Monday, June 4, 2012

New National Telecom Policy 2012: Roaming To Become Free

The Union Cabinet has approved the National Telecom Policy (NTP) 2012, which has been released after a delay of over a year. The policy aims to ultimately abolish roaming charges, allow users to retain their numbers even if they move from one zone to another, in addition to boosting transparency and growth in the scandal-hit sector. 

The draft of the new policy was released by Minister for Communications and IT Minister Kapil Sibal in October 2011. The target is one nation-one mobile number portability and working toward one nation free roaming.

Under the new policy, roaming charges would be done away with thus allowing subscribers to use same number across country without having to pay extra money. Also, it would allow a subscriber to retain his/her original number while shifting base from one city or state to another.

However, consumers will have to wait for some time for this, as the Department of Telecom will first work out modalities of the new scheme before it is brought into force. No timeframe has yet been fixed for the implementation of the policy. The new policy seeks to provide a predictable and stable policy regime for a period of nearly 10 years.

The NTP 2012 envisages increasing penetration of telecom services in rural area from current level of around 39 to 70 per cent by 2017 and 100 per cent by the year 2020. Incidentally, the draft NTP had suggested a 60 per cent rural penetration by 2017.

Under the new policy, broadband speed has been increased to minimum of 2 megabit per second (mbps). This change will come into force with immediate effect.

Delinking of Licenses
Moreover, the NTP-2012 will also separate telecom licenses and spectrum, against the current practice of bundling them, and will charge a market-derived price for the airwaves; the same will apply in the case of broadcasters. Also, rules for Internet telephony would be relaxed under the new policy as it envisages increasing penetration of telecom services in rural areas from the current approximately 39 per cent to 70 per cent by 2017, and 100 per cent by 2020.
However, post the Supreme Court judgment of February 2, 2012, which mandates spectrum auctions, the separation of license and spectrum has already become an undeniable reality. Regardless of the NTP 2012, the DoT would have to separate licenses from spectrum just as it did through an executive order following a Group of Ministers (GoM) direction to auction 3G and BWA spectrum in 2010.

The policy also seeks liberalization of spectrum even though the Telecom Regulatory Authority of India (TRAI), in its latest recommendations, while setting up the reserve price, has already cleared service and technology neutrality with regard to future spectrum auctions. Critical of this move, industry body AUSPI says the proposal to liberalize spectrum in the 1800 MHz band is one of the policy's biggest flaws.

Provisions Under Draft Policy
Originally intended to be NTP 2011, the draft policy was released for public comments only in October 2011, forcing it to be rechristened NTP 2012. The actual timelines for implementation of individual announcements within the new telecom policy are yet to be made known.

With the new policy in place, consumers who use national roaming can now expect to pay local call charges though it is unclear when ‘free roaming' will be initiated. At present, consumers pay local call charges and a premium when traveling outside their service area. The policy also allows national number portability, but again, with no visible timelines.

Other forward-looking propositions like resale of services could become critical in the backdrop of the Supreme Court's cancellation of 122 licenses, which will cease to exist as of August 1, 2012. A sharp reduction in the competition level from 14 operators currently to 7-8 operators could be made up by allowing mobile companies to set up resellers. Services resale is universally recognized as a way to increase competition without duplicating infrastructure or fragmenting the spectrum.

Additionally, it mentions cloud computing, next generation networks, IPV6 and Voice over Internet Protocol (VoIP) as thrust areas — all of which are forward-looking and embrace future technologies. It remains to be seen whether average Internet users will be allowed to use VoIP, especially since this move has been opposed vehemently over the last 5 years by cellular mobile operators.

There is very little in the policy that will help end the impasse faced by the telecom sector. Spectrum pricing, reserve price for the upcoming 2G auctions, historical pricing of spectrum for operators who have received spectrum beyond 6.2 MHz and the more recent contentious issues of reframing, etc, will have to be dealt with through executive decisions, most of which fall outside the purview of the NTP 2012 announcement.

It is also unlikely that the policy by itself will see any major reestablishment of investor confidence, which has been on the decline since late 2010. Both Foreign Direct Investments (FDI) and domestic investments faced a sharp decline during 2010-11 vis-à-vis previous years, according to a recent PWC report. The trend has continued downwards even for the fiscal year ending 2012.

Global Hub of Domestic Manufacturing
The policy aspires to make India a global hub of domestic manufacturing, though not much detail on how this mammoth objective will be achieved is available. The draft policy had mentioned preferential market access for Indian vendors as one of the tactics to ensure a boost to telecom manufacturing in India. This drew severe criticism from the Commerce Ministry on grounds that it violated India's commitments at WTO and GATT. The DoT was forced to give an explicit commitment that WTO and GATT's concerns would be kept in view while issuing guidelines on operationalization of the policy.

The NTP 2012 expects to take India's rural teledensity from 39 to 70 percent in the next 5 years with the target that every single Indian will have a phone by 2020. The policy also gets a formal approval of the new unified licensing regime which allows companies to provide ISP, fixed line, international long distance, national long distance, and a few other services through a single license, whose cost has been proposed by the Department of Telecommunication (DoT) at Rs. 10 crore. So far, very few companies, if any, have shown a desire to acquire the new unified license.

Earlier policies

The policy will be seen as driving small incremental changes with very little ability to solve the existing sector crises, unlike the NTP 1994, which spurred not just private sector investment in mobile and fixed line services but also initiated 49 percent FDI for the first time — ushering in telecom liberalization.

Earlier in 1999, a second policy — which lasted nearly 13 years — slashed costs across the board for the operators and by extension the consumers by moving from a license fee regime to a revenue share structure.

It also opened up the sector to future competition, breaking the duopoly contractual arrangements which had existed in mobile and fixed line telephony until 2000.
Later, starting 2002, additional competition was introduced in the national and international long distance sectors, which led to the slashing of tariffs, in some cases, by more than 90 percent.

The new telecom policy is very welcome as, among other things, it brings in transparency and takes away powers of vital decision-making from the telecom minister of the day and vests it with a ministerial panel. Perhaps there should be a time frame set for the panel so that decisions are not in limbo waiting for the panel to meet.

The other laudable provision is to make India a manufacturing hub for telecom equipment. This is a challenge as manufacturers will have to compete with China in terms of price and volume.

New Benefits
Roaming Fun: With national roaming set to become free, the subscribers need not worry about charges being levied on them while traveling to a different city or state.
Broadband Boost: Speed increased to minimum of 2 mbps. This will come into force with immediate effect
More Transparency: Licenses to be de-linked from spectrum. The policy will allow operators to provide services based on any technology by using airwaves and will not restrict them to use it for particular service using any specific frequency band.

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