SPK/COAI/2020/293

October 30, 2020

Sh. Syed Tausif Abbas,

Advisor (NSL),
Telecom Regulatory Authority of India,
Mahanagar Doorsanchar Bhawan,
Jawaharlal Nehru Marg (Old Minto Road)
New Delhi-110 002

Subject: COAI Response to the TRAI Consultation Paper on “Enabling Unbundling of

Different Layers Through Differential Licensing”

Dear Sir,

This is with reference to the TRAI Consultation Paper on “Enabling Unbundling of Different
Layers Through Differential Licensing” released on August 20, 2020

In this regard, please find enclosed COAI response to the Consultation Paper.

We hope our submission would merit your kind consideration and support.

With regards,

Yours faithfully,

Lt. Gen Dr. SP Kochhar

Director General

Email id: dg@coai.in

Mobile No.: +91 9871554400

14, Bhai Veer Singh Marg, New Delhi – 110 001

tel: +91-11-23349275 fax: +91-11-23349276 email: contact@coai.in website: www.coai.in
 Response to the TRAI Consultation Paper on Enabling Unbundling of Different Layers
Through Differential Licensing released on August 20, 2020

At the outset, COAI welcomes the opportunity to comment on the TRAI Consultation Paper on
Enabling Unbundling of Different Layers Through Differential Licensing.

I. Regulatory Predictability and certainty: Regulatory predictability and certainty is the key to
instilling confidence in the players in the sector who have made huge investments in building
the telecom infrastructure. With technological developments, it is possible to provide telecom
services through a myriad of technologies. For example, Internet service can be provided
through fixed-line and cellular networks. Therefore, any policy should aim that all the
players/operators who are providing telecom services enjoy a level playing field.

II. Investments made by the TSPs need to be protected: In India telecom sector has
empowered over 1 billion citizens and has one of the lowest voice call rates in the world today.
However, the Industry that has invested over INR 11.4 lakh crores in setting up world-class
mobile networks over the last 20 years has gone through one of the most disruptive phases in
the last few years. The Indian telecom industry has witnessed unprecedented challenges in
terms of forced consolidation; shut down of various telecom service providers; rising losses
due to exorbitant spectrum cost, high regulatory levies/taxes, AGR dues payment etc. We are
of the view that Government policies should be directed towards safeguarding the
investments made by the TSPs. Government needs to provide incentives, reduce regulatory
cost, provide appropriate Policy and Financial stimulus to the existing TSPs under the current
licensing framework, to safeguard the business viability of the sector.

III. Unbundling of licensing Layers is not required:

We believe that there is no requirement of unbundling various layers of the license as the
current licensing regime supports the layered approach w.r.t Infrastructure, Service and
Applications

1. Infrastructure: The current licensing framework allows operators to optimally utilize their
networks and spectrum by sharing active and passive infrastructure. Infrastructure Providers
(IP1) are already allowed to own the Passive Infrastructure and the active Infrastructure on

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 behalf of TSPs. The telecom infrastructure laid by IP1 can be shared by multiple players, hence
delinking the infrastructure layer. IP1 are providing these services under a Registration

2. Service:

a. VNO has a separate authorization to provide the telecom services, on the network of the
TSPs. As per the UL (VNO), VNO is not mandated to create any telecom infrastructure and
can act as a pure reseller as being envisaged in the service layer.

b. Though, VNOs can also set up their own network equipment and can create their own
service delivery platforms in respect to customer service, billing and VAS.

c. UL(VNO) not only helps in maintaining the level of competition, but also make way for
innovative services in a niche, unserved areas; help local entrepreneurs with a small
investment to provide telecom service, facilitate effective and efficient utilization of the
infrastructure/resources created by TSPs.

d. TRAI in the consultation paper highlighted that the mobile service VNO are not picking up
as the TSPs are themselves providing services at the retail level. In this regard, we would
like to submit that the Indian mobile market is a highly competitive market having one of the
lowest tariffs in the world. The non-proliferation of MVNO (Access) can largely be
attributable to the little/ no scope for incremental revenue generation in the hyper-
competitive market.

e. We are of the view that the TRAI should prescribe floor tariffs for a limited period to ensure
business viability of the industry. This will also promote MVNO (Access), as this will help
them to adequately price their services at levels which affords business viability.

3. Application: Various Applications services are currently being provided on the TSPs network,
such as Cloud services, OTT etc, which do not require any license. The Authority has adopted
a light-touch regulation for application services allowing for rampant growth of application
providers.

IV. Issues with Unbundling of the Service and Network Licensing Layers:

1. We submit that a ‘differential’ licensing regime for network and Service layers will amount to
moving away from the principles of unified licensing and convergence. Thus, the same needs
to be examined carefully before taking any step in that direction.

2. We are of the view that the unbundling of licenses will only make the licensing regime more
complex, as the conditions have to be reviewed and every time an existing licensee seeks to
provide service, it will have to undergo a long and complex procedure of obtaining a new

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 license. We believe that the Policy should focus on simplifying the Licensing conditions on the
lines of harmonized and equal policies for the competing technologies.

3. Unbundling of the Service and Network Licensing Layers, may also create a situation
wherein a huge amount is spent by the Network Provider in creating the
infrastructure/network, however no service provider use the network of the Network
operator due to various reasons, including lack of business viability. In this scenario, the
investment made by the Network Providers will get redundant.

4. Moreover, at present, it is commercially unviable for the existing TSPs to split their functions
into different layers and act as network operator and service delivery operator separately. The
existing TSPs have made huge investments in terms of Entry fee and License Fee.

5. We also, submit that the licensing regime should be uniform with the same services being
subject to the same rules.

6. We believe that incentivized full sharing of the telecom network, without any incidence of
double taxation, amongst licensed TSPs can serve the objectives of creating a seamless
network layer by unlocking the true potential of the telecom infrastructure of existing licensed
TSPs.

V. Suggested Policy measures

We believe that the objective of introducing different licensing layers is to promote building
common telecom network/infrastructure and making more efficient utilization of telecom
network/infrastructure. This objective can be achieved by providing appropriate Policy and
Financial stimulus to the existing TSPs.

1. Reduce Levies on the sector

The License Fee (LF) and Spectrum Usage Charges (SUC) can be brought down to a nominal
level in the existing licensing framework itself. There is no need for unbundling of license for
the reduction of levies in the telecom sector.

2. Setting of the Floor Tariffs:

a. Given the financial pressure on the sector and the fact that ARPU and Tariffs of the Indian
Telecom sector are the lowest in the world, floor pricing is imperative to ensure that the
sector is sustainable and is in a position to bear the deferred spectrum and AGR dues, while
continuing to invest in world-class networks and services.

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 b. Thus, TRAI should change the existing regulatory regime of complete forbearance in Tariffs
and Regulate tariffs to protect the interest of telecom service providers.

c. Fixation of a floor price, is the way forward to guarantee minimum revenue for the TSPs to
ensure the viability and orderly growth of the sector.

d. Also, as highlighted above the Floor tariffs will help in facilitating the take up of the
MVNO services in India.

3. Allow Pass-through for any consideration paid by one TSP to another for active
infrastructure sharing

a. All the TSPs are allowed to share the active infrastructure, however, the payment made by
one TSP to another TSP is not allowed as a pass-through, to calculate the Adjusted Gross
Revenue (AGR), for determination of the amount of License Fee (L.F) and Spectrum Usage
Charges (SUC).

b. Thus, to facilitate the sharing of the active infrastructure elements, the Government should
immediately allow the pass-through for any consideration paid by one TSP to another for
active infrastructure sharing.

c. Further, irrespective of the issue of the active Infrastructure sharing, the regime of pass-
through charges for admissibility of deductions from Gross Revenue for the levy of LF &
SUC be reviewed and all kind of payments (either fixed or variable) made for any telecom
input resource by one TSP (Licensee) to another TSP (Licensee) should be allowed as a
deduction to the former.

d. We believe that if pass-through is allowed for these payments made for the sharing
of active infrastructure between the TSPs, the same will facilitate the active
infrastructure sharing and no additional change in the licensing regime is required.

4. Allow sharing of Core network elements:

a. Currently active Infrastructure sharing is allowed to TSPs for only antenna, feeder cable,
Node B and transmission systems.

b. The policy on infrastructure sharing should be further liberalized to allow sharing of core
infrastructure such as MSC, HLR, IN etc. among licensees having UL (Access
Authorization).

c. Sharing of core network elements such as MSC, HLR, IN etc. among the TSPs will reduce
cost for the TSPs and facilitate faster rollout.

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5. One Nation One license: The present Unified Licensing is still circle based w.r.t Access
Authorization. We should now move towards One Nation One License wherein an operator is
allowed to have a single network on a Pan India basis to ensure efficient utilization of
resources. This will require:
a. Enhancing the scope of UL-Access to Pan India Authorization with no restriction to route
inter-circle calls via NLD network
b. Uniform SUC charges so that a single GR/ AGR can be formulated and due LF/ SUC is
paid on the same.
c. GR/ AGR definition is suitably modified to ensure clarity and onerous obligations.
d. One GR/ AGR statement for Pan India access services

6. We believe that a light touch regulation for application providers such as M2M, IoT, Cloud
services, data centers, e-commerce, etc. may be continued and they can continue to take
telecom resources from the licensed TSPs. However, in doing so, it may be ensured that any
provision of telecom services and/or holding the wireless equipment, as defined in the Indian
Telegraph Act, 1885, should be permitted only to the licensed TSPs.

7. Notwithstanding the above, we believe that OTT Communications players provide similar
service as TSPs and hence there is a need to formulate a Legal, Licensing and Regulatory
framework for ensuring that all OTT Communication service providers comply with
requirements of National Security, Data Security, Privacy and Confidentiality of user
information, support in disaster management and emergency call services and other issues of
national and consumer interest. While we acknowledge that TRAI has already given its
Recommendations on this issue, however our concerns remain unaddressed. Hence,
we again request TRAI to review this aspect and prescribe the Regulatory Framework
for the OTT Players at the earliest.

Considering the above our submission to the question-wise response is as follows:

Issue -Wise Response:

Q1. Do you agree that in order to attract investment and strengthen the service delivery
segment, Network services layer and Service delivery layer needs to be separated by
introducing specific license for Network Layer alone? Please justify your answer.

COAI Response:

1. We are of the view that there is no additional benefit in case the Network services layer and
Service delivery layer is separated by introducing specific license for the network layer.

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 2. As highlighted by us in the preamble under the current licensing regime there is no barrier to
entry of new operators and there is enough segregation of network and service layer. We
would like to submit that any additional licensing requirement may only create ambiguity
with respect to service scope and responsibility of the entity, for fulfilling extant licensing
conditions, within the new layers as envisaged. This will add to the regulatory burden
of the existing players. Further, unbundling the licensing regime will only increase the
amount of regulation and hence adversely impact the ease of doing business.

3. We also believe that the current licensing regime is also well poised to harness the power
of emerging digital technologies, including 5G, Artificial Intelligence, Internet of Things, Cloud
and Big Data while promoting investment and innovation. Thus, we are of the view that
Government should provide incentives, reduce regulatory cost, provide appropriate Policy
and Financial stimulus to the existing TSPs, allowing them to invest effectively towards these
future technologies.

4. As highlighted in the preamble, ways of providing the benefits to the present TSPs could be:
a. By reducing LF and SUC in the exiting licencing framework
b. By allowing pass-thru of the amount paid by one TSP to another for sharing of active
infrastructure sharing. This is to provide a boost to active infrastructure sharing.
c. By allowing the sharing of Core Network elements.
d. Move towards One Nation One License

Q2. Should the Network Services Layer licensee be permitted to take the Service Delivery
Category licenses and provide the service? If yes, what kind of restrictions and
safeguards are required to be built, in order to protect the competition and innovation
in service delivery segment? Please justify your answer.

COAI Response:

As highlighted in the preamble, we do not support ‘differential’ licensing regime which leads to
the unbundling of the different layers of licensing.

Without Prejudice to our submission above, we would like to highlight the following principles
that need to be adopted in case TRAI decides to unbundle the network and service Layers of
licensing:

1. No worse-off Principle must be adopted for the current licensees while deciding on the policy
of migration.

2. The Scope of the existing licensees should not be reduced.

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 3. Existing licensees must have the option to continue under the existing licensing regime or
migrate to a new license. It may be highlighted that while framing the earlier licensing regime
as well option was provided to the TSPs for migration CMTS to UASL/UL.

4. Principles of level playing field should be adopted

5. Arrangements between the Network Provider and Service Provider should not be mandated
and must be left to a mutual agreement and market forces.

6. Moreover, in case TRAI recommends the unbundling of the Network and Service Layers. The
Network Service license must be permitted to take the Service Delivery Category Licence and
provide the service.

We believe that the above principles will help to develop a licensing regime which enables the
growth of services in the years to come.

Q3. Whether certain obligations should be imposed on the existing Unified Licensees, and other
measures should be taken to encourage UL licensees to provide their network resources to
VNO licensees particularly in mobile service segment? Please suggest the measures in detail.

COAI Response:

1. TRAI has highlighted in the paper that “while VNO regime is successful in other
licenses/authorisations, only one Access service provider (PSU) has entered into an
agreement with a few VNOs.

2. In this regard, we would again like to submit that the Indian mobile market is highly competitive
with one of the lowest tariffs in the world, it is very difficult for the new TSP or VNO to provide
services in the existing scenario. Thus, TRAI needs to immediately set the floor price for
the data services.

3. Further, the commercial model between MVNO and TSPs (existing UL licensees) should be
left to mutual agreement between the MVNO and TSPs

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Q4. In case network layer and service delivery layer are separated by creating separate category
of licenses, as proposed in Q1;

a) What should be the scope for Network layer license and Service Category licenses?

COAI Response:

As stated in our response to previous questions, there is no requirement to create a separate

category of licenses by separating network and service delivery layer as the present licensing
structure supports the layered approach

If it is still decided then, the scope for network and service layer can be:

1. The Network Services Providers (NSPs) layer should comprise of the physical infrastructure,
active and passive elements and cloud-based instances of the network elements that are
required to deploy a telecom network.

2. Service delivery Category should be associated with selling only the basic services i.e. Voice,
Messaging and Data connectivity over the network of the Network Service provider. They
would be permitted to sell these services to retail as well as the corporate (Bulk Usage)
customers who requisition the services for their own end usage only.

b) Out of various responsibilities and obligations enumerated in Unified License, what should be
the respective responsibilities and obligations of Network layer licensees and Service delivery
category licensees? Please elaborate with justifications.

COAI Response:

Refer response to question (a)

c) What mechanism should be put in place to regulate the access to network services of Network
layer licensees by the service delivery Category licensees. Whether certain obligations should
be imposed on Network layer licensees to provide the network resources in a time-bound,
transparent and non-discriminatory manner?

COAI Response:

1. Terms and conditions for the arrangements between the Network Provider and Service
Provider should not be mandated and must be left to mutual agreement and market
forces.

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d) What incentives (for example, lower license fee, lower SUC, etc.) could be provided to
Network Layer licensees in the new unbundled licensing regime to encourage the investment
in the Network layer? Please justify your answer.

COAI Response:

1. The Regulatory Levies (LF and SUC) can be brought down to a nominal level in the existing
licencing framework itself. There is no need for unbundling of licence for the reduction of levies
in the telecom sector.

2. In case of the new licensing regime as well, nominal license fee and SUC should be prescribed
for recovery of administrative charges and auction-related charges respectively.

e) Whether the existing Unified Licensees should be mandated to migrate to the unbundled
licensing regime, or the new regime should be introduced, while keeping the existing regime
continued for existing licensees till the validity of their license, with an option of migration?

COAI Response:

1. Existing licensees must have the option to continue under the existing licensing regime or
migrate to new license.

2. It may be highlighted that while framing the earlier licensing regime as well option was provided
to the TSPs for migration CMTS to UASL/UL.

3. Option should also be provided to the TSPs even after the expiry of their license.

f) Whether existing VNO licensees be mandated to migrate to service delivery category licenses
as per unbundled licensing regime?

COAI Response:

1. As highlighted in the preamble, existing licensees (both UL & VNO) must have the option to
continue under the existing licensing regime or migrate to new license.

g) Whether service delivery category licensees be permitted to parent with multiple Network
Service layer licensees? Please justify your answer.

COAI Response:

1. No, the Service delivery category should be permitted to parent to only one Network Service
layer licensee.

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2. TRAI in its earlier Recommendations on VNO as well had recommended that a VNO licensee
cannot get attached to more than one TSP (MNO) in the same service area. We believe that
this was a considered view and should be continued with in the case of service delivery
category as well.

Q5. Any other issue related to the subject may be raised with suitable explanation and
justification.

COAI Response:

1. We are of the view that the Government based on the recommendations of TRAI should consider
reducing the regulatory financial burden and provide incentives to TSPs to catalyze investment
and innovation in the sector, as highlighted the objective of this paper. We suggest the
following measures for the same:

a. Rationalization of the Regulatory Levies:

i. Reduce the Spectrum Usage Charge (SUC) by 3% for all the TSP’s.
ii. Reduce License Fee (LF) (USOF Contribution) from 8% to 3%.

b. Review the definition of AGR (Prospectively)

c. Allow Pass-through for any consideration paid by one TSP to another for active
infrastructure sharing

d. Allow sharing of core network elements

e. Move towards One Nation One License

f. Prescribing the Floor Price for the data services

g. Prescribing the Regulatory Framework for the OTT communication players

Further, we request TRAI to kindly consider all our inputs mentioned in the preamble.

.***

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