Spectrum allocation and OTT services: Draft Telecom Bill makes key changes

Spectrum for satellite broadband services is not in the Bill's list and it would likely be auctioned

The much-awaited draft of the Indian Telecommunications Bill, released for discussion Wednesday night, seeks to make key changes to the statutory framework governing telecom services in India.

The bill lays down a framework for spectrum assignment, primarily through auctions and administrative allocation in special cases.

These special cases relate to government and the public interest, such as defence, transportation, and research, when spectrum can be assigned through the administrative process. This provision is expected to resolve the confusion caused by the Supreme Court order of 2012, which was interpreted to mean that all spectrum can only be auctioned.

The bill brings over-the-top (OTT) communication services such as WhatsApp or Telegram, along with satellite broadband services, under the ambit of the proposed law. The draft also bestows powers on the government to offer write-offs, conversion of dues into equity, deferment, and relief on default of payment by telcos due to financial problems.

Telcos and analysts have raised several concerns. Stakeholders have until October 20 to respond. Many have said this is not long enough for a serious consultation process. The COAI has merely noted that "in keeping with the reformative policy making by the government, this draft is another milestone to develop a modern and future-ready legal framework in telecommunications."

On telecom backhaul (like the E and V bands), the draft says that spectrum will be given administratively, going against telcos who want it to be auctioned. 

Spectrum for satellite broadband services which stakeholders want to be given administratively is not listed on the administrative list and is likely to be auctioned.

"The draft gives unfettered powers to the government to add in any other function in the list for spectrum being assigned administratively. That is very discretionary as it can go on adding others in the list. Also, through the bill, the government is seeking to ensure parliamentary backing to offer spectrum at an administered price," said the senior executive of a telecom firm.

Secondly, after noting telecom firms' demand for a level playing field, the Department of Telecommunications (DoT) has extended the definition of 'telecommunication services' to bring OTT communications, satellite-based communication services, and the internet under the ambit of the bill.

Telcos have protested that they require a level playing field as OTT communications and satellite-based services offer similar services - audio and video calls and messaging – but neither pay for a licence nor for spectrum.

But a top executive with a leading OTT communications company called it a 'retrograde' step because the services are completely different. "There are so many such OTT applications it's impossible to regulate," he said.

If the bill is passed, OTT players will be required to take a licence and will be subjected to the same conditions as telcos in terms of quality of service and security rules.

WHAT DOES THE DRAFT BILL OFFER

• PROPOSAL: Spectrum to be offered through auction or administratively or any other method prescribed
• IMPACT: Clear framework for spectrum assignment. List of functions for administrative allocation already given. Telcos say this will give too much power to government
• PROPOSAL: Sharing, trading, and leasing of spectrum allowed
• IMPACT: Reduce overall investment requirement for telcos as they roll out 5G     
• PROPOSAL: M&As to require only a notice to the government
• IMPACT: To help in ease of doing business for telcos
• PROPOSAL: In case of a default of payment by an operator, government can offer waivers, deferment, convert dues into equity if it is in financial problems
• IMPACT: Provides a life line to operators to get over financial crises also might make it easier to sell a company

Also included in the draft is a framework for enforcing rules on the Right of Way (ROW) in states and municipal corporations. This legal framework is key to the roll-out of 5G services which will require a huge increase in fibre backbone as more towers are added.

It is laid down that a public entity which owns the land has to grant permission expeditiously, and if not, it has to give substantive grounds why it is not doing so, and a framework for this has been provided.

Telecom companies say the problem is the exorbitant and often arbitrary price for getting permission for ROW. They say the bill has left open the question of who will decide on the timeline for permission and the fees for granting permission for ROW. The draft merely says that the fees "should not exceed the amount as may be prescribed".

"The major reform that the bill wants to bring in is ROW which has been impacting private telcos," said telecom analyst Mahesh Uppal. "While the intention has to be lauded, I cannot see how the central government can take coercive action against states or municipal corporations to impose rules by the centre as land is a state subject. There is no reference as to how this will happen."

Questions area also being raised about whether DoT will become too powerful. Analysts also are worried that the bill will adversely impact the consultative role of the regulator, TRAI. "The draft bill excludes the obligation of the government to consult TRAI on licensing issues. That is a retrograde move," said Uppal.  

A telecom operator said it might also impact the importance of TDSAT as the bill plans to create an alternative dispute resolution process which includes arbitration and mediation, among others.     

Lastly, the bill allows the government to make various decisions to help telcos with financial problems, which has come under scrutiny.

"To incorporate it into an act does not make sense as it does not expand the scope of what the DoT is already doing. It's is already currently giving waivers as well as converting dues into equity for Vodafone India through cabinet clearances. This will create a right for companies to run their businesses inefficiently and then run to the government to save their companies," said a telecom company executive.

The DoT has also not heeded the unanimous call from companies for the USO Fund levy to be discontinued or suspended for a few years until the large unutilised surplus cash of around Rs 60,000 crore has been used.

Instead, the bill has merely changed its name, calling it the Telecommunications Development Fund, which has powers beyond merely taking telecom services to the underserved rural and suburban areas.

The Fund will be used for research and development of new telecommunication services; technology and products; supporting skill development and training; supporting pilot projects; consultancy assistance; and advisory support.