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Key changes in telecom policy: spectrum audit, easier mergers

Posted by on April 12, 2011 0 Comment

The telecom sector, which has been hit hard recently by the 2G spectrum allocation controversy, is to see major changes in policy. On Monday, communications minister Kapil Sibal announced the basic contours of the new telecom policy, to be implemented in the coming months, which will include for the first time audit of spectrum held

by telecom players, spectrum sharing, reduction in the tenure of renewed telecom licences from 20 years to 10 years, and liberalising of merger and acquisition norms.

The minister also announced the formation of a committee to draft the National Spectrum Act, which will be headed by retired judge Shivraj V. Patil.

The government will decide in the next few days if Trai, the telecom regulator, or the Comptroller and Auditor-General of India will be entrusted with the task of auditing spectrum usage by telecom companies. Rival companies have in the past accused each other of spectrum hoarding and not using this scarce resource in an efficient manner. The ministry will review the existing criteria, under which additional spectrum is granted after a mobile operator acquires a specific number of subscribers. “The spectrum allocation may no longer be subscriber linked,” said telecom secretary R. Chandrashekhar.

The department of telecom will also review the existing “rollout” obligations of new telecom companies, which it considers has got outdated. Under the current norms, mobile operators are required to cover at least 10 per cent of the district headquarters in each circle within 12 months of the date of award of the licence.

“This is not relevant in today’s context. Because 10 per cent of district headquarters in case of a middle-sized state will mean two districts. Somebody can put one BTS (mobile tower) in two towns (to meet the current rollout criteria). This is hardly a rollout,” said Mr Chandrashekhar.

The ministry has already announced that in future 2G spectrum will not come bundled with telecom licences and that operators would have to pay market-driven prices for spectrum. The government has decided that while it will liberalise the mergers and acquisitions norms, the number of operators will not be allowed to fall below six in any state, said Mr Sibal. There are now over a dozen mobile operators in a circle. The reason for not allowing the number of operators in a circle to fall below six could be that the government wants to have a certain degree of competition which benefits consumers as tariffs remain low and the service quality is good.

In a setback to old telecom companies like Airtel, whose licence in some circles is coming up for renewal in 2014, Mr Sibal said such licences will now be renewed only for 10 years, instead of the existing 20 years. These companies will need to apply for renewal at least 30 months before the date of expiry of their licences so that the department of telecom has sufficient time to set up policy framework. These firms are likely to pay a high market rate for spectrum when they renew their licences.

The telecom secretary clarified, however, that such measures will not increase call rates for subscribers even when costs go up for the telecom companies. “There are so many other things. There are hundreds of costs which a company has (to bear). It is not that one particular cost is suddenly going to have an impact,” said Mr Chandrashekhar.

He said the Telecom Commission was likely to look into all these issues this month and its decision was expected in three to four months. There was a proposal for four types of licences to replace the existing Unified Access Service Licence system. These will be the unified licence, class licence, licence through authorisation, and broadcasting licence. There will also be a uniform licence fee in future, the telecom secretary added. Asian Age

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