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Dial U for uniformity

Surajeet Das Gupta | August 09, 2003

It's the latest storm to break over the telecom industry. And it isn't about to blow over quickly. Should the telecom industry dump its complex system of licensing in favour of a one-size-fits-all "unified licensing" policy?

Inevitably, the Telecom Regulatory Authority of India's unified licensing White Paper published a few weeks ago, has thrown the industry into a tizzy.

On one side, the basic operators are, predictably, cheering in the aisles. The cellular operators, on the other hand, are crying foul.

However, it's not as simple as that. Some cellular operators are hinting that they wouldn't mind a unified licensing regime but insist that they would need to be compensated for their losses.

Says a senior cellular company executive: "Unified licensing will change the terms of our commercial contract with the government. If you want that you must reconcile our commercial interests and the loss we suffer from the change in the terms."

The brutal fact is that the cellular companies aren't clamouring to get into basic telephony, which is reckoned to be a less profitable game.

But the fixed service operators -- read Reliance Infocomm and Tata Teleservices -- are desperate to convert their WLL licences into full mobile services. That's why the cellular operators see the unified licence as just a way of letting Reliance and the Tatas into their arena -- at an extremely cheap price.

TRAI wants a unified licence to replace the current system in which there are different licences for different services
Existing telecom operators will have to shift to the new unified licence regime
ABTO backs the new proposals saying it will lead to more competition in the mobile market
COAI says smaller players will be hit as only big companies will have the cash to become integrated players
The biggest beneficiaries could be the WLL operators which will be able to offer customers fully mobile services
The battle got an extra twist on Friday when the telecom appellate authority TDSAT delivered a judgement saying that WLL services would be allowed but throwing in the key rider that the differences between WLL and full cellular services had to be maintained.

TDSAT's Chairman Justice Wadhwa dissented and the cellular operators are planning to challenge the legality of WLL in the Supreme Court.

So what is the new telecom fuss all about? At the centre of the storm is a TRAI consultation paper published a few weeks ago.

TRAI has suggested that it will do away with the existing regime under which there are different licences for different services -- fixed line, cellular, national long distance and international long distance.

So in future, operators will only have to get one licence for all these services. Says Trai's Pradeep Baijal: "From 1996 onwards there has been a dispute on WLL which has to be addressed. That is what I am doing."

This would be a dramatic break with the past. And it would mean that existing telecom operators who have taken licences (some have licences for only cellular like Hutch, others only for basic like HFCL) will have to shift to the new licence regime.

The Association of Basic Telecom Operators is confident that it's a change for the better.

Says the organisation's Secretary-General, S C Khanna: "Instead of four operators you will have at least six fully mobile operators so there will be more competition. That is surely good for customers."

The cellular operators, on the other hand, say that the new proposals will kill competition and clobber smaller players.

Asks a senior member of the Cellular Operators Association of India: "Smaller GSM players will have to close shop because they don't have the cash to become integrated players. So where is the competition?"

As the dust settles, there's no denying that the largest visible beneficiaries of the new policy will be the WLL operators who can offer customers fully mobile services instead of restricting their operations only within a city or taluka.

But does this mean there is nothing in it for GSM mobile players at all? At the moment cellular operators have to share long-distance revenues with the NLD operators. That keeps STD call tariffs high.

Initially, TRAI had left long-distance calls out of the unified licensing regime. But now it is planning to discuss this also. Hence cellular operators will be able to offer long-distance calls through their own networks without sharing revenues.

This could expand the customer base for GSM players dramatically as they would be able to offer STD calls at the same cost as local calls.

Underlying the deep divide on unified licensing is the fact that the cellular operators are doubtful about why the new paper has been introduced.

Let's look at their grouses. Firstly, the Government is already working on a Convergence Bill which provides for unification so why is TRAI in such a hurry to push unified licensing?

Second, the proposed consultation paper is essentially meant for TRAI to adjudicate on the dispute between cell and fixed line operators. The cellular operators say there's no point in even holding a discussion on unified licensing since they are planning to challenge the TDSAT judgement in the Supreme Court.

Says a senior member of the COAI, "Until TRAI ensures that WLL is restricted and creates a clear regulation there is no question of us even talking about unified licensing."

Third, they say there is no real need for more mobile players as there is sufficient competition and public interest is not being affected.

The fact is that the mobile operators could have forked out Rs 495 crore (Rs 4.95 billion) and picked up an all-India basic service licence off-the-shelf.

Says a cellular executive: "The argument that a unified licence scheme will offer economies of scale as telcos will use common infrastructure is bunkum. If they want to be a unified player they can do it today and companies like Bharti are already doing it and reducing costs."

But fixed line operators defend the TRAI stand. Says Khanna: "The Convergence Bill might take much more time to be implemented so does that mean we stop all reforms?"

Khanna also points out that the issue before the TDSAT is not in conflict with the consultation paper, which has merely asked for a debate.

The fixed-line operators argue that most major countries are moving towards the unified licensing regime.

Says a fixed line operator: "Malaysia and Singapore have done it and even the European Commission has given a directive to its members for a single regulatory framework for services. So why should India be left behind?"

Is there a via media? The telecom companies are searching for ways out. One possibility is that the WLL players will fork out over Rs 1,000 crore (Rs 10 billion) for migrating to the new licence.

This cash can then be distributed amongst GSM cell operators who have paid higher licence fees so that there is a level playing field.

A second possibility is to work out the net present value of the various companies, calculate what impact they will suffer as a result of the changes and compensate them accordingly.

Says a cell operator: "We must be compensated not only for higher licence fee we paid but also for the risks we took to get into an uncharted market."

There are other sops which many analysts say could be put on the table for negotiations: offer GSM fully mobile operators permission to hand over calls between one circle to another without an NLD operator. Alternatively, the Government could permit mergers and acquisitions within a circle.

Of course, finding solutions to these contentious issues won't be easy. Especially because the cellular operators distrust the regulator's intentions.

Some cellular operators are determined to reject the proposals outright. So, this could be the beginning of another giant battle.

Additional reporting: Sunil Jain

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