Reforms 2.0: Review telecom licensing norms, say experts

The industry has long been demanding that the levies on the industry be reduced. Currently, the various levies account for 30% of the total revenues of the operators.

Further, the industry is also expecting a cut in GST rate of 18% as telecommunication is an essential service.
Further, the industry is also expecting a cut in GST rate of 18% as telecommunication is an essential service.

Reduction in spectrum pricing, rationalisation of levies and restructuring of the licensing regime are the three key areas flagged by sector experts for the government to consider as part of the second round of telecom reforms.

Announcing a revival package for the telecom sector on September 15, which entailed providing cash flow relief to the telecom operators as well as addressing some structural issues, telecom and IT minister Ashwini Vaishnaw had said the government will come out with a second set of reforms as well.

The Telecom Regulatory Authority of India (Trai) has recently come out with a consultation paper on spectrum pricing for auctions next year. The paper also aims to relook at various reform measures associated with upfront payment to be made by the operators for spectrum acquired in auctions, the moratorium period, the number of installments for deferred payment, and spectrum caps. Areas like block size, spectrum surrender and spectrum assignment for private networks will also be analysed in a fresh perspective.

The industry has long been demanding that the levies on the industry be reduced. Currently, the various levies account for 30% of the total revenues of the operators.

“In the next steps, we suggest the government touches upon important aspects such as spectrum pricing and GST (goods and services tax). We are in constant dialogue with the government for the reduction of spectrum prices since they need to be seen as a bundle, which means that access and back-haul are given to us as one,” SP Kochhar, director-general, Cellular Operators Association of India (COAI) said.

“The government’s reforms and relief measures introduced this year is a welcome first step, helping to provide clarity on various aspects. However, more needs to be done to restore the sector’s viability. Currently, regulatory levies and taxes in the Indian telecommunications sector is approximately 30% of revenues, which is highest in the world. Rationalisation of licence fee is necessary, including reducing universal service obligation fund (USOF) levies as approximately 49% of the fund is unutilised,” Prashant Singhal, emerging markets, technology, media, telecom (TMT) leader, EY, said.

Further, the industry is also expecting a cut in GST rate of 18% as telecommunication is an essential service.

Another key area is around the regulatory regime for the telecom sector. According to Mahesh Uppal, director, Com First (India), the telecom operator-centred approach to regulation must be abandoned as times have changed and traditional phone calls and SMSes have been replaced with internet-based services of WhatsApp, Skype, Zoom etc. “While the telcos are still crucial as providers of networks, their role as service providers has shrunk. While paying for scarce spectrum makes sense, licence fees and spectrum usage charges make little sense. Continuing with these levies creates the bogey of ‘same service, same rule’ which has created opposition to popular and essential OTT services,” Uppal said.

He further said revenue sharing is a flawed model for setting government levies. “This means that any effort to incentivise any services say satellite service or rural services, is seen as a loss to the government exchequer and discourages bureaucrats from reducing regulatory burdens,” Uppal added.

Another aspect is around unbundling of licensing regime as suggested by Trai. “As in other advanced regimes like EU, to follow a system of permissions and registrations for all telecom services and possibly elaborate licences only for core networks that use licensed spectrum,” TV Ramachandran, president, Broadband India Forum, said.

Ramachandran said access spectrum, which is a scarce national resource, must be priced rationally and used optimally, and should not be wasted without being used. License fee should cover only cost of administration and regulation, and hence, not exceed 1% of AGR.

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