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GOI on Access Service Licensing

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The Government of India (GOI) had formulated the New Telecom Policy 99 (NTP 99) for proliferation of telecom services and facilities at affordable rates across the length & breadth of the country. Such telecom facilities not only include voice but other various services which are in the interest of the general public leading to indirect and direct employment, growth in GDP and thereby improving the health of the economy.

The basic aim and principles governing the sector is proliferation of telecom services in a competitive environment at affordable tariffs for the common people and specially the rural masses. Any initial entry barriers such as high initial one time charges for spectrum by way of auction or high license fee would have hampered the competition and retarded the fall of tariffs in the sector which would have been detrimental for the rural masses and expansion of such services.

It will not be out of context to mention that in 1994-95 licenses were granted for operation of basic and mobile telephone services by way of auction for license fee. Very high license fee were quoted by the service providers which resulted in practically nil growth of services till 1999 when a migration package was offered to migrate from high fixed annual license fee to a revenue sharing arrangement. The growth of telecom sector is established, without doubt, by such a measure. The competition has forced the tariffs to come down drastically from Rs.16 to Rs.1 per minute over the period of time with the expansion of mobile telephones from 1.2 millions in March 1999 to 305.13 millions at the end of August 2008.

Moreover, even in 2001 no offers were received for less lucrative circles such as Assam, Bihar, J & K, North East, Orissa, West Bengal and Andaman & Nicobar. In 2003, based upon the recommendations of Group of Ministers and TRAI, the Cabinet decided to migrate to Unified Access Service Licence (UAS) regime. The unrestricted entry was permitted with fixed entry fee based upon the entry fee quoted in 2001 for grant of 4th cellular licence in service areas where no offers were received for 4th cellular service licence, the entry fee fixed as equivalent to entry fee for basic service licence as prescribed by TRAI in 2000. Since then, the Policy of grant of UASL licence based on fixed entry fee and allocation of spectrum on first come first served basis, is being followed. In this regard, it is clarified that all the licences issues in Jan, 2008 are as per established Government policies as envisaged in NTP 99 and addendum of 2003 with the approval of Cabinet. Under this policy of UASL, 51 licences were issued till Dec, 2007. Decision of issuing more licences per Circle in January, 2008 was taken to increase competition which will help to increase tele-density in rural areas and reduction in tariff.

The minimum licence fee which would have accrued for cellular service in the four metros and 18 Circles for first two cellular licences would have amounted to Rs. 20393.84 crores over a period of ten years from 1994 onwards while six basic service licensees would have paid Rs. 27863.23 crores over a period of 15 years from 1997.But such high incidence of licence fee would have forced the operators to surrender the licence rather than continuing its services. By way of adopting licence fee on the basis of revenue share since 1999, licence fee collection have been increasing every year and licence fee of the order of Rs.7843 crores was collected during the period 2007-08 for access services and a total licence fee and entry fee amounting to approx. Rs. 54840 crores have been collected so far. There is a continuous increase in the receipt of licence fee. Moreover, increase in subscriber base has also seen increase in collection of service tax from telecom services.

For expansion of such telecommunication services wireless technologies have proved to be boon as the capital cost and gestation period for roll out is very less as compared to wireline service. Spectrum is an essential resource for rolling out of wireless services. Traditionally, 2G wireless services were initially operated by incumbent operator in many countries and spectrum was allocated generally without any auction in most of the parts of the world on first come first served basis. In India also, spectrum was bundled with the license and was accordingly allocated as per the eligibility criteria decided by the Government from time to time.

The basic aim of a government policy is expansion of telecommunication services at an affordable rate in the whole country in a competitive environment so that customer is able to enjoy the fruit of latest technology in terms of data and voice so as to protect his own interest specially in rural areas where other means of communications may not be available, at the same time by following the existing practices and processes, revenue of the government has not been compromised. Every phase of introduction of new operators with present approach has seen reduction in tariffs, expansion of subscriber base and provision of more Value Added Services for subscribers with increased revenues of the Government.

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