October 11, 2011

India Unveils Draft National Telecoms Policy

Published: 10/11/2011
http://www.ihs.com/products/global-insight/industry-economic-report.aspx?ID=1065930440

India has launched a draft national telecoms policy but more details are required in December's final version to give operators greater confidence.



IHS Global Insight Perspective

Significance

Greater broadband availability and rural coverage are at the centre of India's draft telecoms policy.

Implications

Telecoms Minister Kapil Sibal said that 500 MHz of spectrum will be freed up over the next nine years and that 2G spectrum will be unbundled from licences.

Outlook

More details will be set out in December 2011.

India has launched a draft national telecoms policy with the aim of boosting broadband availability and improving coverage in rural areas, as well as encouraging the local manufacture of telecommunications equipment. A final version of the policy is due to be released in December. The draft policy, unveiled by Telecoms Minister Kapil Sibal, has the following main points.

  • Telecoms Sector May Get Infrastructure Status: Sibal said that the Department of Telecommunications (DoT) was in discussions with the Ministry of Finance over assigning infrastructure status to the telecoms sector. This would theoretically give telecoms operators tax breaks and encourage them to invest.

  • 600 Million Broadband Connections by 2020: The government is aiming for 175 million broadband connections by 2017 and 600 million by 2020. The government sees 2-Mbps downlink as a base and is looking for 100-Mbps downlink broadband to be achieved, although the timing and scope of these aims is currently unclear.

  • Fibre to Rural Areas: By 2014 all village panchayats are set to be connected via fibre optics. After 2014, all villages and habitations are to be gradually connected.

  • Pushing for Mergers and Acquisitions: The aim is to "facilitate consolidation in the converged telecom-service sector while ensuring sufficient competition". Sibal also spoke of enabling exit strategies.

  • More Spectrum, Unbundled from Licences: 300 MHz of spectrum will be freed by 2017 and a further 200 MHz by 2020. 2G spectrum is to be unbundled from licences and priced on a market basis.

  • End to National Roaming But Infra-Circle MNP to Go Ahead: Operators will be required to offer free national roaming. Intra-circle mobile number portability will also be implemented.

  • Voice Resale Allowed: Voice resale at the wholesale and retail level will be permitted. This will be enabled by the restructuring of licences into two types: facilities-based network service operators (NSOs) and service delivery operators (SDOs).

Outlook and Implications

  • Operators Await More Details: Sibal acknowledged that the DoT was still in discussions with the Telecom Regulatory Authority of India (TRAI) on the vital issues of merger and acquisition policy and spectrum pricing for 2G. The timelines for implementation of voice resale liberalisation and the phasing out of national roaming charges have yet to be formalised. So, while there is now an idea of the general objectives behind the new telecoms policy, many details are still lacking. News that some 500 MHz of spectrum will be freed up over the next nine years is welcome, but there will still be concerns about the government's plans to unbundle spectrum from licences and price 2G frequencies at market rates. Spectrum trading between operators is likely to be welcome, but there will be fears that fiscal objectives, rather than the health of the telecoms sector, will drive policymaking in the spectrum-pricing area. A more conclusive verdict can be made in December, when the final policy is set to be announced. The fear is that even the final version will not be detailed enough to restore the confidence of India's operators.

  • Past and Present Baggage: The confidence of telecoms-sector players in India has been hit by a number of factors. Past corruption—the discredited 2G licensing process from 2007—patchy implementation of laws and regulations, and disagreements over the interpretation of tax and telecoms-sector rules have led to a number of high-profile legal cases, some of which are still running. India's Central Bureau of Investigation is still looking into a number of former and current industry executives over their alleged part in the 2G licensing process. Vodafone is awaiting a decision over whether or not it will have to pay billions of dollars in tax on what it views as a tax-free transaction (see India: 1 July 2011: Vodafone CFO Warns on Indian Tax Risks). Qualcomm is facing the possibility of losing its broadband wireless licences over what it sees as a technicality (see India: 23 September 2011: DoT Revokes Qualcomm's BWA Licences). Operators and the country’s authorities are also in dispute over charges for excess spectrum holdings and 3G roaming (seeIndia: 20 September 2011: Vodafone Challenges Excess Spectrum Fee Charge in India and India: 28 September 2011: TRAI Moves on 3G Roaming). In addition, the new entrants, in particular, face the possibility of losing 2G licences (see India: 15 September 2011: DoT to Issue Showcause Notices to Nine Operators over "Illegal Licences"). While Sibal has inherited many of these problems, operators will be looking for the new telecoms policy to introduce greater transparency to avoid similar problems in the future. However, the new policy is likely to fail if the goal is to be a panacea for past mistakes. The 2007 2G licensing process undoubtedly cost the Indian treasury billions of dollars, but the authorities should avoid seeking to make future spectrum payments artificially high to make up this shortfall.

No comments: