The Department of Telecommunications (“DoT”) has recently re-affirmed its stance that Internet Service Providers (“ISPs”) will not be allowed to provide Internet telephony services. The present ban on Internet telephony is to be lifted from April 1, 2002, in favour of license holders of basic, national long-distance and international long-distance services. DoT is not in favour of allowing ISPs to provide Internet telephony services since they do not entry fees, universal access levies or stringent licence fees obligations unlike the other telephony service providers.

The DoT has approached the Telecom Regulatory Authority of India (”TRAI”) to recommend the guidelines for opening up the segment and TRAI is expected to come out with its suggestion on the issue by the end of November.

Net to be off Convergence Bill’s net

The panel under the Communications Convergence Bill (“the Bill”) to monitor content, will not monitor content over the Internet. If the Bill is passed in its current form, only content provided by license-holders and that of content application services such as satellite broadcasting, subscription, terrestrial free-to-air TV broadcasting and terrestrial radio broadcasting would be monitored by the panel.

Further, in order to accommodate an equal representation on both content and technical issues, the number of members of the Communications Commission of India (“CCI”) has been increased from the original seven to ten, in addition to the chairperson and the spectrum manager, who are ex-officio members. The CCI has also been empowered to set up additional bureaus to appoint new personnel, if the workload is exacting at any point of time.

The new draft of the Bill, has provided for a fifth category of licence holders i.e., Value added Network Services and Unified Messaging Services. It has clarified that IT-enabled services such as call centres, e-commerce, tele-banking, tele-education, tele-trading, tele-banking, tele-medicine, video text and video conference have not been included for purposes of licence.

However, the Bill does not provide for a composite licence to address "convergence". This may prove to be a big stumbling block as emerging technology makes convergence more and more realistic. Under the present Bill, a company may be required to comply with regulations that may at times be inconsistent. It would be important to address these issues.

Source: The Economic Times, August 30, 2001, Business Standard, August 29, 2001

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TRAI plans consultation paper on QoS for ISPs

The Telecom Regulatory Authority of India (“TRAI”), which has been closely studying the Internet services scenario in other countries is planning to initiate a consultation process for framing quality of service (“QoS”) norms for Internet Service Providers (“ISPs”). The forthcoming paper, while addressing ISPs, would also look at basic service operators who are responsible for dial-up connections for Internet access. It would take into account, service quality with regards to call attempts, speed of access, and other problems faced by consumers accessing the Internet. The TRAI expects to initiate the consultation process in a month’s time.

Source: The Economic Times, August 30, 2001

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Convergence Bill gets Cabinet nod

The latest developments on the Communications Convergence Bill, 2001 (“the Bill”), has been its approval by the Cabinet. The Bill will soon be referred to the Indian Parliament, which will then refer it to a Standing Committee on this issue.

The Bill seeks to repeal:

The Indian Telegraph Act, 1885,
The Indian Wireless Telegraphy Act, 1933,
The Telegraph Wireless Unlawful possession Act, 1950,
The Cable Television Networks (Regulation) Act, 1995, and,
The Telecom Regulatory Authority Act, 1997

The Bill provides for the formation of the Communications Commission of India (“CCI”) which would be an all-encompassing independent umbrella body which would look into (a) licensing, (b) spectrum management (c) dispute resolution (d) codes, technical standards, tariffs, rates for licensed services, (e) conditions for fair, equitable and non-discriminatory access to network facility and service, among other things.

It is anticipated that CCI would be in place by 2002

Source: The Economic Times, August 28, 2001

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DoT issues license terms for unified messaging services

The Department of Telecommunication (“DoT”) has published the terms of license under which Unified Messaging Services (“UMS”) providers will have to operate. According to the new terms any UMS provider will also have to get an Internet Service Provider (“ISP”) license along with the licence specifically for UMS. There will be no entry fee or license fee. A performance bank guarantee of Rs. three lakhs for each licence shall be required. The service provider is required to pay levy towards Universal Service Obligations (“USO”) from the date of licence as per the terms and conditions decided by the Government on the recommendations of Telecom Regulatory Authority of India (“TRAI”).

The UMS provider has to define an area in which he will provide services and this is known as the short distance service area (“SDCA”). From outside the SDCA the service will be accessed on Standard Trunk Dial (“STD”) call basis. A separate application for each service area is required. For UMS, transport of voice mail messages to other locations and subsequent retrieval by the subscriber must be on a non-real time basis. The UMS provider should take measures to prevent any objectionable, obscene, unauthorised or any other content or harmful and unlawful messages or communications infringing upon copyrights, intellectual property etc., in any form, from being carried on his network, consistent with the legal frame-work of the country. Once the DoT reports specific instances of such infringement to the provider then he has to ensure without fail that the carriage of such material on his network is prevented immediately.

The UMS provider is obliged to provide, without any delay the tracing facility to trace origin or content of nuisance, obnoxious or malicious calls, messages or communications transported through his equipment and network. Any damages arising out of default on the part of the provider in this regard he is solely liable for the same.

All matters relating to the application or licence, if granted, will be subject to jurisdiction of Telecom Dispute Settlement and Appellate Tribunal (“TDSAT”).

Source: The Economic Times, August 07, 2001

In a recent twist in the tale, the Indian Government is considering approaching the Supreme Court for issuing a direction that all telecom-related disputes should go to the Telecom Dispute Settlement and Appellate Tribunal (“TDSAT”) after Madras High Court’s stay on limited mobility.

The Madras High Court had on June 11, 2001 issued an “interim injunction” (interloculotory injunction) that bans the SDCA based limited mobility for at least four weeks, although the issue was pending in a separate proceeding before the TDSAT.

The Telecom Regulatory Authority of India, 1997 Act (“Act”) grants exclusive jurisdiction to TDSAT to decide disputes between the licensor and the licensee (subject to certain exceptions). Further, Section 15 of the Act excludes jurisdiction of the civil courts jurisdiction on matters over which TDSAT has jurisdiction. It also expressly restrains the civil courts from granting any injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the Act, which appears to the basis of the Indian Government's plea to the Supreme Court for the said directive.

Telecom Regulatory Authority of India (“TRAI”) recommended to the Department of Telecommunications (“DoT”) the numbering system for the national long distance services in view of the liberalisation of the National Long Distance (“NLD”) sector.

As per TRAI’s recommendations, a subscriber would have to dial zero followed by national long-distance service code (“NLDSC”), carrier access code (“CAC”) and thereafter Standard Trunk Dialling (“STD”) code.

The charges for the interconnection link between national long distance operators would be in accordance with the telecommunication interconnection regulation of May 1999. This regulation provides for the mutual negotiations between interconnection seeker and provider.

The Reserve Bank of India had set up a ‘Working Group on Internet Banking’ to examine different aspects of Internet Banking (I-banking). The Group had focused on three major areas of I-banking:

RBI has accepted the recommendations of the Group to be implemented in a phased manner in accordance to notification on June 20, 2001[1] with immediate effect.

Only banks licensed, supervised and having a physical presence in India would be permitted to offer Internet banking products. There are a host of other regulatory and supervisory regulations that the banks have to comply with to venture into internet banking.

All existing banks offering Internet banking are required to review their systems in light of this circular and report to RBI, within a month, on various aspects (eg. the types of services offered, extent of their compliance with the recommendations, deviations and the time frame for compliance) to obtain post facto approval.

In particular, all banks offering Internet banking must ensure the authentication of records, physical verification of the customer accounts opened, assessment of liability to the customers on account of unauthorized transfer through hacking, denial of service on account of technological failure.

The guidelines have prescribed minimal security measures that the banks need to adhere to. These inter alia include introduction of logical access controls to data, systems, application software, utilities, telecommunication lines, libraries, system software, use of proxy firewalls et al. Physical security measures like infrastructure, back up and maintenance of records have also been spelt out in the guidelines.

On January 26, 2001, the Department of Telecommunications ("DoT") had announced liberalization measures with regard to the telecom services. Basic service operators (“BSOs”) were permitted to provide limited mobility services (Wireless in Local Loop) within the local area i.e. Short Distance Charging Area (“SDCA”) in which the subscriber is registered.

Pursuant to the same, five BSOs had been issued Letters of Intent (“LoI”) by the DoT, to provide limited mobility services. The LoIs were based on the Group of Telecom and Information Technology (“GOT-IT”) report. Reliance, HFCL, Tata Teleservices, Birla-AT&T-TATA combine, and Bharti were successful in obtaining the LoIs.

However, the Association of Cellular Operators had opposed this move, stating that it amounted to a backdoor entry by BSOs into the mobile service industry, and that it violated the licensing agreement between the cellular operators and the DoT. They had moved the Telecom Settlement and Appellate Tribunal (“TDSAT”) to resolve the issue. The case is still being heard by TDSAT.

In a new turn of events, today, a two-judge bench of the Chennai High Court has issued an “interim injunction” (interloculotory injunction) that bans the SDCA based limited mobility for at least four weeks, in a separate proceeding. The said injunction restrains the DoT and the Telecom Regulatory Authority of India ("TRAI") from “dealing with or acting upon or giving further effect in any manner whatsoever” in issuing basic service licenses that permit the use of WLL technology. The order also bars allocation of frequency spectrum for mobile services by FSPs.

The above dispute seems to fall under TDSATs purview. At this stage, the grounds on which the Chennai High Court has granted an injunction are not clear. It would not be surprising if the injunction granted by the Chennai High Court is challenged on grounds of lack of jurisdiction.

Telecom Engineering Centres, an engineering support division of the Department of Telecommunications (“DoT”), is likely to be converted into an autonomous body in order to provide technical support to the Information Communications Entertainment (“ICE”) ministries in deciding policy and licensing issues.
It will support Ministry of Information Technology and Information and Broadcasting ministry, besides supporting DoT on technical matters.
It will support the ICE ministries on various equipment, technical, licensing and policy related issues.

Bharat Sanchar Nigam Limited (“BSNL”) has approached the Telecom Regulatory Authority of India (“TRAI”) to reconsider the imposition of floor price of Rs 450 as monthly rental for limited mobility (wireless in local loop).

The communications minister had last month clearly stated that the BSNL would challenge the floor price as the tariff fixing powers of the regulator were under question.

The Union Cabinet has permitted foreign direct investment (“FDI”) in the telecom sector upto 74%. The earlier FDI cap in this sector was 49 %. In the case of Internet Service Providers with gateways, radio paging and end-to-end bandwidth, the cap has been hiked, but this will need Foreign Investment Promotion Board approval, licensing and security clearances.

The Group on Telecom and Information Technology (GOT-IT) submitted its report to the Indian Prime Minister on allowing limited mobility to basic service providers. The cellular operators had earlier opposed this move by the Government as it would amount to basic operators having a backdoor entry to mobile services market, thus brewing up a controversy.

The report restricts the mobility in Wireless in Local Loop (WiLL) services to a radius of 25 km and fixes the tariff at Rs 1.20 for a three-minute outgoing call, with free incoming calls. The telecom circles have been sub-divided into urban, semi-urban and rural areas. There are different roll-out obligations for the three areas with strict penalty for non compliance.

The operators will have to set up points of presence in all the Short Distance Calling Areas for getting spectrum.

The report does not envisage any additional fee for basic telecom operators providing limited mobile services. It aims at ensuring a level-playing field between the cellular and basic operators by bringing down the revenue share of basic telecom operators from the proposed 60 per cent to five per cent - the same as the cellular operators.

The Telecom Regulatory Authority of India (TRAI) who is also responsible for tariff regulation, had earlier ordered the monopoly long-distance network operator, Bharat Sanchar Nigam Limited (BSNL) to pass on the benefits of the reduced long-distance tariffs to private operators who had used the BSNL network, after the long distance tariffs were lowered.

Subsequently, BSNL challenged that TRAI order before the Telecom Dispute Settlement Tribunal (TDSAT), on the grounds that the principles of natural justice were violated by TRAI (as TRAI had passed that order without giving BSNL a hearing).

TDSAT has set aside the TRAI order. It further granted TRAI the liberty to pass fresh directions in accordance with the law after giving all the parties a fresh hearing.

The Communications ministry announced that India would allow Internet telephony in the country from April 2002, ahead of an earlier plan to do so in 2004.Voice telephony over the Internet is currently banned in India though the country's online population is known to use the technology, which cuts costs of long distance telephony and is tough to monitor.

A high-powered panel advising the Indian Government on economic issues had in a recent report suggested that the Government should consider allowing voice telephony over the net to bring down the costs for users significantly.

The Economic Survey for 2000-01 forecasts that India’s booming Internet access market would be 15 million net subscribers from the current two million by the end of 2003. The average number of users per connection is estimated to be three to four.

Digital signatures, would be available in India to internet users latest by June 2002 and would be a step towards eliminating paper work and red tapism in offices, banking and postal services. Controller of Certifying Authorities in the Information Technology (IT) ministry K N Gupta said the signature would not be expensive and would be dependable and secure and no user can repudiate it at any level.

India being the 12th country obeying the IT policy in the world and having 4 million internet users, would open floodgates for the business and e-governance.

The Cyber Regulation Advisory Committee is in the process of finalising the regulations related to licensing of certifying authorities (CAs), database of CAs and various standards to be adhered to in the issue of digital signatures, encryption, cross certification with CAs in other countries, certification practice statement.

While application forms from aspiring CAs are being accepted from, the essence of the finalised regulations would be made available to applicants in the form of a booklet containing the Information Technology Act and Rules as well later this month.

The list of auditors is expected to be finalised within a week of starting the application process for appointment of CAs.

In a step towards opening up of internet telephony market in the country, Telecom Regulatory Authority of India (TRAI) said it would initiate the process of public consultation on the issue by year end.

TRAI stated that they had studied the worldwide markets and felt that it is impossible to stop technology from entering into the country. Hence they would start the consultation process to collect views on the issue by year end. As the first step towards inviting views on the matter, TRAI would organise a seminar on internet telephony between October and November this year and follow it up by public consultation.

TRAI would also consider the issue of internet telephony, currently banned in India which needed to be addressed for further growth of the domestic telecom market.

Earlier this year, the Economic Survey 2000-01 had identified internet telephony as a major bottleneck in the telecommunications sector. The survey had said that private sector participation in telecom services had failed to take off as a result of unaddressed policy issues like tariff rebalancing, and opening of internet telephony, and added that resolving the issues was key to giving fillip to the sector.

The Government may peg the basic Wireless in Local Loop (WiLL) spectrum commitment for fixed service providers at a modest 1.25 MHz. Such basic allocation will be well below the 5 MHz being demanded by landline operators planning to also offer limited mobility to their subscribers.

Department of Telecommunication (DoT) indicated that such allocations would be linked to an operator’s performance and network rollout obligation. DoT is finalising the WiLL spectrum allocation norms which will be announced shortly.

But sources familiar with the developments indicated that smaller spectrum chunks in the 1.25 MHz would be adequate for the `limited mobility’ services being planned by the basic operators. In the cities, limited mobility may be offered within a 3-5 km radius, while the coverage area could be as high as 20-25 km in rural telecom zones.

TRAI has pegged the WiLL spectrum ceiling at 5 MHz for each basic service provider. The total WiLL spectrum allocation has been fixed at 20 MHz per circle. Such spectrum will be in the frequency band 824-844 MHz paired with 869-889 MHz, which has been reserved for WiLL services under National Frequency Allocation Plan, 2000. It may be mentioned that basic spectrum allocation for each cellular (GSM) operator is 4.4 MHz, which can be raised to 6.25 MHz.

DoT, has dismissed the recent recommendation of the Core Group on Telecom Industry Association which had proposed WiLL spectrum be reserved for a maximum four basic operators.

The discussions between Bharat Sanchar Nigam Limited (BSNL) and private basic and cellular operators over Telecom Regulatory Authority of India’s (TRAI) directive to pass on the benefits of reduced long distance charges to private operators, remained inconclusive.

The legal battle began when TRAI directed BSNL to provide parity to private operators using BSNL network, after the corporation announced lowering of long distance tariff upto 200 kms while adjusting rentals throughout the country in January this year.

TDSAT had earlier stayed TRAI's directive asking BSNL to provide parity to private operators, pursuant to a challenge mounted by BSNL questioning TRAI’s jurisdiction to pass such a directive.

The Cellular Operators Association of India (COAI), said reduction in tariffs by BSNL was part of modifications in Telecom Tariff Order 1999, and it must be applicable to others. Therefore it is their contention that BSNL should not implement the reduced tariffs till the tribunal took a final decision.
BSNL, on other hand, argued that since TRAI had failed to intervene during stipulated reporting time of five days before announcing alternate tariff plan, there was no reason for them to accept the demand for going back to old rates pending the judgement on this issue.

The Telecom Dispute Settlement and Appellate Tribunal (TDSAT) declined to pass an interim order staying the WLL services offer by Basic service operators ("BSO"). However, TDSAT directed that the BSOs should intimate subscribers to WLL services that the service was subject to outcome of the tribunal decision.

The Telecom Regulatory Authority of India (TRAI) has the proposed Universal Service Obligations (USO) fund would be operational from April 1, 2002, to help the basic operators meet the rural telephony target.

TRAI had suggested to the Department of Telecom that the funds from USO fund was not meant just for Village Public Telephone and it could be used for setting up of public tele-info centres to provide broadband services to the common people at public places.

TRAI was making an effort to provide broadband to common man through such facilities which could be from 56 to 256 kbps, depending upon the need and user base.

After the proposed USO fund comes into being on April 1, 2001 within a period of two years up to six thousand such centres are expected to be set up on a short distance calling area concept.

The Department of Posts (DoP) will launch "direct-to-home" email services in 200 centres around the country next month by forging an alliance with a private internet service provider.

It will be a substitute for email. Those who don't have a PC at home can use post-offices, where PCs would be made available to them. The new initiative is a joint venture between the DoP and an ISP based in Andhra Pradesh and the target is to offer the services in 10,000 locations in the country.

The DoP would launch a web-based "track and trace system" by which the customers will be able to trace the DoP's premium products such as speed posts and express parcels sent within the country as well as abroad.

DoP on March 19, 2001launched a new initiative "Datapost 2001", a database of a million households, which would be compiled through a pre-designed questionnaire called "between us". Marketers can rent information specific to their businesses.

The Government invited bids from companies with a minimum net worth of Rs 2,500 crore to sell 25 per cent stake in Videsh Sanchar Nigam Ltd to a strategic partner.

Companies, joint ventures or consortia interested in participating in the proposed disinvestment should have a combined net worth of Rs 2,500 crore.

The net worth of only those promoters will be counted who have at least 10 per cent stake in the equity of their company, the bid document stated. The bid document inviting expression of interest said that the strategic partner selected may be required to make a public offer for further shares of VSNL, in accordance with the Securities and Exchange Board of India regulations.

In choosing between the prospective strategic partners, the Government will pay due attention inter-alia to the security requirements of the country, the document said. The Government currently holds 52.9 per cent in equity capital of VSNL. The interested parties have to submit the Expression of Interest (EOI) package by April 10. This will comprise of an EOI document, statement of legal capacity and a request for qualification.

Based on evaluation of the packages, the qualified parties will be allowed to participate in the subsequent selection process. The Government has also invited bids for appointment of an advisor to assist it in the disinvestment process. Earlier this month, the Cabinet Committee on Disinvestment had approved the process of disinvestment in VSNL.

The Reliance Group has decided to bid for a 25-per cent stake in Videsh Sanchar Nigam. It is considering a number of options including the formation of a consortium consisting of group companies Reliance Infocom and Reliance Industries.

Though the Reliance Group has recently said that all future investments in information technology and telecom will be through Reliance Infocom, the company does not have a net worth of Rs 2,500 crore as required by the Government's guidelines for the VSNL divestment.

Hence, RIL, which has a huge networth, could join hands with Reliance Infocom. There is also a possibility of Reliance Industries bidding alone.

However, the Reliance Group is also exploring the possibility of forming a joint venture with an external partner to participate in the bidding process.

The FDI norms in India allows foreign equity participation of up to 49 per cent in telecom operating companies. VSNL already has a foreign equity participation of 31 per cent through its GDR issue.

At present, the government's holding in VSNL is 52.97 per cent, which will come down to 26 per cent after the 25 per cent divestment to a strategic partner and 1.97 per cent to employees.

The strategic partner selected for the divestment process will also be required to make a public offer to acquire a further 20 per cent stake in VSNL, in accordance with the Securities and Exchange Board of India regulations.

The Reliance group's interest in VSNL stems from the fact that Reliance Infocom is in the middle of a $3 bn broadband network building exercise. The network will link 115 cities. The Infocom project includes investments in data centres and content related services. Infocom has recently applied for a domestic long distance licence. A stake in VSNL would be a natural extension.

The Central Government is planning to amend the Negotiable Instruments Acts 1881(NI Act) to introduce the use of new negotiable instruments - electronic cheques, truncation cheques and securitised certificates. A committee, headed by NV Deshpande, principal legal advisor to the Reserve Bank of India, is drafting the changes.

The decision to amend the NI Act follows the enactment of the Information Technology Act, which recognizes digital signatures. (Comment : The Information Technology Act had specifically excluded negotiable instruments from its purview. Hence, the introduction of new negotiable instruments, may also require amendment of the Information Technology Act if they are to avail of the benefits provided thereunder).

Electronic cheques will be stored in smart cards while truncation cheques or imaging of cheques will ensure faster clearance as an outstation cheque can be cleared once the image of the instrument is transmitted to the bank branch.

The physical delivery of cheques can follow at a later stage. This will revolutionize the payments system. Post amendment, the pass-through and pay-through receipts of securitised deals will be treated as negotiable instruments.

The amended NI Act will cover all debit transfers while the Reserve Bank of India's real time gross settlement (RTGS) systems would take care of all credit transfers.

The Government opened up voice mail and audiotex services to 100% foreign direct investments (FDI) without any restrictions in the form of license fee or entry fee for service providers.

Although 100% FDI had been allowed since the past few months, the latest announcement has abolished the annual fee and reduced the one time performance guarantee to Rs 300,000, making a licence for voicemail and audiotex cheaper by about 80 per cent.

The service area for licenses has been defined as the short distance charging area (sdca) on the basis of local dialing.

Any government or public service agency offering public utility services such as railway, broadcasting, news and media are permitted to provide Audiotex services without obtaining any license. The Government has also permitted Voice mail and Audiotex services to be provided as a value-added service by basic, cellular and cable service providers. However, the entry of private operators is subject to certain financial conditions.

Existing voice mail and audiotex services are allowed to migrate to a new licensing regime from April 1, 2001.

The Government has raised the Foreign Direct Investment (FDI) limit in Internet Service Providers (ISPs) with gateways, end to end bandwidth and radio paging segments to 74 per cent. Prior to this announcement, there was a 49 per cent limit on these segments.

Although, in August last year, the Government permitted 100 per cent FDI in the ISP segment, FDI was limited to 49% for ISPs which have their own international gateways.

The Secretary of the Department of Telecommunication has opposed this move. He pointed out that few countries have exceeded the FDI limit of 49 per cent, citing the examples of US, France and other Asian countries. He also pointed out that India has already exceeded the market access promised by it in telecom (25 per cent) under WTO.

Currently, 13 international gateways for internet services are operational in India.

The Telecom Regulatory Authority of India (TRAI) has directed Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) to extend concessional tariffs for intra-circle calls ranging between 50 to 200 km to all subscribers irrespective of the service provider.

On January 25, TRAI issued a directive to BSNL stating that the revised tariff structure should be made available to private telecom operators as well. Subsequently, TRAI had received a representation from private basic operators as well as cellular operators that they were not receiving the aforesaid benefit. BSNL’s contention was that the revised tariff structure could not be made available to private operators due to technical reasons.

TRAI has reconsidered the issues and with an intent of providing a level-playing field to all the operators directed BSNL to extend the benefits to all subscribers.

BSNL will implement the directives by February 20. The new lower tariffs become applicable from January 26.

The Government, last month spelt out rules for unrestricted entry of private firms in fixed-line telephony (Fixed Service Provider: FSPs). Moreover, it allowed FSPs to offer limited mobility to subscribers by the Wireless in Local Loop technology (WLL). WLL will enable basic telecom service providers to provide mobile telephone services in short distance areas to consumers at substantially lower costs.

Mobile phone firms have in the past paid up to Rs 7,300 crore for 8.8 Mhz of spectrum. However, their pleas for additional spectrum have been rejected. They are now in need of more spectrum immediately, and are entitled to 30 Mhz of precious spectrum being offered by FSPs absolutely free of cost as a result of WLL being permitted.

Cellular firms are concerned that the cheaper limited mobility service offered by FSPs could take away their customers. Hence, private cellular phone companies are applying for fixed-line licenses to take advantage of spectrum being offered free by the Government.

The TRAI is expected to give recommendations on paging services and implementation of the Universal Service Obligation (USO) for providing telecommunication services in the rural areas by the end of next month. Funds from the USO would be made available to the companies on the basis of the firms’ progress and fund requirements.

The Association of Basic Telecom Operators, however, strongly opposed any sharing in the existing tariff of Rs 1.20 saying it would eat into the fixed-line business.

The Information and Broadcasting ministry of India is in the process of amending the Cable Network regulation Act, 1995 to make conditional access mandatory. Industry analysts feel this would mark the onset pay television in India. Hence, broadcasters would be able to map out their subscriber base and specifically cater to their target audience. This would in turn, help broadcasters enhance and reinforce their subscription-based revenues. This has been a long-pending demand of the broadcasting industry. The ministry would make the necessary amendments in consultation with cable operators.

The revised draft Convergence Bill says that the Centre would be responsible for co-ordination with international agencies in matters relating to spectrum management and allocation of available spectrum for strategic and non-strategic or commercial purposes. The Centre will determine the class of persons or services who deserve preferential assignment of any frequency or spectrum by the commission.

The Centre shall establish a spectrum management committee with the Cabinet secretary as the chairman. The Centre shall also notify an officer spectrum manager to act as member-secretary of the committee.

The Communications Commission of India (CCI) shall be responsible for assignment of the non-strategic/commercial spectrum to various users, provided CCI has prior approval of the Spectrum Management Committee. Whenever CCI seeks allocation of additional spectrum for assignment (including in shared bands), it would have to be done in consultation with the spectrum manager. The schemes for assignment of the spectrum will be publicized by the CCI periodically.

The spectrum manager’s job would include co-ordination with international agencies for spectrum planning, use and management, assign frequencies to the Central and state governments — including defense and national security, allocate frequencies or band of frequencies including frequencies that are to be assigned by the CCI. He will also constantly review and make available as much spectrum as possible for assignment by CCI — both in the shared and exclusive brands, provided all requirements of government are met.

Besides this, the manager will monitor spectrum utilization including investigating and resolution of spectrum resolution.

Department of Telecommunication (DoT) had nominated the Centre for Development of Telematics for installation and monitoring equipment of all international gateways to be set up in the country. The equipment put a limit to transmission of internet-traffic and enabled security agencies to monitor the use of gateways. The capacity restriction of bandwidth for private gateways had been set, as DoTs telecom equipment could monitor traffic only up to 8 mbps.

In an attempt to increase the supply of bandwidth in the country, the Department of Telecom DoT has permitted all private internet service providers (ISPs)t o apply for bandwidth, over and above the permissible limit of 8 mbps per gateway.

All ISPs, who have received approvals for their gateways and have an in-principle agreement with the department of telecom, are eligible to apply for more bandwidth, following this development. The decision would accelerate the supply of bandwidth in India following the telecom departments' decision to relax the control they had on private gateways.

The government last week allowed basic operators to offer mobile telephony (Wireless in a Local Loop) within short distance charging area equivalent to a local call area at a rate of Rs 1.20 for a three minute outgoing call with free incoming calls.

TELECOM Dispute Settlement Appellate Tribunal on Monday declined to grant an injunction against the aforesaid government order. The government’s contention is that the tribunal’ is not vested with the jurisdictional power to hear the case. Cellular Operators Association India have also objected to the recommendations made by TRAI, as allowing limited mobility would be in breach of existing contractual licenses given to cellular operators.

On the Republic Day of the nation, the Department of Telecommunications ("DoT") has made announcements of sweeping liberalization measures with regard to the telecom services. Following are the key provisions of the Guidelines :

The basic telecom services sector has been thrown open and all restrictions on the number of operators have been removed.

Basic service operators can provide all types of services except those for which a separate licence is required. Operators in basic telecom services can now provide limited mobility services within the local area i.e. Short Distance Charging Area (SDCA) in which the subscriber is registered.

The Basic service operator's are required to charge the tariff (including for WLL subscribers) for services as per TRAI Tariff orders issued from time to time. Presently incoming calls by WLL subscribers may be charged @Rs.1.20 per unit call, while outgoing calls will be charged @ Rs. 2.70 per unit call. Rental for WLL subscribers is yet to be fixed by TRAI.

The Guidelines prescribe norms as regards the networth of applicants, the financial criteria to be met by applicants including bank guarantees and performance guarantees, entry fee, shareholders track record, etc.

The licence fee to be paid by the basic operators has been fixed at the rate of 12%, 10% & 8% respectively of the annual gross revenue for the three categories of telecom circles A, B & C, respectively. In addition, a revenue share of 2% of Annual Gross Revenue earned from WLL subscribers shall be levied as spectrum charge.

For wireless operations in subscriber access network, the frequencies shall be allocated by WPC Wing from the designated bands prescribed in National Frequency Allocation Plan - 2000. (NFAP-2000).

Cellular Mobile Service Operators may also be permitted to provide fixed phones based on their GSM network infrastructure in the licensed Service Area. (Comment: It is not clear from the text of the Guidelines if this is permissible immediately. It appears that a further notification or an amendment to existing licence agreements would be required.)

Direct interconnectivity among all service providers in a service area is permitted. The number of points of interconnection between cellular mobile service operators and basic service operators shall be as per mutual agreement subject to compliance of prevailing determination, regulation or direction issued by TRAI under the TRAI Act 1997. (Comment: Until now, all operators were required to go through the DoT network to ensure interconnection and have expressed concern about the same. The provision of direct interconnection would enable better services. )

The Government, in the latter half of last year had announced a new category of telecommunications service providers known as Infrastructure Providers Category-II ("IP-II"), who would require to obtain a non-exclusive licence from the DoT prior to commencement of any operations to establish, lease, rent out or sell digital transmission capacity ( end - to- end bandwidth ) capable of carrying a message. At that time, DoT had also indicated that:-

DoT has notified the finalized norms for such IP-II licensees, based on the recommendations of Telecom Regulatory Authority of India ("TRAI"), and the draft Licence Agreement for grant of such licences.

TRAI has recommended that both cellular and basic service providers would pay spectrum charges on par for Circle A. These have been fixed at 2% of revenues for 4.4 Mhz and 3% for 6.2 Mhz.

The Telecom Commission, is expected to shortly recommend the reduction in the quantum of revenues shared by cellular operators with the government from 17 per cent to 12 per cent and to accept the recommendations of the TRAI regarding spectrum charges, to bring both the cellular and basic operators on par.

Source: Economic Times, January 25, 2001; Anand Bazaar Patrika, January 26, 2001

TRAI directive to cellular operators to compensate subscribers and challenge by cellular operators.

TRAI has ruled that the cellular operators had not passed on the full cost-benefits of shifting from a fixed license fee regime to a revenue-sharing regime . TRAI has ruled that although the tariffs had been partially cut by the cellular operators, the monthly rentals to customers has been increased. Hence, the TRAI has directed cellular operators to pay compensation to users for the period between August 1999 and January 2000, amounting to Rs 4000 Million.

The cellular operators however contend that accumulated losses piled up over the last five to seven years are substantial and do not justify the compensation. Hence, the Cellular Operators Association of India has decided to challenge the above TRAI directive.

The Communications Bill ("Bill") aimed at regulating the carriage and content of communications, has been approved by the Group of Ministers appointed to review the same.

The draft Bill prepared by Mr. Nariman, envisages the setting up of the Communications Commission of India ("CCI") which would be vested with the power to grant licenses, manage spectrum, resolve disputes, as well as lay down conditions for fair equitable and non-discriminatory access to network facility and service. It would have the powers as vested in a civil court under the Court of Civil procedure, 1908.

The draft consisting of about 100 clauses is expected to be released for public discussion shortly. The Bill would then be introduced in the Parliament.

The Radio, Television and Video Cassette Recorder Set Rules, 1997 has been amended through a gazette notification. The notification removes the prohibition that was in force, which restricted the use of KU band frequency operating in the bandwidth of 4800 mhz.

The Government had earlier announced its decision to permit broadcasting through Ku Band. However, the presence of an earlier notification banning the use of Ku Band raised questions of legality, which are now sought to be addressed by the latest notification.

The Telecom Regulatory Authority Of India (TRAI) has given recommendations on the entry of basic telecom service providers into limited mobile services based on Wireless In Local Loop (WLL) technology to the Department of Telecommunications (DoT). The DoT has accepted the same and the Telecom Commission will meet on January 24, 2001 to formulate the guidelines. WLL will enable basic telecom service providers to provide mobile telephone services in local areas to consumers at substantially lower costs.

As per the present plans of frequency allocation, the basic service operators are not to be allotted any frequency from the GSM band (which is allotted to cellular service operators).

Cellular mobile service operators apprehend a loss of market, at least in the immediate run. Moreover cellular operators believe that it violates their basic license agreement by allowing basic service operators "backdoor entry" in the mobile services sector.

Internet Service providers (ISPs) who have their own satellite based international internet gateways, may now offer bandwidth to other ISPs. Prior to this, ISPs setting international internet gateways using submarine cables, alone were permitted to offer their international bandwidth to other ISPs. This will give ISPs a choice of multiple international gateways.

The Ministry of Communications has announced guidelines for the entry of a fourth cellular operator (in addition to the existing two private operators and the Department of Telecommunications) in cellular territory circles.

The license fee for the fourth cell operator will be in two tranches- an upfront license entry which will be the same as the highest bid, and sharing of 17% of the operator’s annual gross revenue. Existing cellular operators will not be allowed to bid for the fourth license in areas that they already have an existing licenses.

There will be a pre-qualification round to verify the bidders to meet the eligibility criteria and there will be three rounds of financial bidding. The highest price quoted in the first bidding will be the reserve price for the second round. The licenses are technology neutral.

The Guidelines permit the transfer of such licenses with the written consent of the Department of Telecommunications ("DOT") who will ensure that the buyers meet the criteria pertaining to the net worth and, paid up equity and other conditions. (Comment : This permissive provision for transferability is interesting as it was not present in the earlier licenses nor in the New Telecom Policy 1999. However, this provision would be beneficial to the industry in view of active merger and acquisition activity in this sector in India. It remains to be seen whether earlier cellular licensees would have the benefit of this beneficial provision)

The bidder company should have a combined net worth of Rs 1000 Million for category A and paid up capital of 10 crore. Category A comprises of Mumbai, Calcutta, Delhi, Chennai, Andhra, Karnataka, Gujarat, Maharashtra, and Tamil Nadu. The bidder company should have a combined net worth for category B of Rs 500 Million and paid up capital of 5 crores. Category B comprises of Harayana, Kerala, MP, Punjab, Rajasthan, UP, and West Bengal. The net worth for category C 30 crores and paid up capital of 2 crores. Category C comprises of Andaman & Nicobar, Bihar, HP, and Orissa.

The licenses will be issued for twenty years and will be extendable for another ten years. The total foreign equity will be restricted to 49%.

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