BUSINESS ENVIRONEMENT- IV

Telecommunication:

I- Regulator: Telecom Regulatory Authority of India (TRAI)

II- Licenses: Telecom Regulatory Authority of India(TRAI) Act, 1997 and DoT

Basic Reading : https://trai.gov.in/sites/default/files/CP_13042004.pdf

https://www.trai.gov.in/release-publication/reports/study-paper

https://www.sciencedirect.com/science/article/pii/S0970389619301570

https://www.trai.gov.in/notifications/press-release/trai-issues-telecomtariff-66th-
amendment-order-2022

Introduction

India is currently the world’s second-largest telecommunications market with a subscriber

base of 1.20 billion and has registered strong growth in the past decade and a half.

▪ The number of telephone subscribers in India was 1,181.13 million at the end of
Sep-23.
▪ Total number of Internet subscribers is 918.19 million at the end of Sep-23. Out of
918.19 million internet subscribers, number of Wired Internet subscribers are
37.11 million and number of Wireless Internet subscribers are 881.08 million.
▪ Contribution of mobile phone industry in India contributed 6.5% to the country's
GDP in 2022-23
▪ The fifth generation (5G) telecom service, which was launched in India in 2022, is
likely to create 2.2 crore jobs in the sector and related activities like cloud
computing, robotics, and the Internet of Things (IoT) by 2025 and further boost its
share in the country’s GDP.
▪ In 2022, India had 28 billion app downloads, which is the second-largest market for
app downloads in the world. In 2023, India had 25.96 billion app downloads, which
is slightly less than in 2022. In 2023, Instagram was the most downloaded app in
India with 245 million downloads.
▪ Telecom is the second highest revenue earner for the government, after income
tax: The sector is expected to contribute as much as 90% of the government’s non-
tax revenue. Digital India programme is dependent on the telecom sector to a major
extent.
▪ The liberal and reformist policies of the Government of India have been
instrumental along with strong consumer demand in the rapid growth in the Indian
telecom sector. The deregulation of Foreign Direct Investment (FDI) norms has
made the sector one of the fastest growing and a top five employment opportunity
generator in the country.
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HISTORY OF THE TELECOMMUNICATION INDUSTRY IN INDIA-

Brief: India's telecommunication network is the second largest in the world by

number of telephone users (both fixed and mobile phone) 1,181.13 million at the
end of Sep-23.. It has one of the lowest call tariffs in the world enabled by mega
telecom operators and hyper-competition among them. India has the world's
second-largest Internet user-base with 881.08 Million broadband internet
subscribers and 37.11 Million Narrowband subscribers in the country as on
sept’23. Total number of Internet subscribers is 918.19 million at the end of Sep-
23.

Major sectors of the Indian telecommunication industry are telephone, internet

and television broadcast industry in the country which is in an ongoing process of
transforming into next generation network, employs an extensive system of
modern network elements such as digital telephone exchanges, mobile switching
centres, media gateways and signaling gateways at the core, interconnected by
a wide variety of transmission systems using fibre-optics or Microwave radio relay
networks. The access network, which connects the subscriber to the core, is
highly diversified with different copper-pair, optic-fibre, and wireless
technologies. DTH, a relatively new broadcasting technology has attained
significant popularity in the Television segment.

The introduction of private FM has given a fillip to the radio broadcasting in India.
Telecommunication in India has greatly been supported by the INSAT system of
the country, one of the largest domestic satellite systems in the world. India
possesses a diversified communications system, which links all parts of the
country by telephone, Internet, radio, television, and satellite.

Indian telecom industry underwent a high pace of market liberalisation and

growth since the 1990s and now has become the world's most competitive and one
of the fastest growing telecom markets.

Telecommunication has supported the socioeconomic development of India and

has played a significant role to narrow down the rural-urban digital divide to
some extent. It also has helped to increase the transparency of governance with
the introduction of e-governance in India. The government has pragmatically used

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modern telecommunication facilities to deliver mass education programmes for

the rural folk of India.

Evolution of the Telecom Sector in India

▪ Indian telecom sector is more than 165 years old.

▪ Telecommunications was first introduced in India in 1851 when the first
operational land lines were laid by the government near Kolkata (then
Calcutta), although telephone services were formally introduced in India much
later in 1881.
▪ Further, in 1883, telephone services were merged with the postal system. In
1947, after India attained independence, all foreign telecommunication
companies were nationalised to form the Posts, Telephone and Telegraph
(PTT), a body that was governed by the Ministry of Communication.
▪ The Indian telecom sector was entirely under government ownership until
1984, when the private sector was allowed in telecommunication equipment
manufacturing only.
▪ The government concretised its earlier efforts towards developing R&D in the
sector by setting up an autonomous body – Centre for Development of
Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication
technology to meet the growing needs of the Indian telecommunication
network.
▪ The actual evolution of the industry started after the Government separated
the Department of Post and Telegraph in 1985 by setting up the
Department of Posts and the Department of Telecommunications (DoT).

REGULATOR: TELECOM REGULATORY AUTHORITY OF INDIA (TRAI)-

Telecom Regulatory Authority of India (TRAI)?

The Telecom Regulatory Authority of India (TRAI) was established on 20th February, 1997
by the Telecom Regulatory Authority of India Act, 1997.

▪ Headquarters: The head office of the Telecom Regulatory Authority of India

RAI) is located at New Delhi.
The entry of private service providers brought with it the inevitable need for
independent regulation. The Telecom Regulatory Authority of India (TRAI) is a
regulatory body which was, thus, established with effect from 20th February 1997 by
an Act of Parliament under section 3 of the Telecom Regulatory Authority of India
Act, 1997 to regulate telecom services, including fixation/revision of tariffs for
telecom services which were earlier vested in the Central Government.

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TRAI's mission is to create and nurture conditions for growth of

telecommunications in the country in a manner and at a pace which will enable
India to play a leading role in emerging global information society.

One of the main objectives of TRAI is to provide a fair and transparent policy
environment which promotes a level playing field and facilitates fair competition.

In pursuance of above objective TRAI has issued from time to time a large number
of regulations, orders and directives to deal with issues coming before it and provided
the required direction to the evolution of Indian telecom market from a government
owned monopoly to a multi operator multi service open competitive market.

The directions, orders and regulations issued cover a wide range of subjects
including tariff, interconnection, and quality of service as well as governance of the
Authority. It is a statutory body and regulates the telecommunications sector in the
country.

To summarise the objectives of TRAI are:

▪ TRAI's mission is to create and nurture conditions for growth of

telecommunications in the country.
▪ TRAI regulates telecom services including fixation/revision of tariffs for telecom
services which were earlier vested in the Central Government.
▪ It also aims to provide a fair and transparent policy environment which
promotes a level playing field and facilitates fair competition.

TRAI Structure

• TRAI shall have, in addition to its chairman, at least two full-time members
and not more than two-part members, all appointed by the Central
Government.

Tenure of Members: The Chairperson and other members shall hold their office for
a term of three years or till the age of 65 years, whichever is earlier.

• Chairperson: The Chairperson has the powers of general superintendence.

- He/She presides over the meetings of the TRAI.
• Vice-Chairperson: The Central Government may appoint one of the members
of the Authority as the Vice-Chairperson of TRAI.
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- The vice-chairperson exercises and discharges the powers and

functions of the Chairperson in his/her absence.

• The members should have special knowledge of, or professional experience in

telecom, industry, finance, accountancy, law, management, and consumer
affairs.

• Only those senior or retired Government officers can be appointed as

members who have served for at least three years as secretary/additional
secretary to the Union or State Governments.

Removal of Members: The Central Government is empowered to remove any

member of the TRAI, if he/she:

• has been adjudged an insolvent

o has been convicted of an offence which involves moral turpitude

o has become physically or mentally incapable of acting as a member

o has abused his/her position, rendering his/her continuance in office

prejudicial to the public interest.

TRAI Meetings:

o The Chairperson has the power of organising the meetings at times. He/She
presides over the meetings.

o In the absence of the chairperson, the vice-chairperson presides over the

meetings.

o In the absence of a vice-chairperson, any member can be chosen from the

authority to preside over the meeting.

o The decisions in the meetings are taken by the majority vote of the
members present.

• In the event of an equality of votes, the Chairperson (or the member

presiding the meeting) gives a second or casting vote.

Powers and Functions of TRAI

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Powers and Functions of TRAI (detailed explanation)

The diverse powers and functions of Telecommunication Regulatory Authority of India
are that the authority promotes efficiency and encourage competition in the
telecommunication operation services to encourage growth in the services, in the
telecommunication services protect the consumers interest, and lay down the period for
providing long distance and local telecommunication circuits between various different
service providers. Also the various powers and functions of TRAI (Telecommunication
Regulatory Authority of India) can make an inspection of the various equipments that are
being used in the network, recommend the kind of equipments that the service providers
must use, monitor the service quality, and also conduct survey periodically of the service
that is provided by the service providers.
TRAI powers and functions includes settlement of disputes that arise between
service providers, maintaining a register of the agreements that are interconnected, and
give advice to the government at the centre on subjects that relate to the development of
the telecommunication technology. Further the various functions and powers of TRAI are
charge fees at rates that may be fixed by regulations, perform functions that the central
government may entrust, and also carry out functions that are necessary according to the
TRAI Act, 1997.
An amendement was made to the Telecom Regulatory Authority of India Act in the
year 2000. The role of the original TRAI has now been divided among two authorities
Telecom Regulatory Authority of India (TRAI) and The Telecom Disputes Settlement and
Appellant Tribunal (TDSAT), The tRAI has been allotted the regulatory and
recommendatory functions and the adjudicatory functions are vested with the TDSAT.
However, the Central Government is not bound to accept the recommendations of the
Authority. The Central Government is required to take into consideration the
recommendations of TRAI in cases of when new licence has to be granted to a service
provider and the Authority must furnish its recommendations within sixty days period. TRAI
may ask for relevant information or documents required for the purpose of making
recommendations to the Central Government and the Government must furnish such
information within seven days period from the receiving of such application. The Central
Government after considering such a recommendation of the Authority may return back to
the Authority for its amendment. The Authority must send to the Central Government its
recommendation within fifteen days from the date of receiving of such suggestion for
amendment.

The Supreme Court had occasion to deliberate on section 11(b) and (C) in the case of
Union of lndia v. Association of Unifed Telecom Service Providers of India. " The Court
observed that:

"Central Government has power to decide on conditions of licence including payment by

licensee for license. Notwithstanding this, Central Government is bound to seek
recommendations of TRAI on terms and conditions of license though recommendations are
not binding on it. In case of difference between TRAI and Central Government with regard
to a particular term or condition of license, Central Government's decision is final and
binding."

The Supreme Court further held that:

"TRAI being an expert body, its recommendations given under section 11(1)(a) have to be
given due weightage by the Central Government but are not binding on it. However,
regulatory and other functions under section 11(1)(b), (c) and (d) have to be performed
independent of Central Government and are binding on licensees subject only to appeal
in accordance of the provisions of TRAI Act.
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The Authority has the power to give notice in the Official Gazette the tariff at which the
telecom services within and outside India will be provided under this Act. TRAI has also the
power to fix the tariff at which messages shall be broadcasted to any country outside India.
It may advise altered tariff for different persons or group of persons for similar telecom
services and the Authority must give reasons where different rates are set. The Authority
while discharging its functions shall not take steps prejudicial to the security of the State,
the interest of the sovereignty and integrity of India, friendly relations with foreign States,
public order, morality Legal Framework on Regulatory Authorities in India: Contemporary
Position or decency, The Authority should try to be transparent while discharging its
powers and functions under the Act.

The Authority has the power to call upon any service provider to provide explanation or
information with respect to its affairs; or appoint one or more persons to make an
investigation in relation to the dealings of any service provider; and direct any of its
employees or officers to examine the account books or other documents of any service
provider All such service providers must cooperate with the Authority. Each service
provider must keep account books or other documents prescribed by rules. The Authority
can issue necessary directions for good performance by service providers.

What are the Functions of TRAI? – Key pointers

Makes Recommendations: The function of the TRAI is to make recommendations on

the following matters:
o Need for introduction of new service provider.
o Revocation of license for non-compliance of terms and conditions of licence.
o Measures to facilitate competition and promote efficiency in the operation of
telecommunication services to facilitate their growth.
o Technological improvements in the services provided by the service
providers.
Discharge of Responsibilities: The TRAI is responsible for discharging the following
functions:
o Ensuring the compliance of terms and conditions of licence.
o Ensuring the technical compatibility and effective interconnection between
different service providers.
o Laying down the standards of quality of service to be provided by the service
providers.
o Ensuring the quality of service and conducting the periodical surveys of such
services.
o Timely and officially notifying the rates at which the telecommunication
services within India and outside India shall be provided under the TRAI Act, 1997.
Non-Binding Recommendations: The recommendations of the TRAI are not binding
upon the Central Government.
o If the Central Government does not accept any recommendation of the TRAI
or needs modifications, it refers the recommendation back to the Authority for its
reconsideration.
o The TRAI forwards to the Central Government its recommendation after
considering the reference made by that Government within 15 days.

What are the Powers of TRAI?- Key pointers

Order for Furnishing Information: It can call upon any service provider to furnish
in writing the information or explanation relating to its affairs as the Authority may
require.
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Appointments for Inquiry: The Authority may appoint one or more persons to make
an inquiry in relation to the affairs of any service provider.
Order for Inspection: It is empowered to direct any of its officers or employees to
inspect the books of accounts or other documents of any service provider.
Issue Directions to Service Providers: The Authority shall have the power to issue
such directions to service providers as it may consider necessary for proper functioning by
service providers

Telecom Disputes Settlement Appellate Tribunal (TDSAT)

The TRAI Act was amended by an ordinance, effective from 24 January 2000,
establishing a Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take
over the adjudicatory and disputes functions from TRAI. TDSAT was set up to
adjudicate any dispute between a licensor and a licensee, between two or more
service providers, between a service provider and a group of consumers, and to hear
and dispose of appeals against any direction, decision, or order of TRAI.

• The powers of the TRAI have been considerably diluted by the TRAI
(Amendment) Ordinance, 2000. Post 2000, the regulation of telecom
services is to be done by TRAI and the newly set up Telecom Disputes
Settlement Appellate Tribunal (TDSAT).
• They will also adjudicate disputes, protect interests of service providers
and consumers, to promote and ensure orderly growth of the telecom
sector.

The composition of TDSAT is also changed to include the chairman and not more
than two whole-time members and not more than two part-time members to be
appointed by the Government. The TDSAT has been given the mandate to adjudicate
disputes:-

i. between a licensor and a licensee;

ii. between two or more service providers;
iii. between a service provider and a group of consumers.

The Union Government, State Government, any local authority, or any individual
can approach the TDSAT for adjudication on issues related to disputes between
parties mentioned above.

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The chairperson and members of this tribunal are to be appointed by the

Government of India in consultation with the Chief Justice of India.

Eligibility:

Chairperson: A person shall not be qualified for appointment as the Chairperson

unless he/she is or has been, a Judge of the Supreme Court or the Chief Justice of a
High Court.

Other Members: He/She must have held the post of Secretary to the
Government of India or any equivalent post in the Central/State Government.

Term of office: The Chairperson and the other members of TDSAT shall hold
office for a term of maximum four years or seventy years (for Chairperson),
whichever is earlier.

In the case of members other than the Chairperson, the maximum age is
sixty-five years.

Removal of Members: The conditions for removal of any member of the

Tribunal are the same as those of the TRAI.

Jurisdiction of TDSAT: The civil courts do not have jurisdiction to entertain

any matter which the TDSAT is empowered to determine.

An order passed by TDSAT is executable as a decree of civil court, the

Tribunal has all the powers of a civil court.

It is not bound by the procedure laid down by the Code of Civil Procedure but
guided by the principles of natural justice.

The Tribunal has the powers to regulate its own procedure.

LICENSE: TELECOM REGULATORY AUTHORITY OF INDIA

TELECOM LICENSE FRAMEWORK OF INDIA-

What is a telecom license?

A telecommunications licence authorizes an entity to provide telecommunications services
or operate telecommunications facilities. Licences also generally define the terms and
conditions of such authorization, and describe the major rights and obligations of a
telecommunications operator.

The grant of telecom licenses in India is primarily governed by the Indian Telegraph

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Act, 1885, and the Indian Wireless Telegraph Act, 1933. The Indian Telegraph Act,
1885, provides an

exclusive privilege to the Central Government for establishing, maintaining, and

working telegraphs, and power to grant licenses for such activities. Licensing
framework has been an integral part of India’s telecommunication law. Under the
Indian Telegraph Act, 1885, Section
4 gives the Central Government the power to grant license on such conditions and
in consideration of such payments as it thinks fit, to any person to establish, maintain
or work a telegraph within any part of India. Considering the market and
technological developments, the licensing regime has evolved with the passage of
time. The existing licensing regime i.e., the Unified License regime came into
effect in 2013. Unified License offers service-wise authorizations for establishing
service-specific network and to provide the authorized service(s). The allocation
of spectrum is delinked from the license and it has to be obtained

separately as per the prescribed procedure, for different services. Only one Unified
License is required for all telecom services in the entire country. The service
provider may choose the services to be offered, which are called Service
Authorizations.

WHAT IS LICENSING IN TELECOM INDUSTRY?

A telecommunications license authorizes an entity to provide telecommunications

services or operate telecommunications facilities. Licenses also generally define the
terms and conditions of such authorization, and describe the major rights and
obligations of a telecommunications operator.

WHO GRANTS TELECOM LICENSE?

Under the Indian Telegraph Act, 1885, section 4 gives power to the government to
grant license to any person to establish, maintain or use a telegraph. However, in
the telecom sector, the government had complete monopoly until the early 1990s.
Since 1992, the government has allowed licensing in the telecom sector by the
Department of Telecommunications (DoT) is the sole authority for licensing
telecommunications services. However, before granting a license, the DoT must
receive recommendations from the Telecom Regulatory Authority of India (TRAI).
The DoT will grant a license if TRAI does not object.

WHAT ARE THE TYPES OF TELECOM LICENSE IN INDIA?

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ISSUES FACED BY THE TELECOM SECTOR IN INDIA

• High Right-of-Way (ROW) cost: Sometimes, state governments charge a huge
amount for permitting the laying of fiber, etc.

▪ Low of fixed line penetration: India has very little penetration of fixed-line
in its network whereas most of the developed countries have a very high
penetration of fixed lines (telephone line that traveled through a metal wire
or optical fiber as part of a nationwide telephone network).

o Only around 25% of Towers in India relate to fibre networks, whereas

in developed nations, it is in excess of 70%.

o 5G Network requires towers to be connected to with very high-speed

systems. Those high speeds are not possible on the present radio
systems.

▪ Declining Average Revenue Per User (ARPU): ARPU decline now is sharp
and steady, which, combined with falling profits and in some cases serious
losses, is prompting the Indian telecom industry to look at consolidation as
the only way to boost revenues.

o Recently, the Supreme Court allowed the government’s plea to

recover adjusted gross revenue of about Rs 92,000 crore from telcos,
that further adds to their stress.

▪ Limited Spectrum Availability: Available spectrum is less than 40% as

compared to European nations and 50% as compared to China.

▪ Low Broadband Penetration: Low broadband penetration in the country is

a matter of concern. As per white paper presented on broadband at the last
International Telecommunication Union (ITU), broadband penetration in
India is only 7%.

▪ Over the Top (OTT) applications do not need permission or a pact with a
telecommunications company. This hampers the revenue of
telecommunication service providers.

▪ Huge fluctuations in the duties on Telecom Equipment which contribute

to connecting the whole system from the central server to the consumer.

▪ Timeframe of policy execution: Government have withdrawn a lot of things

to benefit telecom sector but by the time it gets executed to the market, it
becomes too late.
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▪ Lack of Telecom Infrastructure in Semi-rural and Rural areas: Service

providers must incur huge initial fixed cost to enter semi-rural and rural
areas.

▪ Pressure on Margins Due to Stiff Competition: With competition heating up

post entry of Reliance Jio, other telecom players are feeling the heat of
substantial drop in tariff rates both for voice and data (more significant for
data subscribers).

Steps Taken by the Government

▪ A new National Digital Communications Policy - 2018 (NDCP-2018) was

unveiled in Oct 2018, to replace National Telecom Policy-2012, to cater to the
modern needs of the digital communications sector of India. The policy aims to
attract USD 100 billion worth of investments and generate 4 million jobs in the
sector by 2022.
▪ Telecom Commission was re-designated as the "Digital Communications
Commission”.
▪ In 2017, Department of Telecom (DoT) came up with a gazette notification,
advising the state governments to give quicker ROW permission and charge
very little amount to service providers. Though, only some states responded.
▪ The government has provided benefits to telecom sector by withdrawing some
duties.
▪ The government has fast-tracked reforms in the telecom sector and continues
to be proactive in providing room for growth for telecom companies.
▪ The Department of Information Technology intends to set up over 1 million
internet-enabled common service centres across India as per the National e-
Governance Plan.
▪ FDI cap in the telecom sector has been increased to 100% from 74%. Out of
100%, 49% will be done through automatic route and the rest will be done
through the FIPB approval route.
o FDI of up to 100% is permitted for infrastructure providers offering
dark fibre, electronic mail, and voice mail.
▪ The Government of India has introduced Digital India programme under which
all the sectors such as healthcare, retail, etc. will be connected through the
internet.

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Refer this link https://www.lexology.com/library/detail.aspx?g=d626eaef-f300-4dbf-

85a7-34a015300226 for :
• Summary of regulatory framework for the communications sector.
• Foreign ownership restrictions
• Authorisation or licensing regime.
• Application Process
• Do spectrum licences generally specify the permitted use or is permitted use
(fully or partly) unrestricted? Is licensed spectrum tradable or assignable?
• ex-ante regulation - remedies
• Structural or functional separation between an operator’s network and service
activities
• Universal service obligations
• Number allocation scheme and number portability regime in your jurisdiction.
• Customer terms and conditions in the communications sector
• data protection regime applicable to the communications sector?

• cybersecurity or network security in your jurisdiction?

•

• key emerging trends and hot topics in communications regulation

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