In recent times, multiple telecom operators have united in their opposition to a proposed introduction of differential licensing through the segregation of different layers such as infrastructure, network, services, and the application layer. This article delves into the background of this controversy, the current licensing regime, the issues highlighted by operators, and potential measures if the new system is implemented.
Background
In May 2019, the Department of Telecommunications (DoT) announced that the National Digital Communications Policy 2018, as part of its ‘Propel India’ mission, planned to overhaul the licensing and regulatory system to stimulate investments, innovation, and promote Ease of Doing Business. Differential licensing via unbundling of different layers was included as part of this strategy. The Telecom Regulatory Authority of India (TRAI) was tasked with putting forward recommendations and collecting opinions from relevant stakeholders, primarily telecom operators, on the potential benefits and required actions.
The Existing Licensing Regime
Telecom licenses in India are mainly controlled by the Indian Telegraph Act 1885, and the Indian Wireless Telegraph Act 1933. These Acts grant exclusive authority to the Central Government to establish, maintain, and operate telegraphs, and wireless telegraphy equipment, as well as granting licenses for these activities. In November 2003, the Unified Access Service License (UASL) regime, which permits an access service provider to offer both fixed and/or mobile services under the same license using any technology, was introduced. The National Telecom Policy issued in June 2012 aimed to simplify this licensing framework, thus striving to create one nation-wide license across services and service areas.
Highlighted Issues
Separating network licenses will bring an element of uncertainty to the licensing system and negatively impact future network investments. A converged license for the network and service layer provides transparency and certainty to an operator making a network investment. Moreover, any proposed changes would necessitate reconfiguration of business models, making the process counterproductive. The ongoing process of unification under the existing licensing regime is still incomplete, and introducing new types of licenses through the unbundling of network and service layers would further complicate the system.
Potential Measures
If the proposed changes were to be implemented, there should not be any obligatory migration of licenses until existing licenses expire. There should also be a clearly defined compensation methodology, particularly for investments made in the past decade. Additionally, attention needs to be given to addressing the poor financial health of the telecom sector, and the strengthening of telecom infrastructure projections, estimating a required fund infusion of about Rs. 2,00,000 crore over the next 2-3 years. Regulatory costs need to be reduced, and appropriate policy and financial stimuli should be provided to existing service providers.
Looking Ahead
Telecom service providers have expressed that unbundling is neither necessary nor desirable. Any changes that require business models to be reconfigured at a time when existing investments have not fully recovered would be counterproductive. Therefore, addressing existent issues in the sector is necessary before implementing another licensing framework which could create further uncertainty and challenges.