In January 2010, the Department of Telecommunications (DoT) initiated the process of overhauling its decade-old telecom policy. An internal committee was constituted to formulate the National Telecom Policy (NTP), 2011, which would look into a variety of issues spanning licensing, spectrum pricing, mergers and acquisitions (M&As), broadband and restructuring of DoT.

Though the guidelines of NTP, 2011 will be finalised and presented to the Telecom Commission for its approval by the end of the year, Union Minister for Telecommunications and IT Kabil Sibal revealed the broad contours of the NTP while recently presenting the 100-day report on the progress of various measures announced in the beginning of the year.

Broadly, the review and reforms being considered include an audit of spectrum usage by telecom operators, delinking of spectrum allocation and licences, and changes in the M&A guidelines.

According to the minister, the idea is to delink licences from mobile spectrum, which now comes free with it. The government also plans to ask companies to pay for spectrum based on a market-driven mechanism for all future licences.

Although the methodology for allocation and pricing of spectrum has not been decided yet, Sibal announced the constitution of a committee under the chairmanship of retired Supreme Court judge Shivraj Patil to draft a “spectrum act”. Sibal also announced the need for regular audits of spectrum usage by external agencies to determine efficient usage of airwaves by mobile companies and other non-commercial users like the Ministry of Defence and the Department of Space. “We want regular audits and reviews of spectrum usage by various agencies. We believe that this is a must. Whether the agency is going to be the Comptroller and Auditor General (CAG) or the Telecom Regulatory Authority of India, we have yet to decide,” Sibal noted.

Meanwhile, the announcement that has brought cheer to operators is the proposal to allow spectrum sharing. Though it is expected that DoT will stipulate riders for the same, the industry still believes that it is a move in the right direction.

The proposed guidelines are also looking at a uniform licence fee across all service areas. The quantum of fee is, however, yet to be decided. Operators currently pay between 6 per cent and 10 per cent of their revenues as licence fees, depending on the circle of operation. Further, operators can opt for a national-level licence or can continue with the existing system of circle-wise licensing.

The minister also indicated that the existing rollout obligations of operators are likely to be modified since DoT has been finding it increasingly difficult to monitor individual operators’ rollout initiatives in each circle.

As for renewal of licences, the new policy will be looking at certain modifications, such as companies now seeking to renew their licences will have to apply 30 months before their current licences are due to expire so that there is enough time for DoT to deal with the applications. Further, licences will now be renewed after 10 years, as against the existing policy of licence renewal after 20 years.

Talking about security issues relating to the interception of data on secure networks, Sibal stated that the draft amendment of licence terms to take care of security issues had been sent to the Ministry of Home Affairs late March for its comments. According to Sibal, this would be finalised soon.

Research In Motion, the manufacturer of BlackBerry smartphones, was one of the companies under pressure to provide access to data on the company’s secure networks. Earlier, the government citing security reasons had said that it needed to monitor RIM’s corporate email and messenger services on the basis that the heavy encryption of BlackBerry phones made it convenient for terrorists to use them without being monitored. With regard to this case in particular, Sibal noted that RIM had offered a solution to monitor its messenger services in February and the telecom department was examining the proposal.

The department, according to Sibal, had given clearance to some companies to offer 3G telecom services in areas where they have given an undertaking to allow government agencies to monitor data on their networks. Reliance Communications, Tata Teleservices Limited and Bharti Airtel have given such undertakings, Sibal stated.

Acceding to the view held by the telecom industry and analysts that the current telecom M&A rules are restrictive and the government needs to relax them to facilitate consolidation in the 15-operator market, Sibal noted that the “M&A guidelines do need to be liberal to meet the needs of a dynamic sector like telecom”.

Under the current M&A rules, one company cannot hold more than 10 per cent stake in two competing firms in one telecom circle. Also, new licensees are not allowed to sell out or exit before three years of operations. Further, when two operators merge their revenues or subscriber base, it should not exceed 40 per cent of the total revenue/subscribers in that circle. 

Not explaining how these regulations will be eased or changed to allow more consolidation, the minister has only said that the number of players in each telecom circle should not fall below six, including the state-run operators, to ensure sufficient competition in the sector