The department of telecommunications (DoT) has threatened to terminate the operating licence of Koshika Telecom, the cellular licensee of Uttar Pradesh (west and east), Bihar and Orissa, if it does not stop franchising its cellular service, branded Ushaphone, to public call offices (PCOs).
The DoT default notice follows Koshika Telecom franchising its cellular service to PCOs in the circles it is licensed in. The telecom company has been adopting the franchising strategy to roll out its service in the circles. Some other companies are planning to implement a similar strategy.
According to DoT, franchising a service by private telecom operators violates the licence agreement. According to a department letter to Koshika Telecom, "The franchise of a cellular PCO by the company by means of a sub-licence is violative of the clause 10 of the licence agreement where creation of a sub-licence is expressly prohibited. This is also an offence under Section 20A of the Indian Telegraph Act, 1885, as the holder of the licence will be contravening conditions contained in the licence.
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"Further, a cellular PCO falls within the definition of a telegraph under Section 3(1) of the Indian Telegraph Act, 1885, and a cellular operator if establishes, maintains or works a telegraph in contravention of Section 4 without any licence from central government/Telegraph Authority, will be committing an offence under Section 20 of the Act."
The letter continues, "In view of the above, you are requested to immediately stop the franchising of the PCOs and withdraw the franchises already given immediately and in any case within 30 days of this default notice failing which, your licence may be terminated in accordance with the clause 6 and condition 15.1, Schedule B of the licence agreement for breach of the terms and conditions of the same. "
DoT's sharp reaction to the Koshika Telecom business strategy of franchising its service to PCOs has surprised cellular companies. An executive of one company said, "This is clearly anti-competitive. How can the department stop companies from franchising their services when it does the same?"
A significant portion of DoT's revenues is estimated to accrue from PCO operations.