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Trai licence recommendations may increase competition
[January 03, 2013]

Trai licence recommendations may increase competition

NEW DELHI, Jan 03, 2013 (Mint - McClatchy-Tribune Information Services via COMTEX) -- India's telecom regulator has recommended a separate wireless operating licence for spectrum, as part of the proposed unified licence for access services, paving the way for increased competition and lesser regulatory interference in the world's second biggest mobile phone services market.

The Telecom Regulatory Authority of India (Trai) has proposed a national level or service-area level unified licence and a separate wireless operating licence for telecom operators, following the suggestions of the National Telecom Policy, 2012, which had directed that spectrum allocation be delinked from the licence.

"The recommendations seem to be a simplification for the telecom operators, enabling them to focus on operations once everything is in place, rather than there being a need to amend the licence every time there is a small change in the parameters," said a Mumbai-based telecom analyst with a foreign brokerage firm, requesting anonymity. "Even something like an allocation of spectrum needed amendment of the licence." The regulator's latest recommendations have come after it had issued suggestions on the unified licences on 16 April and 12 May on a request from the department of telecommunications (DoT). A DoT panel that looked into the recommendations had made some changes before referring it back to the regulator on 21 December.

The need for new licences was also necessitated by the re-entry of telecom operators, including the Indian unit of Norway's Telenor ASA and Videocon Industries Ltd, after their licences were cancelled by a 2 February Supreme Court order. Telenor and Videocon won spectrum in a November auction.

The unified licence will bring all services that now require operators to obtain separate licences from DoT, a move that is aimed at reducing revenue loss because of inconsistent classification of revenue generated by service providers. The current universal access service (UAS) licence requires operators to apply for separate licences for national long distance and international long distance as well as Internet services.

The telecom regulator has said that new entrants to the sector will be given interim service-level unified licences, till such time as the unified licensing norms are notified by the government.

Trai has also suggested changes to key parts of the earlier licences, including the definition of adjusted gross revenue (AGR), for wireless services that use spectrum.

The regulator has suggested that the operators pay the government a percentage of revenue earned only from wireless services provided and not AGR, as spectrum usage charge.

AGR is defined as all the revenue that directly accrues to the company, excluding taxes and interconnection charges that it pays to other operators for carrying a phone call.

The modification is likely to assuage operators that have been demanding a change in the definition and is being contested in a number of court cases. Companies say that AGR should not include revenue made from other services such as advertising, while the government's stand is that there would not be any other revenue if it was not for the wireless services provided. Operators pay 6-10% of their AGR as spectrum usage charge.

Trai has also suggested a change in the equity cross-holding restrictions, where an entity is barred from holding over 10% equity in more than one licence holder. The regulator has proposed that this norm should be applied only on spectrum holders and not on unified licence owners.

The regulator has also suggested a change in the definition of value-added services (VAS). It said that VAS should include all services provided by an operator, excluding voice calls.

Trai has also suggested changes in the penalty clause. Current rules impose a penalty of Rs.50 crore for every transgression by a company. Instead, the regulator has suggested a five-step graded process with a demarcation between major and minor violations. For minor violations, a company can be penalized Rs.1 lakh for its first transgression, which then goes up to Rs.25 lakh from the third violation onwards.

For major violations, Trai has suggested Rs.5 lakh for the first transgression, Rs.2.5 crore for the second, Rs.5 crore for the third and Rs.10 crore for the fourth after which the firm becomes liable for cancellation of its licences.

On spectrum sharing, the regulator has said only operators whose entire spectrum in a particular band has been paid for (liberalized) would be permitted to share spectrum without any additional one-time spectrum charge. "Spectrum trading is not permitted, at present," said the Trai recommendations.

___ (c)2013 the Mint (New Delhi) Visit the Mint (New Delhi) at Distributed by MCT Information Services

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