Convergence Plus
Policy & Regulation
Wednesday, August 23, 2017
Telecom body alleges misinformation on IUC

Trai may begin consultations on next round of spectrum auctions in SeptemberTrai is reportedly aiming to conclude the IUC review soon and will come out with a new framework
The Cellular Operators Association of India (COAI) has said entities seeking implementation of the ‘bill and keep’ (BAK) method for interconnections between operator systems are “distorting facts”. They’ve cited an affidavit given by the Telecom Regulatory Authority of India (Trai) to the Supreme Court (SC) in 2011. That affidavit, it has said, listed symmetry of traffic as a pre-condition to implement a BAK regime. The Mukesh Ambani-owned Reliance Jio had alleged the top three operators had benefited by at least Rs 1 lakh crore due to non-implementation of BAK.

During an open house discussion on the interconnection usage charge (IUC) on July 20, many participants had claimed that in 2011, Trai had said it would implement the BAK regime in two years from 2011. IUC is a regulation made by Trai in which phone companies pay one another for using each other’s network to complete calls.

“Treating this affidavit that has been filed in an ongoing litigation as equivalent to a regulation, these participants have been demanding implementation of BAK,” COAI said in a letter to Trai.

The regulator, it said, had notified IUC regulations in March 2009, fixing the mobile termination charge (MTC) at 20p a minute. The regulations were challenged by telecom companies at the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The latter in September 2010 asked Trai to reconsider the matter afresh and to complete the consultation process in a time-bound manner, so that new IUC charges could be implemented by January 1, 2011.

However, Trai filed an appeal in the SC against the TDSAT order in September 2010. The SC in July 2011 directed Trai to calculate and resubmit the MTC, with and without inclusion of capex/capital cost. Subsequently, the COAI letter said, Trai gave an affidavit in October 2011, with calculations on MTC using different methodologies.

Later, Trai sought the SC’s permission to notify the regulations with the rates contained in the affidavit. However, the SC dismissed the application and the said petition was still pending with the SC, said COAI. Their letter says Trai initiated a consultation in 2014 to review IUC and in February 2015, the MTC was fixed at 14p per minute. “During formation of IUC regulations in 2015, Trai deliberated on feasibility of implementation of the BAK regime at length and consequently rejected the implementation due to the reason that the level of imbalance/asymmetry did not fulfill the basic requirement of symmetry before adopting a BAK regime,” it said.

Trai is reportedly aiming to conclude the IUC review soon and will come out with a new framework. The issue has been a bone of contention between incumbents and newcomer Jio. The existing telcos want fully allocated cost-based IUC; Jio and Reliance Communications (a separate group) propose the BAK model, which means zero charges. (Source: Business Standard)

Trai may begin consultations on next round of spectrum auctions in September

Trai may begin consultations on next round of spectrum auctions in SeptemberThe Telecom Regulatory Authority of India may begin consultations on next round of spectrum auctions in September, although it's unlikely the government will sell airwaves in this financial year, given high level of debt and competition in the industry. Consultations could stretch out to late this year or early next, rendering any sale in FY18 a remote possibility, going by the time taken for previous auctions. "By September, the consultation paper on auctions should be out," a Trai official said, asking not to be identified. "When the auctions can be held is for the telecom department to decide."

Trai chairman RS Sharma told ET in May that he planned to submit recommendations to the Department of Telecom by December and although there was financial stress in the sector, the consultation process would be carried out and completed. Trai officials said its suggestions could include the schedule for the next spectrum sale.

The previous spectrum auction took place about 10 months after Trai gave its first set of recommendations on base prices in January 2016. Final recommendations were in April and approved by the Telecom Commission in the same month. The notice inviting applications, the formal document that lays down the auction timeline, came out in August and the sale started in October that year.

DoT had asked Trai in April to recommend reserve prices in a range of 4G bands and for spectrum for 5G services, which could be making their debut.

However, the telecom industry wants the auction only in late 2018. Analysts said there is no appetite for fresh spectrum as telecom companies, burdened with debt estimated by banks at Rs 7.29 lakh crore, are in the midst of a rate war and are in no financial position to bid for expensive airwaves.

Banks also fear defaults by telcos. Reliance Communications has already been forced into debt restructuring. The government has set up an inter-ministerial group to look at ways of easing the financial stress in the sector and the panel's report is expected this month.

DoT, too, has told the finance ministry that it does not expect telcos to bid for airwaves this year and has asked it to lower its revenue expectations from the sector by 37% to about Rs 29,500 crore for this financial year.

All major telcos, including market leader Bharti AirtelBSE 0.76 %, Reliance Jio Infocomm, Vodafone India and Idea CellularBSE 0.28 %, bought up the airwaves they needed at the October sale.

The response to the 2016 auction was muted because of high spectrum costs. (Source: Economic Times)

Trai seeks reduction in GST on telecom to 5%

Trai seeks reduction in GST on telecom to 5%Telecom Regulatory Authority of India (Trai) has batted in favour of telecom operators by suggesting a lower licence fee, spectrum usage charge and a goods and service tax (GST) rate of 5%. “DoT may take up with Ministry of Finance the issue of reduction in GST rate from 18% to flat 5% by declaring telecom sector as core infrastructure industry and economy enabler in India,” Trai said in a letter to Department of Telecommunications (DoT) secretary Aruna Sundarajan.Such an effort would make telecom services affordable and facilitate fast digitisation of the economy as well as the proliferation of telecom services in rural and remote areas to achieve the ‘Digital India’ mission.

“Digital India is largely dependent on affordability and ubiquitous availability of the telecom services. It certainly is not a luxury. Telecom sector is backbone of the economy and capable of contributing through multiplier effect,” Trai said in the letter seen by DNA Money.
An inter-ministerial group has been formed to look into the financial stresses faced by the operators and suggest a solution.
As per industry estimates, total debt for the sector is at around Rs 4.5 lakh crore. IMG already had a round of discussion with all the operators and will come out with its decision soon.

Trai also recommended that spectrum usage charge (SUC) for all auctioned airwave should be at a flat rate of 3% of adjusted gross revenue (AGR) of wireless services and for Broadband Wireless Access (BWA).

The letter has come after the meeting of all telecom CEOs with Trai on June 15.

On the relaxation in pay-out on spectrum auctioned price, Trai recommended that 10% of the bid amount can be made as initial payment from the forthcoming auction onward and the balance can be made in 18 years (18 equal annual installments with interest).
The regulator had, in January 2016, also recommended that the balance payment period for instalments of auctioned radio waves be increased to 18 years.

“On several other issues like levies of licence fee, Universal Service Obligation (USO) Fund, spectrum charges, promotion of wireline infrastructure, etc, the Authority in the past has already given its recommendations to the government,” Trai said in the letter. (Source: DNA)

Telecom sector woes on AGR: Govt awaits 'favourable' SC verdict

Telecom sector woes on AGR: Govt awaits 'favourable' SC verdictTelecom companies with a licence need to pay about 8 per cent of their total revenue to government
To get the telecom sector a stable financial base, the government is waiting for a favourable verdict from the Supreme Court on the longest dispute in the sector, instead of tweaking interconnect charges or setting tariff rules, according to a top bureaucrat. As telecom minister Manoj Sinha is set to meet telecom company chiefs this week, the officials in the know said none of the options on the table, including changes in interconnect charges and tweaking of the tariff regime, would work without settling the adjusted gross revenue (AGR) controversy.

They are optimistic it can happen as the Telecom Regulatory Authority of India (Trai) and the department of telecommunications (DoT) are now working together to resolve this knot.

While AGR is administered by DoT, spectrum and tariffs are set by Trai and each blames the other for the impasse the sector finds itself in. Settling AGR is also convenient while setting tariff rules that Trai has proposed or demanding a softer reserve price for airwaves are politically difficult calls. Trai incidentally has made a presentation to the government on changing the tariff rules for the sector.

It has also helped that the Prime Minister’s Office has asked the two to ensure a viable and long term solution to the sector’s financial distress is hammered out. For the PMO this is urgent as the Digital India framework would depend on how the telecom companies perform. It is also linked to the proposed auction of 5G airwaves.

The DoT is now headed by Aruna Sundararajan, who is holding it as an additional charge. Interestingly, the inter-secretary panel, the telecom commission which takes the final call on most policy issues includes, Tapan Ray, who has joined as secretary in the department of economic affairs, recently. The one holding the longest tenure at the policy making levels now is Trai Chairman R S Sharma.

The AGR problem has a long history. It is about what constitutes gross revenue for a telecom company. In 11 years it has travelled through all courts in the country, including the Supreme Court, several high courts — the latest one being distant Tripura — to the telecom appellate body, the Telecom Disputes Settlement and Appellate Tribunal. It is again pending in the Supreme Court, expected to come up after the vacations.

Telecom companies with a licence need to pay about 8 per cent of their total revenue to the government and that includes all the lines of business they may be involved in. It is in addition to the price they pay to buy spectrum, their usage and others but they have no ability to partner with any content player to earn additional revenue. A company offering the same bouquet of services but as a non-licensee freely replicates the same services. This means the latter can offer his consumers both voice and data services at a far less cost. The former regime, companies say, militates against fair play.

DoT has long held that the simplicity of the AGR regime has ensured no disputes about revenue payable from the sector, something which has been the bane for several sectors. Also, it has argued that the current stress in the sector has little to do with AGR per se and more with the high reserve price set for spectrum. The government has so far collected over Rs 3.6 lakh crore from the successive rounds of auctions which has been close to 25 per cent of its total non-tax revenue in the past seven years, a report by rating agency Icra notes. To make life easier for the telecom companies, DoT has suggested Trai could consider a softer reserve price in the ensuing auctions.

Sharma has suggested that AGR rules should be eased to carve out non-telecom revenues from the calculation. The regulator in a consultation paper said receipts from USO Fund, meant to finance expansion of rural telephony, capital gains from sale of fixed assets and securities, bad debts and dividend and interest income, should also be out of the revenue base. It had argued these will still not make the calculation of AGR difficult, something that DoT has repeatedly argued against.

Telecom sector analyst Mahesh Uppal says linkage of the fees payable by the telecom companies with realistic calculation of yearly revenues will reduce dependence on high reserve prices. “This will help design better spectrum auctions,” he adds. (Source: Business Standard)

Govt considers Apple’s request to allow after-sale servicing of refurbished phones

Govt considers Apple’s request to allow after-sale servicing of refurbished phonesUS-based mobile phone manufacturer Apple’s plea to be allowed to import refurbished phones has not been entirely rejected by the government. While the Department of Industrial Policy and Promotion (DIPP) has refused to allow the company to sell its second-hand phones in the country, the government is still open to its request of allowing used handsets to be imported to meet Apple’s after-sale service contract. “We are still looking at their proposal of being allowed to import refurbished phones to meet their after-sale service requirements. The discussions are still on in that matter,” a DIPP official told BusinessLine.

Allowing Apple to import its used phones into the country for meeting after-sale services requirement would essentially mean that the company be permitted to use the parts of such phones to service the i-phones sold in the country.

“The DIPP has received such requests before for products such as photocopy machines and printers, where foreign companies have proposed that they be allowed to import second-hand parts to service products sold in the country,” said another official. “However, a positive decision has not been taken on any of the proposals yet.”

The policy uncertainties notwithstanding, Apple started manufacturing its devices in India last week, at its Taiwanese contract manufacturing partner Wistron’s plant, in Bengaluru. (Source: The Hindu Businessline)

Small e-comm vendors will have to pay GST upfront

Small e-comm vendors will have to pay GST upfrontBudget hotels and small-scale vendors registered on ecommerce sites such as Airbnb, Flipkart and Amazon will have to pay tax upfront under the goods and services tax (GST) regime when they receive payments, even if they fall in the exempted category. That's because all vendors registered on such sites will be liable to 1 per cent tax collected at source. GST is on its way to being rolled out on July 1 with most goods and services having been slotted into their respective slabs by GST Council last week. The objective to impose 1 per cent on these sites is to capture all transactions in the ecommerce space and not allow anything to slip through the cracks.

All ecommerce players are bound by law to deduct tax from registered vendors whenever there is a sale, irrespective of whether the seller is liable to pay tax or not. They will withhold 1 per cent whenever the payment is made to the seller. The GST Council has decided to exempt hotels with room tariffs up to Rs 1,000 per day as also a number of household goods.

Those below a turnover threshold of Rs 20 lakh are also exempted under GST. They will have to claim refunds subsequently from the tax department. "If anyone does not have a liability, they can claim a refund," said an official.

"As very few sellers fall within the Rs 20 lakh bracket this is not a big worry for us. We have also welcomed the tax rate. The areas which need clarification are what happens in case of a return. Also, stock transfer is a matter of concern for us as," said a spokesperson of the All India Online Vendors' Association (AIOVA), a group of 2,000 sellers.

Tax experts said this would put small vendors at a disadvantage as their working capital will get blocked.

"In transactions through an ecommerce operator, the compliance shall increase in the GST regime, more so for small service providers," said Bipin Sapra, partner, EY. Sapra said vendors will have to get registered to claim refunds of the tax collected at source by the ecommerce operator. (Source: Economic Times)

Trai asks Telecom Department to 'revisit' Right of Way rules

Trai asks Telecom Department to 'revisit' Right of Way rulesThe telecom regulator has asked the telecom department (DoT) to ‘revisit’ its Right of Way (RoW) rules whose terms imply tower companies such as Bharti Infratel, Indus Towers and American Tower Corp are excluded from seeking benefits under the rules. It warned that such an exclusion would lead to a slowdown in tower installations, hurting quality of services. “Exclusion of IP-1s (infrastructure providers) from the said (RoW) rules will not only affect provisioning of duct and optical fibre cable (OFC) but will also result in slowdown of tower installation,” Sudhir Gupta, secretary at the Telecom Regulatory Authority of India (Trai), wrote in a recent letter to the DoT secretary, a copy of which was reviewed by ET.

The government, in its Right of Way (RoW) policy unveiled on November 15 last year, allowed only a ‘telecom service licensee’ to seek Right of Way. With this, telecom infrastructure providers such as Indus Towers, Bharti Infratel, American Tower Corp (ATC), Tower Vision and GTL Infrastructure, which deploy mobile telephony towers for licensed telecom service providers, were excluded from seeking RoW.“The infrastructure providers are registered with DoT and provide telecom infrastructure to only telecom service provider.

The IP-1s have played a pivotal role as far as provisioning of passive infrastructure is concerned,” Gupta said. Citing data from Towers and Infrastructure Providers Association (Taipa), Gupta added that the tower companies have installed more than 4.5 lakh towers and nearly 15 lakh base transceiver stations, which is increasing at 5% on-year. Taipa represents telecom tower companies.

“Keeping the above in mind, the Authority is of the view that there is an imminent need to revisit the RoW rules and IP-1s should be made eligible to seek/avail Right of Way facility/permisision,” the Trai secretary said. Telecom tower companies have been demanding inclusion in RoW policy, and have made several submissions to the government.

Taipa director general TR Dua told ET that IP-1s are key players in implementing the government’s flagship initiatives such as Digital India and Smart Cities as the tower companies can significantly accelerate telecom infrastructure rollout. “The exclusion of IP-1s from the rules is arbitrary and retrograde and will lead to delay in rollout of telecom infrastructure across the country.

Further, this is seriously impeding the future rollout of the telecom infrastructure, besides effecting the investment in telecom infrastructure sector. This, further, impacts financial health of infrastructure providers,” Dua said.

The infrastructure provider (IP) industry that has invested `2.5 lakh crore in the country was created in 2000 and is registered with the DoT for implementation, maintenance and leasing of passive infrastructure— mobile towers and fibre-based networks—for telcos catering to 1.1 billion Indians. The development comes at a time when infrastructure firms too are undergoing massive consolidation in tandem with the service industry, which is operating under intense financial pressure amid amid drop in revenues following Reliance Jio’s foray in September 2016. In 2016, Boston-based ATC acquired a controlling stake in Kolkata based Srei Infrastructure-promoted Viom Networks at Rs.7,635 crore, while Reliance Communications is selling a controlling stake in its tower unit to Canada’s Brookfield. (Source: Economic Times)

Airtel, Jio spar over time taken to comply with Trai order

Airtel, Jio spar over time taken to comply with Trai orderThe conflict between Bharti AirtelBSE -0.15 % and Reliance Jio Infocomm heated up as the country’s no. 1 telco accused its rival of violating the Telecom Regulatory Authority of India (Trai) order to stop the Summer Surprise offer and urged the watchdog to take “suitable action.”

Newcomer Jio in turn pointed to its April 6 statement that said the telco would comply with the regulator’s directive and is in the process of withdrawing the Summer Surprise offer as soon as it is “operationally feasible.”

Bharti AirtelBSE -0.15 % said the new entrant should have stopped the offer immediately. “We are surprised that Reliance Jio is openly continuing with its Summer Special offer despite the same being declared ab initio void by the Trai,” a Bharti Airtel spokesperson told ET in an email on Sunday. “In addition, Reliance Jio is running an aggressive campaign via social media and on ground as well as digital flyers encouraging customers and channel partners to subscribe and recharge under the scheme.”

The company, which kicked off commercial services in September, was in breach of the regulator’s instruction, Bharti said. “This is a flagrant violation of Trai’s unambiguous directive and it is clear the extension is invalid for all customers who have recharged after the regulatory order came into effect,” Bharti said. “We are sure the honorable regulator will take suitable action against this violation.”

Jio, while agreeing to comply with the order, has maintained that it’s broken no laws. “All the customers who have subscribed to Jio Summer Surprise offer prior to its discontinuation will remain eligible for the offer,” Jio reiterated on Sunday.

“There is no reason, even technical, why Jio’s Summer Surprise could not have been stopped immediately, post the Trai order,” said a top executive at one of India’s largest telcos.

Several retailers in Mumbai and Delhi told ET that Sunday may be the last day for availing of the offer but were unsure if it wouldn’t be available Monday. At stake are significant numbers of people Jio wants to add to its 72 million user base. Incumbents meanwhile want Jio to start charging for services as soon as possible to allow them to draw up pricing strategies to protect their user base.

Jio’s rivals haven’t decided on making an official complaint to Trai, which said Summer Surprise offer did not fit into “regulatory framework.” It had also said Jio’s explanations hadn’t been satisfactory.

Vodafone India and Idea CellularBSE 0.40 % didn’t respond to emailed queries. Trai had said on April 7 that Jio will stop the offer but since it’s a “large network, it takes some time. We are saying to stop it in a shortest possible time and it can be few hours, a day or a day and half but it can’t be April 15.”

Rajan Mathews, director general of the Cellular Operations Association of India (COAI), declined to comment specifically on the issue.

“If there are loopholes (in Trai’s order), then it is for Trai, as a vigilant regulator, to be aware of these and identify them and close the loopholes immediately,” said Mathews. “Those who become aware of these loopholes, should in turn, inform the regulatory authority, with the hope that it will then act to close these loopholes.”

Even if the offer is withdrawn a few days before April 15, Jio may still emerge the winner, analysts said. Assuming that Jio takes three-four days to alert its distributors, channels, partners and the public on the stoppage, that would still give it 10 days out of the 15 that were planned for the offer.

Early closure will probably lead to a rush of people wanting to sign up before the end.

Jio’s two successive free offers that ended March 31have damaged incumbents, which have been forced to cut voice and data rates sharply while needing to invest in capital expenditure, hurting revenue and profitability. Industry debt has ballooned to nearly Rs 4.90 lakh crore. The financial stress, the government has said, has eroded revenue from licence fees and spectrum usage charges.

The legality of Jio’s offers and Trai’s decision to clear them are being challenged in the high court and the telecom tribunal, which has asked the regulator to revisit its decision. Jio has maintained all its plans are in line with the rules. (Source: Economic Times)

Telecom Coordination Committee to Redress Mobile Tower Grievances in Gurugram

Telecom Coordination Committee to Redress Mobile Tower Grievances in GurugramA city-level 'Telecom Coordination Committee' would be set up soon to redress grievances related to mobile phone towers in Gurugram, a senior civic official said today. The committee would be constituted to get levels of EMF (Electromagnetic Field) radiation from such towers checked by Telecom Enforcement, Resource and Monitoring (TERM) cells within one week of receipt of complaint.

"A City-level Telecom Coordination Committee will be constituted to get levels of EMF radiation from such towers checked..," said Commissioner, Gurugram Municipal Corporation, V Umashankar.

This was divulged by the official during an awareness programme organised by Department of Telecommunications, Central Government in Gurugram, a press release said. (Source: NDTV)

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