area. The company offers wide

ranging & most transparent tariff schemes designed to suit every

customer. BSNL has 90.09 million cellular & 5.06 million WLL

customers as on 31.07.2011. 3G Facility has been given to all 2G

connections of BSNL. In basic services, BSNL is miles ahead of its

rivals, with 24.58 million wire line phone subscribers i.e. 71.93% share of

the wire line subscriber base. BSNL has set up a world class multi-

gigabit, multi-protocol convergent IP infrastructure that provides

convergent services like voice, data & video through the same Backbone

& Broadband Access Network. At present there are 8.09 million

broadband customers. The company has vast experience in planning,

installation, network integration & maintenance of switching &

transmission networks & also has a world class ISO 9000 certified

Telecom Training Institute. During the 2010-11, turnover of BSNL is

around Rs. 29,700 Crores.


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PRIVATE SECTORS:-

1.)INDIAN COMPANIES: - Below mentioned are the few Indian private

companies that are listed by the telecom industry.

Company Name Market Cap in Crores

Bharti Airtel 108066.23

Reliance Communications 32683.44

Idea Cellular 14368.92

Tata Communications 13181.25

Tata Teleservices 4393.06

Spice Communications 4136.13

MTNL 4044.6

GTL 2475.12

GTL Infrastructure 2210.49

On Mobile Global 1403.52

HFCL Infotel 457.73

ITI 413.28

Him.Fut.Comm 386.99

Astra Microwave 241.88

Gemini Communications 125.71

Avaya Global

118.54Shyam Telecom 64.58

Nelco 63.55

XL Telecom & Energy Limited 55.96

Goldstone Infratech Ltd 52.6

Nu Tek 48.16

Kavveri Telecom 26.51

Krone Communications 24.52

Mobile Telecommunications Ltd 17.37

Valiant Communications

16.58Pun.Communi. 16.19

Nettlinx 12.68

Aishwarya Telecom Ltd 9.86

Interg.Digitial 3.15

Vital Communications 2.81

2.)FOREIGN INVESTED COMPANIES: -

TOTAL SUBSCRIBERS IN INDIA (AS OF 2013)
http://www.airtel.in/http://www.airtel.in/http://www.rcom.co.in/http://www.rcom.co.in/http://www.ideacellular.com/http://www.tatacommunications.com/http://www.tatacommunications.com/http://www.tatateleservices.com/http://www.tatateleservices.com/http://www.spiceindia.com/spice/aboutus.asphttp://www.spiceindia.com/spice/aboutus.asphttp://www.mtnl.net.in/http://www.mtnl.net.in/http://www.gtllimited.com/http://www.gtlinfra.com/http://www.onmobile.com/http://www.onmobile.com/http://www.hfclconnect.com/http://www.astramwp.com/http://www.astramwp.com/http://www.gcl.in/default.htmhttp://www.gcl.in/default.htmhttp://www.avayaglobalconnect.com/http://www.avayaglobalconnect.com/http://www.shyamtelecom.com:4040/http://www.xltelenergy.com/news.htmhttp://www.goldstonebpo.com/http://www.goldstonebpo.com/http://www.nutek.in/Home/Default.aspxhttp://www.mobileteleindia.com/http://www.valiantcom.com/http://www.valiantcom.com/http://puncom.com/http://puncom.com/http://www.nettlinx.com/http://www.aishwaryatelecom.com/http://www.aishwaryatelecom.com/http://www.aishwaryatelecom.com/http://www.nettlinx.com/http://puncom.com/http://www.valiantcom.com/http://www.mobileteleindia.com/http://www.nutek.in/Home/Default.aspxhttp://www.goldstonebpo.com/http://www.xltelenergy.com/news.htmhttp://www.shyamtelecom.com:4040/http://www.avayaglobalconnect.com/http://www.gcl.in/default.htmhttp://www.astramwp.com/http://www.hfclconnect.com/http://www.onmobile.com/http://www.gtlinfra.com/http://www.gtllimited.com/http://www.mtnl.net.in/http://www.spiceindia.com/spice/aboutus.asphttp://www.tatateleservices.com/http://www.tatacommunications.com/http://www.ideacellular.com/http://www.rcom.co.in/http://www.airtel.in/


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The telecommunication industry is the fastest growing industry in every

country. Over the last decade and particularly over the last five years, India has

registered an impressive growth in the telecommunications sector; 1India now

has a total of 846.32 MillionTelecom subscribers, comprising of of 811.59

Mobile subscribers & 34.73 wirelinesubscribers. The Indian Tele-density nowstands at 70.89%. India today has the worldssecond largest network which isgrowing at a rate which is unmatched by any other country in the world. With

the connections now growing at a faster pace in rural areas as compared to

urban, it is expected that as India crosses the 1 billion mark, the rural teledensity

will grow from the current value of 32.95% to 40%. The sector is growing at

45%per year which has been made possible through continuous effort of thegovernment during the recent years. The telecom sector of India has thus

contributed to a great extent towards the socioeconomic development of India.

SUB-DIVISIONS OF THE TELECOM INDUSTRY

INDIAN

TELECOMMUNICATION

SECTOR

WIRE LINE WIRELESS

GSM CDMA


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NATIONAL TELECOM POLICY 1994 AND ITS IMPLEMENTATION

Giving effect to this realization and liberalizing successfully required heavy doses of

investment and structural changes in the telecom monolith. This was perhaps the genesis

of a new policy initiative resulting in the enunciation of the National Telecom Policy

1994. This policy document represented the first attempt to codify policy objectives andprovide a roadmap for telecom development in India. The policy document laid down

specific targets, such as making telephone service available on demand by 1997,

coverage of all villages by 1997, provision of PCOs in urban areas for every 500 persons

by 1997 and introducing all value added services available internationally, preferably by

1996. The resource gap estimated for realization of these targets was well over Rs. 230

billion and therefore the policy emphasized the involvement of the private sector and the

need for private investment to bridge the resource gap. Hence, the policy for the first

time allowed private companies registered in India to participate in the provision of basic

telephone services subject to stipulated conditions. It established a duopoly regime

providing for two operators each in the four metros and eighteen telecom circles.

Another important dimension of this policy document was its emphasis on protecting andpromoting consumer interests and ensuring fair competition. The policy reflected an

ambitious approach in setting the targets, but adopted a cautious approach in dealing

with the issues of liberalization in the telecom sector. The duopoly regime that it

established implied continued dominance of the market by the incumbent government

operator, which inhibited growth of a competitive environment.

Even though the NTP94 did not go far enough on the liberalization route, it did cut

the umbilical cord tying the Indian telecom sector to its monopoly supplier, nursed by the

more-than-a-century old Indian Telegraph Act. The new paradigm in the telecom sector

created interest worldwide and investors, both Indian and foreign, evinced keen interest

in being partners in telecom development. However, the implementation of the policy

did not match the euphoria it created and delivered mixed results. Physical targets were

unrealized, particularly for rural telephony. Only about half of over 600,000 villages

stood covered by March 1999. And many of these telephones in rural areas failed to

work properly for technology reasons.

However, with regard to provision of PCOs, the progress was comparatively better

and the number rose from 80,000 in March 1994 to 277,000 in March 1999. There was

significant growth in the number of STD/ISD PCOs, which went up from 57,119 in

March 1994 to 272,989 in March 1999. The STD/ISD PCOs were franchised, and

provided opportunity for self-employment to unemployed youth, ex-servicemen andeconomically disadvantaged segments of the society. In the introduction of private

players in the mobile and the basic segments of the service, the main criterion was the

bid price for a 10-year license, with the proposed annual payments converted to a net

present value using a discount rate of 16 percent. In both service segments, the rollout of

private operators suffered considerable delay, particularly so in the case of basic service,

largely due to controversies surrounding the bidding and selection processes for award of

a license. As a result, by 1999 the private operators could introduce service in only two

of the six circles for which basic service licenses were awarded. The picture was

somewhat better for mobile services, as private mobile operators started operations in

1997. From a policy perspective, the noticeable delays and hiccups pointed to the need

for greater transparency and clarity in the licensing process and the terms of licenses, aswell as for an independent regulator.


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TELECOM REGULATORThe NTP94 placed considerable emphasis on protecting consumer interests and

ensuring fair competition. The obvious implication of this emphasis was to establish the

institution of regulator for the telecom sector at the earliest. But, action on this account

also encountered delays. Only in 1997 did the GOI enact a law -- the Telecom

Regulatory Authority of India Act 1997 (TRAI Act 1997) -- leading to the establishment

of an independent statutory Regulatory Authority for the telecom sector, with clearly

defined functions, powers and responsibilities to encourage competition, ensure a level

playing field, and promote and protect consumer interests. The Telecom Regulatory

Authority of India (TRAI) enjoyed wide-ranging functions and powers in the areas of its

responsibility. These relate to and include ensuring technical compatibility and effective

interconnection between operators and service providers; regulating revenue-sharing

agreements among service providers; monitoring quality-of-service standards; ensuring

compliance with license conditions; approving tariffs for telecom services; and

protecting consumer interests. The TRAI is not entrusted with functions relating to

licensing, standard setting and allocating spectrum, which are in the domain of the GOI.

This Act initially had vested dispute settlement functions with the TRAI, but an

amendment to the TRAI Act in 2000 divested TRAI of these functions.

Impact of telecom policy of 1994

Entry of private players in the telecom sector

Std/isd pcos were franchised, and provided opportunity for self-employment

Total demand rose by 50% from 7.03 million on 1.4.1992 to 10.5 million on

1.4.1994 over a three year period and touched about 15.8 million by 1.4.1997.

Telephone density in india in 1994 was about 0.8 per hundred persons & world

average of 10 per hundred persons which reached to 1.6 in 1997 and 4.3 in 2002


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Need for a new telecom policy of 1999

In addition to some of the objectives of NTP 1994 not being fulfilled, there have also been far

reaching developments in the recent past in the telecom, IT, consumer electronics and media

industries world-wide. Convergence of both markets and technologies is a reality that is

forcing realignment of the industry. At one level, telephone and broadcasting industries areentering each other's markets, while at another level, technology is blurring the difference

between different conduit systems such as wireline and wireless. As in the case of most

countries, separate licences have been issued in our country for basic, cellular, ISP, satellite

and cable TV operators each with separate industry structure, terms of entry and varying

requirement to create infrastructure. However, this convergence now allows operators to use

their facilities to deliver some services reserved for other operators, necessitating a relook

into the existing policy framework. The new telecom policy framework is also required to

facilitate India's vision of becoming an IT superpower and develop a world class telecom

infrastructure in the country.

Objectives and targets of the New Telecom Policy 1999

The objectives of the NTP 1999 are as under:

Access to telecommunications is of utmost importance for achievement of the country's

social and economic goals. Availability of affordable and effective communications for the

citizens is at the core of the vision and goal of the telecom policy.

Strive to provide a balance between the provision of universal service to all uncovered

areas, including the rural areas, and the provision of high-level services capable of meeting

the needs of the country's economy;

Encourage development of telecommunication facilities in remote, hilly and tribal areas of

the country;

Create a modern and efficient telecommunications infrastructure taking into account the

convergence of IT, media, telecom and consumer electronics and thereby propel India into

becoming an IT superpower;

Convert PCO's, wherever justified, into Public Teleinfo centres having multimedia

capability like ISDN services, remote database access, government and community

information systems etc.

Transform in a time bound manner, the telecommunications sector to a greater competitive

environment in both urban and rural areas providing equal opportunities and level playing

field for all players;

Strengthen research and development efforts in the country and provide an impetus to build

world-class manufacturing capabilities.

Achieve efficiency and transparency in spectrum management.

Protect defence and security interests of the country.


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Enable Indian Telecom Companies to become truly global players.

In line with the above objectives, the specific targets that the NTP 1999 seeks to achieve

would be :

Make available telephone on demand by the year 2002 and sustain it thereafter so as to

achieve a teledensity of 7 by the year 2005 and 15 by the year 2010

Encourage development of telecom in rural areas making it more affordable by suitable tariff

structure and making rural communication mandatory for all fixed service providers.

Increase rural teledensity from the current level of 0.4 to 4 by the year 2010 and provide

reliable transmission media in all rural areas.

Achieve telecom coverage of all villages in the country and provide reliable media to all

exchanges by the year 2002.

Provide Internet access to all district head quarters by the year 2000

Provide high speed data and multimedia capability using technologies including ISDN to all

towns with a population greater than 2 lakh by the year 2002.

New Policy Framework

The New Policy framework must focus on creating an environment, which enables continuedattraction of investment in the sector and allows creation of communication infrastructure by

leveraging on technological development. Towards this end, the New Policy Framework

would look at the telecom service sector as follows :

Cellular Mobile Service Providers, Fixed Service Providers and Cable Service Providers,

collectively referred to as Access Providers

Radio Paging Service Providers

Public Mobile Radio Trunking Service Providers

National Long Distance Operators

International long Distance Operators

Other Service Providers

Global Mobile Personal Communication by Satellite (GMPCS) Service Providers

V-SAT based Service Providers.


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Restructuring of DoT

World-wide, the incumbent, usually the Government owned operator plays a major role in the

development of the telecom sector. In India, DoT is responsible for the impressive growth in

number of lines from 58.1 lakhs on April 1, 1992 to 191 lakhs in December 1998, showing

CAGR of' 20%. DoT is expected to continue to play in importnat, and indeed, dominant rolein the development of the sector.

Currently, the licensing, policy making and the service provision functions are under a single

authority. The Government has decided to separate the policy and licensing functions of DoT

from the service provision functions as a precursor to corporatisation. The corporatisation of

DoT shall be done keeping in mind the interests of all stakeholders by the year 2001.

All the future relationship (competition, resource raising etc.) of MTNL / VSNL with the

corporatised DoT would be based on best commercial principles.

The synergy of MTNL, VSNL and the corporatised DoT would be utilised to open up new

vistas for operations in other countries.

5.0 Spectrum Management

With the proliferation of new technologies and the growing demand for telecommunication

services, the demand on spectrum has increased manifold. It is therefore, essential that

spectrum be utilised efficiently, economically, rationally and optimally. There is a need for a

transparent process of allocation of frequency spectrum for use by a service and making it

available to various users under specific conditions.

The National Frequency Allocation Plan (NFAP) was last established in 1981, and has been

modified from time to time since. With the proliferation of new technologies it is essential to

revise the NFAP in its entirety so that it could become the basis for development,

manufacturing and spectrum utilization activities in the country amongst all users. The NFAP

is presently under review and the revised NFAP-2000 would be made public by the end of

1999, detailing information regarding allocation of frequency bands for various services,

without including security information. NFAP shall be reviewed no later than every two years

and shall be in line with radio regulations of International Telecommunication Union.

Relocation of existing Spectrum and Compensation:

Considering the growing need of spectrum for communication services, there is a need to

make adequate spectrum available.

Appropriate frequency bands have historically been assigned to defence & others and

efforts would be made towards relocating them so as to have optimal utilisation of spectrum.

Compensation for relocation may be provided out of spectrum fee and revenue share levied

by Government.

There is a need to review the spectrum allocations in a planned manner so that requiredfrequency bands available to the service providers.


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There is a need to have a transparent process of allocation of frequency spectrum which is

effective and efficient. This would be examined further in the light of ITU guidelines. For the

present, the following course of action shall be adopted.

Spectrum usage fee shall be charged.

Setting up an empowered Inter-Ministerial Group to be called as Wireless Planning

Coordination Committee (WPCC) as part of the Ministry of Communications for periodical

review of spectrum availability and broad allocation policy.

Massive computerisation in the WPC Wing will be started during the next three months

time so as to achieve the objective of making all operations completely computerised by the

end of year 2000.

6.0 Universal service obligation

The Government is committed to provide access to all people for basic telecom services at

affordable and reasonable prices. The Government seeks to achieve the following universal

service objectives:

Provide voice and low speed data service to the balance 2.9 lakh uncovered villages in the

country by the year 2002

Achieve Internet access to all district head quarters by the year 2000

Achieve telephone on demand in urban and rural areas by 2002

The resources for meeting the USO would be raised through a 'universal access levy' which

would be a percentage of the revenue earned by all the operators under various licences. The

percentage of revenue share towards universal access levy would be decided by the

Government in consultation with TRAI. The implementation of the USO obligation for rural /

remote areas would be undertaken by all fixed service providers who shall be reimbursed

from the funds from the universal' access levy. Other service providers shall also beencouraged to participate in USO provision subject to technical feasibility and shall be

reimbursed from the funds from the universal access levy.

7.0 Role of Regulator

The Telecom Regulatory Authority of India (TRAI) was formed in January 1997 with a view

to provide an effective regulatory framework and adequate safeguards to ensure fair

competition and protection of consumer interests. The Government is committed to a strong

and independent regulator with comprehensive powers and clear authority to effectively

perform its functions.


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Award of 2G licenses in 2007-08 and subsequent developments

25 new UAS licenses were awarded between June, 2004 and March, 2007 on FCFS

basis and as per the existing license conditions.

Reference was made to TRAI in April, 2007 to furnish recommendations on limiting

the number of access providers in each service area and other license conditions.

Salient recommendations of TRAI dated August 28, 2007 are:

No cap be placed on the number of access service providers in any area.

Spectrum in 2G bands (800, 900 and 1800 MHz) should continue to be priced

as before for new entrants.

In future, all spectrum, excluding the spectrum in the 2G bands should beauctioned.

Dual spectrum may be allocated to existing licensees on same entry fee

charged from existing/ new licenses.

TRAI recommendations accepted in the Internal Telecom Commission (ITC) meeting

held on October 10, 2007.

Approved by the then Minister-in-charge on October 17, 2007.

Process followed for award of 2G licenses:

Press release issued by DoT on September 24, 2007 (appeared in news papers

on September 25, 2007) specifying October 01, 2007 as the cut off date for

accepting new applications. 343 new applications were received in this

period.

Reference made to Ministry of Law and Justice (ML&J) on the options to deal

with the large number of applications. Advice of ML&J to refer the matter toa Empowered GoM (EGoM) not accepted.

Applications received upto September 25, 2007 taken up for processing under

an FCFS methodology notified via a press release issued on January 10, 2008,

wherein, fulfillment of the Letter of Intent (LoI) conditions was stipulated for

earmarking seniority for allotment of UAS license.

Applicants were asked to collect DoTs response on the applications on

January 10, 2008 at 3:30 PM and submit compliance of LoI within 15 days.

121 LoIs were issued on January 10, 2008; 78 complied with on the same day; 42 complied

on the next day. In all, 16 applicants were issued 120 UAS licenses between February and


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March, 2008. 2 more licenses were issued in July 2008 to another applicant company, who

made application prior to September 25, 2007

Salient recommendations of TRAI report dated May 11, 2010:

Auction should not be resorted to for spectrum in 2G bands (800, 900 and1,800 MHz bands).

Salient recommendations of TRAI report dated May 11, 2010:

Auction should not be resorted to for spectrum in 2G bands (800, 900 and

1,800 MHz bands).

Observations on Presumptive loss based on 3G prices:

UAS licenses issued in January 2008 and 3G payments made in May, 2010.,

therefore, 3G prices have to be discounted to reflect time value of money.

Economic value of spectrum a function of subscriber base and ARPU. While

subscriber base increased 3 times, ARPU reduced by 66%.

2G spectrum was subject to availability. On average, allottees of 2008 (and even

earlier) have received spectrum after a gap of a year, therefore 2G spectrum is

available on an average for 19 years instead of 20 years..


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There is difference in spectral efficiency of 2G and 3G spectrum:

5 MHz of 2G and 3G spectrum have spectral efficiencies of 40.61 Erlangs and 149.1

Erlangs respectively, i.e., in the ratio of 1:3/4.

While computing the pro-rata value for 4.4 MHz spectrum vis--vis 6.2 MHz, thenon-linear advantage due to consolidation of holding 6.2 MHz over 4.4 MHz needs

consideration.

Telecom sector policy has evolved continuously since 1999 and is predicated on the

following pillars: increase in teledensity and affordability to the consumer; creation

of a competitive environment, with level playing field between existing and new

incumbents; and, revenue accrual to Government both through one time fee and

annual recurring charges.

The policy evolved through NTP, 1999; 1999 migration package for existingoperators; development policies followed between 1999 and 2004; and, the

overarching vision articulated through the X FYP.

The policy created a historical legacy, once it was decided to allow induction

of new operators in the UAS regime on the basis of 2001 entry fee.

TRAI, the sector regulator, has recommended for induction of more players at

low entry charges, in its successive recommendations of October/November,

2003; January/May, 2005; August, 2007; and, May, 2010.

The policy has met with spectacular success, in terms of increase in

teledensity and subscriber base; reduction in call rates; and, boosting

economic growth.

Development policies pursued between 1999 and 2004 had significany

financial implications.

o However duopoly regime was ended and additional operators were

introduced.

o This resulted in direct benefit to the consumers over ` 1,00,000 croreper annum, as a result of ARPU drop between September, 2007 and

May, 2010).

3G auction has a different context. There were no historical legacy issues, hence no

issues of level playing field arose. Moreover, auction of 3G spectrum was a

consistent recommendation of TRAI, in its successive reports of September, 2006;

August, 2007; and May, 2010.

If the TRAI recommendation of May, 2010 (on the basis of which the presumptive

loss has been estimated) is seen in totality and spectrum upto 6.2 MHz is kept out ofthe ambit of pricing, the value of presumptive loss reduces to NIL.


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The offer was conditional and untenable, since it pertained to 6.2 MHz

spectrum in the 900 MHz band, in all 22 service areas which was not

available.

The company also asked for permission for active infrastructure sharing

whereas sharing of spectrum is not permitted under the current UAS regime.

The offer was subsequently withdrawn by the company and this was stated in

its affidavit before the Supreme Court of India.

The amount offered (` 13,752 crore) was spread over 10 years, with the first

year offer being only ` 250 crore. The company could have reneged on its

commitment after being allotted spectrum at 1/5 thof its extant price.

There is no provision in the licensing regime to offer spectrum on the basis of conditional

offers.

Valuation of company is a function of many factors, and not just the quantum

of spectrum held.

The cases are of dilution, not sale of equity.

Government has been encouraging induction of Foreign Direct Investment in

all sectors, including telecom.

National Long Distance

National Long Distance opened for private participation. The Government announced on13.08.2000 the guidelines for entry of private sector in National Long Distance Services without

any restriction on the number of operators. The DOT guidelines of license for the National Long

Distance operations were also issued.

Highlights - NLD Guidelines

Unlimited entry for carrying both inter-circle and intra-circle calls.

Total foreign equity (including equity of NRIs and international funding agencies) must not

exceed 74%. Promoters must have a combined net worth of Rs.25 million.

Private operators will have to enter into an arrangement with fixed-service providers within a

circle for traffic between long-distance and short-distance charging centres.

Seven years time frame set for rollout of network, spread over four phases. Any shortfall in

network coverage would result in encashment and forfeiture of bank guarantee of that phase.

Private operators to pay one-time entry fee of Rs.25 million plus a Financial Bank Guarantee

(FBG) of Rs.200 million. The revenue sharing agreement would be to the extent of 6%.

Private operators allowed to set up landing facilities that access submarine cables and use

excess bandwidth available.

Licence period would be for 20 years and extendable by 10 years.


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International Long Distance

In the field of international telephony, India had agreed under the GATS to review its opening up

in 2004. However, open competition in this sector was allowed with effect from April 2002 itself.There is now no limit on the number of service providers in this sector. The licence for ILD

service is issued initially for a period of 20 years, with automatic extension of the licence by a

period of 5 years. The applicant company pays one-time non-refundable entry fee of Rs.25

million plus a bank guarantee of Rs.250 million, which will be released on fulfillment of the roll out

obligations. The annual licence fee including USO contribution is @ 6% of the Adjusted Gross

Revenue and the fee/royalty for the use of spectrum and possession of wireless telegraphy

equipment are payable separately. At present 24 ILD service providers (22 Private and 2 Public

Sector Undertaking) are there. As per current roll out obligations under ILD license, the licensee

undertakes to fulfill the minimum network roll out obligations for installing at least one GatewaySwitch having appropriate interconnections with at least one National Long Distance service

licensee. There is no bar in setting up of Point of Presence (PoP) or Gateway switches in

remaining location of Level I Tax's. Preferably, these PoPs should conform to Open Network

Architecture (ONA) i.e. should be based on internationally accepted standards to ensure

seamless working with other Carrier's Network.

Universal Service Obligation Fund

Another major step was to set up the Universal Service Obligation Fund with effect from April 1,

2002. An administrator was appointed for this purpose. Subsequently, the Indian Telegraph(Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF)

was passed by both Houses of Parliament in December 2003. The Fund is to be utilized

exclusively for meeting the Universal Service Obligation and the balance to the credit of the Fund

will not lapse at the end of the financial year. Credits to the Fund shall be through Parliamentary

approvals. The Rules for administration of the Fund known as Indian Telegraph (Amendment)

Rules, 2004 were notified on 26.03.2004.

The resources for implementation of USO are raised through a Universal Service Levy (USL)

which has presently been fixed at 5% of the Adjusted Gross Revenue (AGR) of all TelecomService Providers except the pure value added service providers like Internet, Voice Mail, E-Mail

service providers etc. In addition, the Central Govt. may also give grants and loans. An

Ordinance was promulgated on 30.10.2006 as the Indian Telegraph (Amendment) Ordinance

2006 to amend the Indian Telegraph Act, 1885 in order to enable support for mobile services,

broadband connectivity, general infrastructure and pilot project for new technological

developments in rural and remote areas of the country. Subsequently, an Act has been passed

on 29.12.2006 as the Indian Telegraph (Amendment) Act 2006 to amend the Indian Telegraph

Act, 1885.


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USFO has initiated action to bring mobile services within the ambit of Universal Service

Obligation Fund (USOF) activities. Under this initiative, 7387 mobile infrastructure sites are being

rolled out, in the first phase, across 500 districts and 27 states of India. This scheme will provide

mobile services to approximately 0.2 million villages which where hitherto deprived of the same.

As on 30th June 2010, 7183 shared towers have been set up under the First Phase of thescheme. The USOFof DOT has proposed to set up about 10,128 additional towers in order to

extend the mobile coverage in other uncovered areas under the Second Phase of the Scheme.

Unified Access Services

Unified access license regime was introduced in November 2003. Unified Access Services

operators are free to provide, within their area of operation, services, which cover collection,

carriage, transmission and delivery of voice and/or non-voice messages over Licensee's network

by deploying circuit, and/or packet switched equipment. Further, the Licensee can also provide

Voice Mail, Audiotex services, Video Conferencing, Videotex, E-Mail, Closed User Group (CUG)as Value Added Services over its network to the subscribers falling within its service area on

non-discriminatory basis. The country is divided into 23 Service Areas consisting of 19 Telecom

Circle and 4 Metro Service Areas for providing Unified Access Services (UAS). The licence for

Unified Access Services is issued on non-exclusive basis, for a period of 20 years, extendable by

10 years at one time within the territorial jurisdiction of a licensed Service Area. The licence Fee

is 10%, 8% & 6% of Adjusted Gross Revenue (AGR) for Metro and Category 'A', Category 'B'

and Category 'C' Service Areas, respectively. Revenue and the fee/royalty for the use of

spectrum and possession of wireless telegraphy equipment are payable separately. The

frequencies are assigned by WPC wing of the Department of Telecommunications from the

frequency bands earmarked in the applicable National Frequency Allocation Plan and in

coordination with various users subject to availability of scarce spectrum.

Internet Service Providers (ISPs)

Internet service was opened for private participation in 1998 with a view to encourage growth of

Internet and increase its penetration. The sector has seen tremendous technological

advancement for a period of time and has necessitated taking steps to facilitate technological

ingenuity and provision of various services. The Government in the public interest in general, and

consumer interest in particular, and for proper conduct of telegraph and telecom services hasdecided to issue the new guidelines(Details) for grant of licence of Internet services on non-

exclusive basis. Any Indian company with a maximum foreign equity of 74% is eligible for grant

of licence.

Broadband Policy 2004

Recognizing the potential of ubiquitous Broadband service in growth of GDP and enhancement

in quality of life through societal applications including tele-education, tele-medicine, e-

governance, entertainment as well as employment generation by way of high-speed access to

information and web based communication; Government has announced Broadband Policy inOctober 2004. The main emphasis is on the creation of infrastructure through various


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technologies that can contribute to the growth of broadband services. These technologies include

optical fibre, Asymmetric Digital Subscriber Lines (ADSL), cable TV network; DTH etc.

Broadband connectivity has been defined as Always On with the minimum speed of 256 kbps. It

is estimated that the number of broadband subscribers would be 20 million by 2010. With a view

to encourage Broadband Connectivity, both outdoor and indoor usage of low power Wi-Fi andWi-Max systems in 2.4 GHz-2.4835 GHz band has been delicensed. The use of low power

indoor systems in 5.15-5.35 GHz and 5.725-5.875 GHz bands has also been delicensed in

January 05. The SACFA/WPC clearance has been simplified. The setting up of National Internet

Exchange of India (NIXI) would enable bringing down the international bandwidth cost

substantially, thus making the broadband connectivity more affordable.

The prime consideration guiding the Policy includes affordability and reliability of Broadband

services, incentives for creation of additional infrastructure, employment opportunities, induction

of latest technologies, national security and brings in competitive environment so as to reduceregulatory interventions.

By this new policy, the Government intends to make available transponder capacity for VSAT

services at competitive rates after taking into consideration the security requirements. The

service providers permitted to enter into franchisee agreement with cable TV network operators.

However, the Licensee shall be responsible for compliance of the terms and conditions of the

licence. Further in the case of DTH services, the service providers permitted to provide Receive-

Only-Internet Service. The role of other facilitators such as electricity authorities, Departments of

ITs of various State Governments, Departments of Local Self Governments, Panchayats,Departments of Health and Family Welfare, Departments of Education is very important to carry

the advantage of broadband services to the users particularly in rural areas.

Target has been set for 20 million broadband connections by 2010 and providing Broadband

connectivity to all secondary and higher secondary schools, public health institutions and

panchayats by 2010.

In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology (on wire) will be providedfrom about 20,000 existing exchanges in rural areas having optical fibre connectivity. Community

Service Centres, secondary schools, banks, health centres, Panchayats, police stations etc. can

be provided with this connectivity in the vicinity of above-mentioned 20,000 exchanges in rural

areas. DOT will be subsidizing the infrastructure cost of Broadband network through support from

USO Fund to ensure that Broadband services are available to users at affordable tariffs.

Tariff Changes

The Indian Telecom Sector has witnessed major changes in the tariff structure. The

Telecommunication Tariff Order (TTO) 1999, issued by regulator (TRAI), had begun the processof tariff balancing with a view to bring them closer to the costs. This supplemented by Calling


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Party Pay (CPP), reduction in ADC and the increased competition, has resulted in a dramatic fall

in the tariffs. ADC has been abolished for all calls w.e.f. 1st October 2008.

The peak National Long Distance tariff for above 1000 Kms. in 2000 has come down from US$

0.67 per minute to US$ 0.02 per minute in 2009. The International Long Distance tariff from US$ 1.36 per minute in 2000 to US$ 0.16 per

minute in 2009 for USA, Canada & UK.

The mobile tariff for local calls has reduced from US$0.36 per minute in 1999 to US$ 0.009 -

US$ 0.04 per minute in 2009.

The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per month

Foreign Direct Investment (FDI)

In Basic, Cellular Mobile, Paging and Value Added Service, and Global Mobile Personal

Communications by Satellite, Composite FDI permitted is 74% (49% under automatic route)

subject to grant of license from Department of Telecommunications subject to security and

license conditions. (para 5.38.1 to 5.38.4 of consolidate FDI Policy circular 1/2010 of DIPP)

FDI upto 74% (49% under automatic route) is also permitted of the Following:-

Radio Paging Service

Internet Service Providers (ISP's)

FDI upto 100% permitted in respect of the following telecom services:

Infrastructure Providers providing dark fibre (IP Category I);

Electronic Mail; and

Voice Mail

Subject to the conditions that such companies would divest 26% of their equity in favor of Indian

public in 5 years, if these companies were listed in other parts of the world.

In telecom manufacturing sector 100% FDI is permitted under automatic route.

The Government has modified method of calculation of Direct and Indirect Foreign Investment

in sector with caps (para 4.1 of consolidate FDI Policy circular 1/2010 of DIPP) and have also

issued guidelines on downstream investment by Indian Companies. (para 4.6 of consolidate

FDI Policy circular 1/2010 of DIPP)

Guidelines for transfer of ownership or control of Indian companies in sectors with caps from

resident Indian citizens to non-resident entities have been issued (para 4.2.3 of consolidate

FDI Policy circular 1/2010 of DIPP)


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Performance of telecom equipment manufacturing sector

As a result of Government policy, progress has been achieved in the manufacturing of telecom

equipment in the country. There is a significant telecom equipment-manufacturing base in the

country and there has been steady growth of the manufacturing sector during the past few years.

The figures for production and export of telecom equipment are shown in table given below: (Rs.in crore)

Figures for production and export

YearProduction Export

2002-03 14400 402

2003-04 14000 250

2004-05 16090 400

2005-06 17833 1500

2006-07 23656 1898

2007-08 41270 8131

2008-09 488800 11000

2009-10 50000 13500

(Projected @ 18%) (Projected @ 25%)

Rising demand for a wide range of telecom equipment, particularly in the area of mobile

telecommunication, has provided excellent opportunities to domestic and foreign investors in the

manufacturing sector. The last two years saw many renowned telecom companies setting up

their manufacturing base in India. Ericsson set up GSM Radio Base Station Manufacturing facility

in Jaipur. Elcoteq set up handset manufacturing facilities in Bangalore. Nokia and Nokia Siemens

Networks have set up their manufacturing plant in Chennai. LG Electronics set up plant of

manufacturing GSM mobile phones near Pune. Ericsson launched their R&D Centre in Chennai.

Flextronics set up an SEZ in Chennai. Other major companies like Foxconn, Aspcom, Solectronetc have decided to set up their manufacturing bases in India.


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The Government has already set up Telecom Equipment and Services Export Promotion Council

and Telecom Testing and Security Certification Centre (TETC). A large number of companies like

Alcatel, Cisco have also shown interest in setting up their R&D centers in India. With above

initiatives India is expected to be a manufacturing hub for the telecom equipment.

Opportunities

India offers an unprecedented opportunity for telecom service operators, infrastructure vendors,

manufacturers and associated services companies. A host of factors are contributing to enlarged

opportunities for growth and investment in telecom sector:

An expanding Indian economy with increased focus on the services sector

Population mix moving favorably towards a younger age profile

Urbanization with increasing incomes

Investors can look to capture the gains of the Indian telecom boom and diversify their operations

outside developed economies that are marked by saturated telecom markets and lower GDP

growth rates.

Inflow of FDI into India's telecom sector during April 2000 to Feb. 2010 was about Rs 405,460

million. Also, more than 8 per cent of the approved FDI in the country is related to the telecom

sector.

Research & Development

India has proven its dominance as a technology solution provider. Efforts are being continuously

made to develop affordable technology for masses, as also comprehensive security

infrastructure for telecom network. Research is on for the preparation of tested infrastructure for

enabling interoperability in Next Generation Network. It is expected that the telecom equipment R

& D shall be doubled by 2010 from present level of 15%. Modern technologies inductions are

being promoted. Pilot projects on the existing and emerging technologies have been undertaken

including WiMax, 3G etc. Emphasis is being given to technologies having potential to improve

rural connectivity. Also to beef up R&D infrastructure in the telecom sector and bridge the digital

divide, cellular operators, top academic institutes and the Government of India together set up

the Telecom Centres of Excellence (COEs). The main objectives of the COEs are as follows:

Achieve Telecom Vision 2010 that stipulates a definite growth model and take it beyond. Secure Information Infrastructure that is vital for country's security.

Capacity Building through Knowledge for a sustained growth.

Support Planned Predictive Growth for stability.

Reduce Rural Urban Digital Divide to reach out to masses.

Utilize available talent pool and create environment for innovation.

Management of National Information Infrastructure (NII) during Disaster

Cater the requirement of South East Asia as Regional Telecom Leader

To achieve these objectives seven Centre of Excellences in various field of Telecom have been

set up with the support of Government and the participation of private/public telecom operators


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as sponsors, at the selected academic institutions of India. The details of COEs are enumerated

below: -

TCOEs Centres

Sr.

No.

Associate Institute Sponsor Work Assigned

1 IIT KharagpurVodafone Essar & Texas

Instruments

Next Generation Network (NGN) & Network

Technology

2 IIT Delhi Bharti AirtelTelecom technology and management of

Infrastructure

3 IISC (Indian Institute of

Science), Bangalore,

Aircel & Texas instrumentInformation Security & Disaster Management

of Infrastructure

4IIT Kanpur BSNL & Alphion

Technology Integration, Multimedia &

Computational Mathematics

5

IIT Chennai BSNL & Alphion

Telecom Infrastructure & Energy

6IIT Mumbai

TTeleservicesRural Applications

7 IIM Ahmedabad Idea CellularPolicy, Regulation, Governance, Customer

care & Marketing

3G & Broadband Wireless Services (BWA)

The government has in a pioneering decision, decided to auction 3G & BWA spectrum. The

broad policy guidelines for 3G & BWA have already been issued on 1stAugust 2008 and

allotment of spectrum has been planned through simultaneously ascending e-auction process by

a specialized agency. New players would also be able to bid thus leading to technology

innovation, more competition, faster roll out and ultimately greater choice for customers at

competitive tariffs. The 3G will allow telecom companies to offer additional value added services

such as high resolution video and multi media services in addition to voice, fax and conventional

data services with high data rate transmission capabilities. BWA will become a predominant

platform for broadband roll out services. It is also an effective tool for undertaking social


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initiatives of the Government such as e-education, telemedicine, e-health and e-Governance.

Providing affordable broadband, especially to the suburban and rural communities is the next

focus area of the Department.

BSNL & MTNL have already been allotted 3G & BWA spectrum with a view to ensuring early rollout of 3G & WiMax services in the country. They will pay the same price for the spectrum as

discovered through the auction. While, Honble Prime Minister launched the MTNL's 3G mobile

services on the inaugural function of India Telecom 2008 held on 11th December 2008, BSNL

launched its countrywide 3G services from Chennai, in the southern Tamil Nadu state on 22nd

February 2009.

Mobile Number Portability (MNP)

Mobile Number Portability (MNP) allows subscribers to retain their existing telephone number

when they switch from one access service provider to another irrespective of mobile technologyor from one technology to another of the same or any other access service provider. The

Government has announced the guidelines for Mobile Number Portability (MNP) Service Licence

in the country on 1st August 2008 and has issued a separate Licence for MNP service w.e.f.

20.03.2009. The Department of Telecommunication (DoT) has already issued licences to two

global companies (M/s Syniverse Technologies Pvt. Ltd. and M/s MNP Interconnection Telecom

Solutions India Pvt. Ltd.) for implementing the service. MNP is to be implemented in whole

country in one go by 31.10.2010

Targets Set By the Government

1. Network expansion

800 million connections by the year 2012.

2. Rural telephony

200 million rural subscribers by 2012

Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010.

3. Broadband

20 million Broadband connections by 2010

Broadband with minimum speed of 1 mbps.

Broadband coverage for all secondary & higher secondary schools and public health care

centres by the end of year 2010.

Broadband coverage for all Grampanchayats by the year 2010

Broadband on demand is every village by 2012

4. Manufacturing


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Making India a hub for telecom manufacturing by facilitating more and more telecom specific

SEZs.

Quadrupling production in 2010.

Achieving exports of 10 billion during 11th Five year plan.

5. Research & Development6. International Bandwidth

Indian Telecommunications at a glance

Rank in world in network size 3rd

Tele density (per hundred populations) 52.74

Telephone connection (In million)

Fixed 36.95

Mobile 548.32

Total 621.28

Village Public Telephones inhabited (Out of 5,93,601 uncovered villages) 5,69,385

Foreign Direct Investment (in million) (from April 2000 till March 2010) 4070

Licenses issued

Basic 2

CMTS 38

UAS 241

Infrastructure Provider I 219

ISP (Internet) 371

National Long distance 29

International Long distance 24


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Pre-eminence of India as a technology solution provider.

Comprehensive security infrastructure for telecom network.

Tested infrastructure for enabling interoperability in Next Generation Network.

o Facilitating availability of adequate international bandwidth at competitive prices to drive

ITES sector at faster growth.

2011

National Telecom Policy 2011 makes one key recommendation that could revolutionize the

digital space from a content and services perspective, without directly making any specific

content references. Itsnot about spectrum and network sharing , or mergers and acquisition, but

a key change in the licensing regime.

The Draft NTP-2011 suggests the creation of technology neutral Unified Licenses (under the One

Nation-One License) policy, that is envisaged in two separate categoriesthe Network Service

Operator / Communication Network Service Operator (CNSO), which is licensed to maintain

converged networks for delivering various types of services e.g. Voice, Data, Video, broadcast,

IPTV, VAS etc., very importantly, in a non-exclusive and non-discriminatory manner.

The second would be a Service Delivery Operator (SDO) / Communication Service Delivery

Operator (CSDO). The Service Delivery Operator (SDO) would be licensed to deliver any/ all

services e.g. tele-services (voice, data, video), internet/broadband, broadcast services, IPTV,

Value Added Service and content delivery services etc.

What this means

This is a clear separation of content and carriage: This is clearly a separation of content and

services from their carriage.

While the devil will be in the details, this could mean that network service operators will become

what they were always intended to bemodes of access to content and services for consumers,

and content providers will be able to provision their services to customers independently of

network service providers. You can say that that is already possible, and this is what the mobile

VAS industry has been doing, but the way things have panned out, especially with the revenue

share regime, what is being provided to customers is not in the hands of the content and service

provider, but the telecom operator. The telecom operatorapart from the case of the mobile

Internetcontrols what is on the pipe, and that control is also used to push the revenue share

regime, which rarely favors the content owner.


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Key Targets

1. Create knowledge based society through proliferation of broadbandprovide 'broadband on

demand' by 2015. Achieve target of 175 million broadband users by 2017 and 600 million by 2020.2.

To promote R&D & product development in telecom3. To make India a global hub for telecom

equipment manufacturing4. Increase rural tele-density from 35% to 60% by 2017 and to 100% by

2020.5. 80% of telecom networks to be domestically manufactured by 2020Consumer initiatives

1. Abolish roaming charges 2. Mobile Number Portability, which is currently restricted to a circle-level

basis, to be enhanced to allow consumers to retain their mobile numbers when they move to a new

city or any location in the country without having to pay 'roaming charges'. 3. Strengthen grievance

redressal mechanisms 4. Broadband speeds to be revised to 512 kbps & further to 2 Mbps by 2015 &

100 Mbps by 2025. Regulator to enhance consumer awareness on tariffs, services 6. Strengthen

consumer protection act

Spectrum

1. Free up 300 MHz of airwaves for commercial telephony by 2017 & another 200 MHz of spectrum

by 20202. All future spectrum allocations will be priced at market rates3. Allow spectrum pooling,

sharing & trading4. Prepare a roadmap for spectrum availability for next 5 years 5. Reserve smallamounts of spectrum in certain frequencies for indigenous development of products & technologies 6.

Enact 'Spectrum Act', to deal with all issues connected with mobile permits, including re-farming,

pricing of this resource, withdrawal of allotted spectrum and norms for sharing and trading. 7. To

promote use of white space with low power devices

For mobile permits

1. To frame an exit policy for new entrants to surrender their mobile permits & airwaves 2. Delink

licence from spectrum. Make mobile permits technology neutral and divide them into 2 categories

Network Service Operator & Service Delivery Operator 3. Allow sharing of networks 4. Regulate value

added services, especially the carriage charge 5. To provide clear rules for renewal of all mobile

permits 6. To put in place legal, regulatory and licensing framework for convergence of services,

networks and devices 7. Move towards an unified licensing regime that will allow operators to offerany service 8. Address the Right of Way issues in setting up of telecom infrastructure 9. Relaxed M&A

norms to allow consolidation


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NTP 2012 & Future Projections

The National Telecom Policy was adopted by the cabinet on May 31, 2012. It

was released in public domain later in June. Among other things, the policy aims

to provide a single licence framework, un-bundle spectrum from licences, and

liberalise spectrum.

The new policy is in line with the government decisions and TRAI

recommendations discussed above. The policy also aims to achieve higher

connectivity and quality of telecommunication services. Its key features are

detailed below.

Licensing: Presently, as per the 2003 Amendment to the 1999 TelecomPolicy, there are two forms of licences Unified Service Licence (to

provide any telegraph service in various geographical areas) and Unified

Access Service Licence (to provide basic and cellular services in defined

service areas). The new policy targets simplification of licensing

framework by establishing a unified license for all telecom services and

conversion to a single-license system for the entire country. It also seeks

to remove roaming charges.

Spectrum: As of now spectrum bands are reserved on the basis of

technology that may be used to exploit them. For instance, the 900 and

1800 bands are reserved for GSM technology and 800 for use of CDMA

technology. The new policy seeks to liberalise spectrum. Further,

spectrum would be de-linked from all future licenses. Spectrum would be

reframed so that it is available to be used for new technology. The policy

aims to move to a system where spectrum can be pooled, shared and

traded. Periodic audits of spectrum usage would be conducted to ensure

efficient utilization of spectrum. The policy aims at making 300 MHz of

additional spectrum available for mobile telecom services by the year 2017

and another 200 MHz by 2020.


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Connectivity: The policy aims to increase rural tele-density from the

current level of approximately 39% to 70% by 2017, and 100% by 2020. It

seeks to provide 175 million broadband connections by the year 2017 and

600 million by 2020 at a minimum 2 Mbps download speed. Higher

download speeds of 100 Mbps would be made available on demand.

Broadband access to all village panchayats would be made available by

2014 and to all villages by 2020. The policy aims to recognise telecom,

including broadband connectivity, as a basic necessity like education and

health, and work towards the Right to Broadband.

Promotion of domestic industry: The policy seeks to incentivise and give

preference to domestic telecom products in procurements that (i) have

security implications for India; or (ii) are for the governments own use. It

also seeks to establish a Telecom Finance Corporation to mobilise and

channelize finances for telecom projects.

Legislations: The policy seeks to review the TRAI Act to remove

impediments to effective functioning of TRAI. It also seeks to review the

Indian Telegraph Act, 1885. The need to review the Indian Telegraph Act,

1885 was also recognised in the 1999 Telecom Policy.

One Nation One LicenseAt present, the country has been divided into 23 services areas or 'circles'

and licenses are awarded to telecom companies in a specific circle. The

NTP 2012 has proposed the removal of circle based licensing and theintroduction of the concept of 'One Nation-One License'. This will result in

the abolition of the concept of 'national roaming'.

Resale of Telecom Services

The extant regulations contain a prohibition on resale of telecom services,

except in certain specified circumstances and only by a stipulated category

of licensees. The NTP 2012 seeks to do away with this prohibition andfacilitate resale, both at the wholesale as well as retail level, in order to


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encourage robust competition at the consumer end while ensuring security

and other license related obligations.

Spectrum Sharing

The NTP 2012 seeks to move at the earliest so that the Government will

allow spectrum pooling, trading and sharing". This is a significant

departure from the present regulations that expressly prohibit the sharing

of spectrum.

Telecom Infrastructure

Another change sought to be brought out under the NTP 2012 is in relation

to streamlining the use and rollout of the infrastructure for telecom

services.

The NTP 2012 proposes policies that will simplify regulations relating to

rights of way and tower installation to facilitate coordination between the

operators and the State Governments. This would include measures such

as the provision of common service ducts for orderly growth of telecom

infrastructure, mapping of infrastructure assets on an inter-operable GIS

platform by all telecom infrastructure and service providers, improvement

of the SACFA clearance process to speed up site clearances, the use of

alternate sources of energy to power the telecom infrastructure coupled

with the use of low powered active radio devic

Exit Policy

The present licensing regime does not adequately deal with the exit of a

telecom service provider from its obligations under the license.

The NTP 2012 proposes the formulation of a sound exit policy to pave the

way for rationalization of the number of cellular licensees in the country to

a number that is closer to the global norm. Recognizing, also that many


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licenses are due to expire in the relatively short term, it will looks to

establish clear guidelines for extension or migration of the existing

licenses.

FUTURE PROJECTIONS:

The new policy has omitted a controversial clause in the draft version which said

revenue generation will continue to be a secondary objective of the government, and

instead states that affordability and availability of effective communication will be

core objectives of the policy, which will replace the over-a-decade-old NTP-99.

Doing away with the roaming charges will enormously help the subscribers as they

don't have to pay higher charges, apart from offering them the flexibility to have the

same number anywhere in the country and will have more focused retention

schemes from operators. For the operators this will have a negative impact on

revenues and may have higher churn, but on the positive side the volume of minutes

should go up significantly. However, the new policy does not speak about conditions

of refarming, issues on spectrum pricing, participation by operators in the auction,etc.

There is very little in the policy that will help end the impasse faced by the telecom

sector. Spectrum pricing, reserve price for the upcoming 2G auctions, historical

pricing of spectrum for operators who have received spectrum beyond 6.2 MHz and

the more recent contentious issues of refarming, etc, will have to be dealt with

through executive decisions, most of which fall outside the purview of the NTP 2012

announcement.

The policy clearly specifies the urgent requirement of technological solutions that can

reach out to larger population of the country. It becomes imperative for mobile phone

manufacturers as well as services providers to tap that opportunity, especially when

the government, RBI, regulatory body, industrial associations and various other

concerned stakeholders are talking about the urgent requirement to emphasis on

mobile banking technology.


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Announcement of much awaited policy on mergers and acquisitions and permitted

100 foreign investment in the telecom sectorwhich will drive Indian telecom sector

in the coming years. It will help mid sized firms, while bigger players will have more

flexibility. Vodafone wants its stake beyond 64.38 percent. Once the market

stabilises, it will play its role. We can expect some more foreign players to come in.

The infrastructure status will make tower providers eligible for viability gap funding,

higher limit on external commercial borrowing, lower import duties and exemptions

on excise duty on telecom infrastructure equipment. Companies like Bharti Infratel,

Indus Towers and Reliance Infratel will get accelerated depreciation, which will

encourage more investments in the sector, he said. Tower providers will also get

softer lending rates at 3-4% on loan terms of 10-15 years compared to the market

borrowing rates of 12-13% over 5-7 years. Companies will be given a tax holiday

under section 80-IA of the Income Tax Act. However, it needs to be pointed out that

it would have made more sense had infrastructure status been given to the sector

earlier. Giving infrastructure status to an industry that is already matured and has

already incurred most of the setting up cost across the country makes little sense.

Though Bharti Infratel mentions that it needs funds to set up more towers, most of

the towers are already operational. Further, the assets are already well-depreciated

as they are generally charged at a rate between 5-9.5 per cent per year, depending

on the useful life classified by each company.

Telecom attracted more than 7.7 per cent of Indias total FDI during 2010-11, which

came down to 5.4 per cent in 2011-12, 1.35 per cent in 2012-13 and to just 0.26 per

cent during April-October 2013. The first steep drop was in 2012-13 when it declined

by more than 81 per cent from the previous year, and this further dropped by about

88 per cent during April-October 2013 when compared with the full fiscal year data of

the previous year. Singapore-based SingTel received the nod to increase stake in

the long-distance phone business in India. British telecom giant Vodafone has also

received approval to have 100 per cent equity holding in Vodafone India, which

would have investments of Rs 10,141 crore. Meanwhile, the Government has, in

August 2013, decided to increase FDI limit in telecom to 100 per cent.


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Traditional PBX system will be replaced by IP PBX, which will bring cost advantages

and it reduces opex, capex, and communication costs. After actual deployment of

the system, revenues are likely to increase at a CAGR of at least 30-40%.

As a telecom enterprise, an operator now does not require 22 licenses in 22 different

circles. They can buy a single license as well as spectrum to deploy their services in

a technology of the operators choice. Also at the service level, an operator can

resell its license to a third party operator which will further provide service to its

consumers. It transforms into a positive advantage for the operators. As for any other

enterprise, the increase in the minimum broadband speed from 512 kbps to 2 Mbps

by 2015 will eventually result in faster access to data and increase in productivity.

Increase the rural teledensity from the existing level of 39% to 70% by 2017 and

100% by 2020. Increasing choice and one of the lowest tariffs in the world have

made the cellular services in India an attractive proposition for the average

consumer. The penetration levels in urban areas have already crossed 100%.

Therefore the main driver for future growth would be the rural areas where tele-

density is around 39.22%.

Enable citizens to participate in and contribute to e-governance in key sectors like

health, education, skill development, employment, governance, banking etc. to

ensure equitable and inclusive growth and ensure adequate availability of spectrum

and its allocation in a transparent manner through market related processes. Make

available additional 300 MHz spectrum for IMT services by the year 2017 and

another 200 MHz by 2020.


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WEBLIOGRAPHY

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www.business-standard.com
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Documents

Telecom Policy of India and Its Impact