BUSINESS ENVIRONEMENT- IV

REGULATOR: TELECOM REGULATORY AUTHORITY OF INDIA

(TRAI)-

The entry of private service providers brought with it the inevitable need for independent
regulation. The Telecom Regulatory Authority of India (TRAI) is a regulatory body which
was, thus, established with effect from 20th February 1997 by an Act of Parliament under
section 3 of the Telecom Regulatory Authority of India Act, 1997 to regulate telecom
services, including fixation/revision of tariffs for telecom services which were earlier vested
in the Central Government.

TRAI's mission is to create and nurture conditions for growth of telecommunications in the
country in a manner and at a pace which will enable India to play a leading role in emerging
global information society.

One of the main objectives of TRAI is to provide a fair and transparent policy environment
which promotes a level playing field and facilitates fair competition.

In pursuance of above objective TRAI has issued from time to time a large number of
regulations, orders and directives to deal with issues coming before it and provided the
required direction to the evolution of Indian telecom market from a government owned
monopoly to a multi operator multi service open competitive market.

The directions, orders and regulations issued cover a wide range of subjects including tariff,
interconnection and quality of service as well as governance of the Authority. It is a statutory
body and regulates the telecommunications sector in the country.

TRAI Structure

 TRAI shall have, in addition to its chairman, at least two full-time members and not
more than two-part members, all appointed by the Central Government.
 The members should have special knowledge of, or professional experience in
telecom, industry, finance, accountancy, law, management and consumer affairs.

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

 Only those senior or retired Government officers can be appointed as members who
have served for at least three years as secretary/additional secretary to the Union or
State Governments.

Telecom Disputes Settlement Appellate Tribunal (TDSAT)

The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a
Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory
and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a
licensor and a licensee, between two or more service providers, between a service provider
and a group of consumers, and to hear and dispose of appeals against any direction, decision
or order of TRAI.

 The powers of the TRAI have been considerably diluted by the TRAI
(Amendment) Ordinance, 2000. Now the regulation of telecom services is to be
done by TRAI and the newly set up Telecom Disputes Settlement Appellate
Tribunal (TDSAT).
 They will also adjudicate disputes, protect interests of service providers and
consumers, to promote and ensure orderly growth of the telecom sector.

The composition of TDSAT is also changed to include the chairman and not more than two
whole-time members and not more than two part-time members to be appointed by the
Government. The TDSAT has been given the mandate to adjudicate disputes:-

i. between a licensor and a licensee;

ii. between two or more service providers;
iii. between a service provider and a group of consumers.

The Union Government, State Government, any local authority or any individual can
approach the TDSAT for adjudication on issues related to disputes between parties mentioned
above.

The chairperson and members of this tribunal are to be appointed by the Government of India
in consultation with the Chief Justice of India.

Powers and Functions of TRAI

The Powers and Functions of TRAI are mainly:

 To recommend the need for and timing of introduction of new service providers and
terms and conditions of the license to a service provider;

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

 To ensure technical compatibility and inter-connect between different service

providers and regulate their revenue-sharing arrangements;
 To ensure compliance with terms of license and revaluation of the same for non-
compliance;
 To lay down and ensure a time period for providing long-distance and local distance
circuits;
 To facilitate competition and promote efficiency in operations to promote the growth
of telecom services;
 To protect consumers’ interest, monitor quality of services, inspect equipment used in
networks and make recommendations about such equipment;
 To maintain a register of interconnect agreements and keep it open for inspection and
to settle disputes among the service providers in this respect;
 To give advice to the government on any matter related to the telecom industry. Levy
fees and charges for services and, ensure that universal service obligations are
complied with; and
 To perform any such other administration and financial function as may be entrusted
to it by the Central Government.

LICENSE: TELECOM REGULATORY AUTHORITY OF INDIA

TELECOM LICENSE FRAMEWORK OF INDIA-

The grant of telecom licenses in India is primarily governed by the Indian Telegraph Act,
1885, and the Indian Wireless Telegraph Act, 1933. The Indian Telegraph Act, 1885,
provides an exclusive privilege to the Central Government for establishing, maintaining, and
working telegraphs, and power to grant licenses for such activities. Licensing framework has
been an integral part of India’s telecommunication law. Under the Indian Telegraph Act,
1885, Section
4 gives the Central Government the power to grant license on such conditions and in
consideration of such payments as it thinks fit, to any person to establish, maintain or work a
telegraph within any part of India. Considering the market and technological developments,
the licensing regime has evolved with the passage of time. The existing licensing regime i.e.,
the Unified License regime came into effect in 2013. Unified License offers service-wise
authorizations for establishing service-specific network and to provide the authorized
service(s). The allocation of spectrum is delinked from the license and it has to be obtained

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

separately as per the prescribed procedure, for different services. Only one Unified License is
required for all telecom services in the entire country. The service provider may choose the
services to be offered, which are called Service Authorizations.

WHAT IS LICENSING IN TELECOM INDUSTRY?

A telecommunications license authorizes an entity to provide telecommunications services or

operate telecommunications facilities. Licenses also generally define the terms and conditions
of such authorization, and describe the major rights and obligations of a telecommunications
operator.

WHO GRATNS TELECOM LICENSE?

Under the Indian Telegraph Act, 1885, section 4 gives power to the government to grant
license to any person to establish, maintain or use a telegraph. However, in the telecom
sector, the government had complete monopoly until the early 1990s. Since 1992, the
government has allowed licensing in the telecom sector.

WHAT ARE THE TYPES OF TELECOM LICENSE IN INDIA?

Following are the types of telecom licenses-

1. ISP Licenses Category A, B, and C

2. UL VNO License
3. OSP Registrations
4. Share Infrastructure License
5. IP-1 Registration
6. Audiotext / Voice Call / UMS License

ISP Licenses Category A, B, and C-

1. Category A ISP License: If you want to provide internet services across India, you
need ISP License category A. A PAN India License, the entry fee required to get it is
Rs 30 Lakh.
2. Category B ISP License: Want to provide internet services within a telecom circle or
across a metro area? Get an ISP License Category B. The entry fee required to get it
is Rs 2 Lakh.

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

3. Category CISP License: What if you just want to provide Internet Services within a
small block, or a small neighbourhood (secondary switching area)? In that case, you go
for ISP License Category C. It is the cheapest among them all. The ISP C Class fees
is not more than Rs 50,000/-.

UL VNO License-

It is a new form of Unified License suited for ISPs on a tight budget. Much like ISP License,
it also has three categories:

1. Category A: The UL VNO Category A License is valid across India.

2. Category B: The UL VNO Category B License is valid within a Metro Area/telecom
circle
3. Category C: The UL VNO Category C License is valid within a secondary switching
Area.

The telecom license renewal for a UL VNO License has to be done early because
it is valid only for 3 years.

OSP Registrations-

You call it to call centre, but the experts call it OSP: the Other Services Provider. OSPs are
businesses that use telecom resources to provide services such as BPO, LPO, KPO, RPO,
Tele- education, Tele-banking, networking and others. These telecom Licenses in India are
also provided by Department of telecommunication. It is to ensure that the telecom resources
aren’t misused.

The types of OSPs are as follows:

1. Domestic OSPs: They are country-bound OSPs.

2. International OSPs: They are unbound licenses that can operate across international
borders.

OSP License is location bound, which means that you have to get one OSP License per
location if you have multiple call centers.

Sharing Infrastructure License-

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

Setting up a call center is pricey. Therefore, it is always a good idea to share the infrastructure
with another OSP to keep the cost a bit down. The Share Infrastructure License is a Telecom
License Agreement between two OSPs to share infrastructure. Both parties have to sign this
agreement and submit it to the OSP and that’s it, they can begin sharing the resources to
perform their tasks.

Work from Home Registration-

Call Centres nowadays provide an option for their employees to work from home. It involves
a work from home registration – an agreement that avails call center workers be more
productive while being in the ambiance of their houses.

IP-1 Registration-

OSPs require a lot of infrastructures, which is up to an Infrastructure Provider to provide.

You can become an Infrastructure Provider by getting the IP-1 License. With this license, you
can provide the following infrastructures:

1. Dark Fibre
2. Right of Way
3. Tower
4. Duct Space

Audiotext / Voice Call / UMS License-

If you want to provide Audiotext, Voice Call or Unified Messaging services to your clients,
you need to get the Audio tax License.

1. Audio Tax: Audio and Text services

2. Voice Call: Voice Call Services
3. UMS: Unified Messaging Services that covers every form of messaging service.

ISSUES FACED BY THE TELECOM SECTOR IN INDIA-

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

 High Right-of-Way (ROW) cost: Sometimes, state governments charge a huge

amount for permitting the laying of fiber, etc.

 Lack of fixed line penetration: India has very little penetration of fixed-line in its
network whereas most of the developed countries have a very high penetration of
fixed lines (telephone line that traveled through a metal wire or optical fiber as part of
a nationwide telephone network).

o Only around 25% of Towers in India are connected with fibre networks,
whereas in developed nations, it is in excess of 70%.

o 5G Network requires towers to be connected to with very high-speed systems.

Those high speeds are not possible on the present radio systems.

 Declining Average Revenue Per User (ARPU): ARPU decline now is sharp and
steady, which, combined with falling profits and in some cases serious losses, is
prompting the Indian telecom industry to look at consolidation as the only way to
boost revenues.

o Recently, the Supreme Court allowed the government’s plea to recover

adjusted gross revenue of about Rs 92,000 crore from telcos, that further
adds to their stress.

 Limited Spectrum Availability: Available spectrum is less than 40% as compared

to European nations and 50% as compared to China.

 Low Broadband Penetration: Low broadband penetration in the country is a

matter of concern. As per white paper presented on broadband at the last
International Telecommunication Union (ITU), broadband penetration in India is
only 7%.

 Over the Top (OTT) applications such as WhatsApp, OLA and so on do not need
permission or a pact with a telecommunications company. This hampers the revenue
of telecommunication service providers.

 Huge fluctuations in the duties on Telecom Equipment which contribute to

connecting the whole system from the central server to the consumer.

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

 Timeframe of policy execution: Government have withdrawn a lot of things to

benefit telecom sector but by the time it gets executed to the market, it becomes too
late.

 Lack of Telecom Infrastructure in Semi-rural and Rural areas: Service

providers have to incur huge initial fixed cost to enter semi-rural and rural areas.

 Pressure on Margins Due to Stiff Competition: With competition heating up post

entry of Reliance Jio, other telecom players are feeling the heat of substantial drop
in tariff rates both for voice and data (more significant for data subscribers).

HISTORY OF THE TELECOMMUNICATION INDUSTRY IN INDIA-

India's telecommunication network is the second largest in the world by number of

telephone users (both fixed and mobile phone) with 1179.49 million subscribers as on 31
January 2021. It has one of the lowest call tariffs in the world enabled by mega telecom
operators and hyper-competition among them. India has the world's second-largest
Internet user-base with 747.41 million broadband internet subscribers in the country.

Major sectors of the Indian telecommunication industry are telephone, internet and
television broadcast industry in the country which is in an ongoing process of
transforming into next generation network, employs an extensive system of modern
network elements such as digital telephone exchanges, mobile switching centres, media
gateways and signalling gateways at the core, interconnected by a wide variety of
transmission systems using fibre-optics or Microwave radio relay networks. The access
network, which connects the subscriber to the core, is highly diversified with different
copper-pair, optic-fibre and wireless technologies. DTH, a relatively new broadcasting
technology has attained significant popularity in the Television segment. The introduction
of private FM has given a fillip to the radio broadcasting in India. Telecommunication in
India has greatly been supported by the INSAT system of the country, one of the largest
domestic satellite systems in the world. India possesses a diversified communications
system, which links all parts of the country by telephone, Internet, radio, television and
satellite.

Indian telecom industry underwent a high pace of market liberalisation and growth since
the 1990s and now has become the world's most competitive and one of the fastest
growing telecom markets.

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

Telecommunication has supported the socioeconomic development of India and has

played a significant role to narrow down the rural-urban digital divide to some extent. It
also has helped to increase the transparency of governance with the introduction of e-
governance in India. The government has pragmatically used modern telecommunication
facilities to deliver mass education programmes for the rural folk of India.

COMPLIANCES AND PENALTIES –

The Telegraph Act is the primary legislation underlying the telecommunications regulatory
framework for India and prescribing various powers of the government to operate and
regulate telecoms services in the country. Under the current regime, the task of granting
licences and approvals to telecoms players for providing telecoms services in India has been
assigned to the Department of Telecommunications, the Ministry of Communications and
Information Technology (DoT). The DoT formulates and implements the telecoms licensing
regime, under which licences and approvals are granted to corporations to carry out telecoms
services.

The Wireless Act was formulated and implemented to regulate wireless communication and
the possession of the concerned wireless telegraphy apparatus. It has been explicitly
stipulated that the possession of any apparatus, appliance, instrument or material used or
capable of use in wireless communication requires a licence from the DoT to that effect. A
penalty has been prescribed for possession without the requisite licence.

Apart from the above-mentioned legislation, the Foreign Direct Investment (FDI) Policy, as
amended from time to time, lays down the foreign investment and ownership restrictions for
the sector. The government prescribes the threshold limits of investment, entry routes and
other conditions for such investment under the FDI Policy, as amended from time to time.
The FDI Policy segregates various services on the basis of foreign investment allowed,
regulated and prohibited. Presently, with regard to the foreign investment in entities engaged
in the telecoms services, although FDI up to 100 per cent is permitted for most of the
telecoms services, certain service-specific conditions and entry restrictions for the investment
coming from outside India may apply. Any amount of investment beyond 49 per cent in the
telecoms entity would require the prior approval of the government. In November 2017 the
DoT issued internal standard operating procedures for scrutiny of FDI cases in the DoT as
well as a checklist.

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

With the implementation of the New Telecom Policy (NTP) of 2012, the licensing regime for
the telecom sector underwent a radical transformation. Moreover, the NTP 2012 envisaged
‘one nation, one license’ and hence, the ‘unified license regime’ was introduced.
Additionally, players in the industry went from having to obtain separate Licences for
different telecom services in India such as national and international long-distance services
(NLD & ILD), internet services, etc. to needing just one license,

The unified license covers all fixed, mobile, and satellite services and communication,
both wireline and wireless media. Authorisation under the unified license (UL) comprises
one or more of the following services:

1. access service;

2. internet service (and subsequent categories);

3. national long distance (NLD) service;

4. international long distance (ILD) service;

5. global mobile personal communication by satellite service;

6. public mobile radio trunking service;

7. very small aperture terminal closed user group service;

8. Indian national satellite system mobile satellite system reporting service; and

9. resale of international private leased circuit service

A service provider may opt for all services if they wish to operate in all the sectors. The
introduction of a virtual network operator model has helped the facilitation of resale of
existing telecom infrastructure at the services level. This requires a separate license under
the UL regime, which grants for 10 years. Further, the UL will grant for 20 years with
effect from the date of authorization. This may renew by the DoT. However, audio
conferencing services require separate licensing by the DoT and are currently not covered
under a UL.

The requirements for this authorisation are -:

 Entities must incorporate in India.

KIRIT P. MEHTA SCHOOL OF LAW

 BUSINESS ENVIRONEMENT- IV

 They must be compliant with the limits under the FDI regulations for the relevant
sector.

 Applicants will require to pay the relevant fees and maintain minimum equity and net
worth as that prescribe by the Central Government.

 Applicants require to furnish a bank guarantee and that prescribes by the relevant
authorities.

KIRIT P. MEHTA SCHOOL OF LAW