Académique Documents
Professionnel Documents
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Policy Perspectives
Status Report
Scheme of Presentation
Scheme of Presentation
Salient features of NTP, 1999 : Objectives: (revenue maximization not an objective) o To introduce greater competition in the telecommunications sector. o To provide equal opportunities and level playing field for all players. o To make available affordable and effective communications for the citizens. Importance assigned to Telecom Regulatory Authority of India (TRAI). NTP, 1999 continues to be the policy matrix guiding telecom sector to date. qMigration package offered to existing licensees (42 CMTS, 6 Basic): Revenue sharing arrangement (15% of Adjusted gross revenue [AGR]) instead of fixed license fee, with effect from August 01, 1999. Pro rata license fee payable upto July 31, 1999 to be treated as entry fee. 3 levies from this point: entry fee, annual license fee and annual spectrum usage charges. 5 Significant Financial implication of the transition. q
Scheme of Presentation
Scheme of Presentation
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qProcess followed for award of 2G licenses: Press release issued by DoTon September 24, 2007 (appeared in news papers on September 25, 2007) specifying October 01, 2007 as the cut off date for accepting new applications. 343 new applications were received in this period. Reference made to Ministry of Law and Justice (ML&J) on the options to deal with the large number of applications. Advice of ML&J to refer the matter to a Empowered GoM (EGoM) not accepted. Applications received upto September 25, 2007 taken up for processing under an FCFS methodology notified via a press release issued on January 10, 2008, wherein, fulfillment of the Letter of Intent (LoI) conditions was stipulated for earmarking seniority for allotment of UAS license. Applicants were asked to collect DoTs response on the applications on January 10, 2008 at 3:30 PM and submit compliance of LoI within 15 days. 121 LoIswere issued on January 10, 2008; 78 complied with on the same day; 42 complied on the next day. In all, 16 applicants were issued 120 UAS licenses between February and March, 2008. 12 2 more licenses were issued in July 2008 to another applicant company, who made application prior to September 25,
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Scheme of Presentation
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Presumptive licenses
Ca t e g o ry S Te l ra t e
loss
on
award
of
` Crore Crit e ria f o r w o rk in g o u t p o t e n t ia l lo s s t o e x c h e q u e r Ra t e s o n t h e S a le o f e q u it y b y t h e n e w b a s is o f 3 G lic e n s e e s Un it e c h Swan a u c t io n 1,02,498* 37,154** 36,993# 40,442 15,132 14,052 33,230 12,433 12,003
New licenses 38,950 Dual technology 14,573 licenses Beyond contracted 13,841 quantity of 6.2 MHz Total 67,364
1,76,645
69,626
57,666
Presumptive loss to be estimated against 4.4 MHz (instead of 6.2 MHz) allotted to new licensees. ** Presumptive loss to be estimated against 4.4 MHz (instead of 5 MHz) allotted to dual technology licensees. # Presumptive loss against Spectrum beyond 6.2 MHz not to be considered as the allotment of additional spectrum (post January 17, 2008) is subject to pricing as determined in future for spectrum beyond 6.2 MHz. Decision to be taken after TRAIs recommendations which are presently 15 awaited after TRAIs letter of May 18, 2010. *
on
award
of
Observations on Presumptive loss based on 3G prices: qUAS licenses issued in January 2008 and 3G payments made in May, 2010., therefore, 3G prices have to be discounted to reflect time value of money. qEconomic value of spectrum a function of subscriber base and ARPU. While subscriber base increased 3 times, ARPU reduced by 66%. q2G spectrum was subject to availability. On average, allottees of 2008 (and even earlier) have received spectrum after a gap of a year, therefore 2G spectrum is available on an average for 19 years instead of 20 years.. qThere is difference in spectral efficiency of 2G and 3G spectrum: 5 MHz of 2G and 3G spectrum have spectral efficiencies of 40.61 Erlangs and 149.1 Erlangs respectively, i.e., in the ratio of 1 :3/4. qWhile computing the pro-rata value for 4.4 MHz spectrum vis--vis 6.2 MHz, the non-linear advantage due to consolidation of holding 6.2 MHz over 4.4 MHz needs consideration. q q q 16 q
on
award
of
Observations on Presumptive loss based on 3G prices -----<II>: qTelecom sector policy has evolved continuously since 1999 and is predicated on the following pillars: increase in teledensity and affordability to the consumer; creation of a competitive environment, with level playing field between existing and new incumbents; and, revenue accrual to Government both through one time fee and annual recurring charges. The policy evolved through NTP, 1999; 1999 migration package for existing operators; development policies followed between 1999 and 2004; and, the overarching vision articulated through the X FYP. The policy created a historical legacy, once it was decided to allow induction of new operators in the UAS regime on the basis of 2001 entry fee. TRAI, the sector regulator, has recommended for induction of more players at low entry charges, in its successive recommendations of October/November, 2003; January/May, 2005; August, 2007; and, May, 2010. q
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on
award
of
Observations on Presumptive loss based on 3G prices -----<III>: The policy has met with spectacular success, in terms of increase in teledensityand subscriber base; reduction in call rates; and, boosting economic growth. Development policies pursued between 1999 and 2004 had significanyfinancial implications. o However duopoly regime was ended and additional operators were introduced. o This resulted in direct benefit to the consumers over ` 1,00,000 croreper annum, as a result of ARPU drop between September, 2007 and May, 2010). q3G auction has a different context. There were no historical legacy issues, hence no issues of level playing field arose. Moreover, auction of 3G spectrum was a consistent recommendation of TRAI, in its successive reports of September, 2006; August, 2007; and May, 2010. qIf the TRAI recommendation of May, 2010 (on the basis of which the presumptive loss has been estimated) is seen in totality and spectrum upto 6.2 MHz is kept out of the ambit of pricing, the 18 value of presumptive loss reduces to NIL. NIL
on
award
of
Observations on Presumptive loss based on Offer of S Tel Ltd.: q The offer was conditional and untenable, since it pertained to 6.2 MHz spectrum in the 900 MHz band, in all 22 service areas which was not available. q The company also asked for permission for active infrastructure sharing whereas sharing of spectrum is not permitted under the current UAS regime. q The offer was subsequently withdrawn by the company and this was stated in its affidavit before the Supreme Court of India. q The amount offered (` 13,752 crore) was spread over 10 years, with the first year offer being only `250 crore. The company could have reneged on its commitment after being allotted spectrum at 1/5th of its extant price. q There is no provision in the licensing regime to offer spectrum on the basis of conditional offers.
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Scheme of Presentation
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Conclusion..
qThe policy matrix which led to the issue of UAS licenses in 2008 q q evolved over a period of time, through NTP, 1999; decision of the Union Cabinet, dated October 31, 2003; practice adopted by successive Ministersfor grant of UAS licenses; and, successive TRAI recommendations of 2003, 2005 and 2007. qThe policy has met with unqualified success and has propelled India into the fastest growth telecom market worldwide. qThe issue of deficiencies, if any, in translating policy into procedure and procedure into actions, are being looked in to by the One Man Committee set up by DoT and Investigating Agencies. Appropriate action will be taken based on the findings. q q
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BENEFITS REALISED
1. DIRECT CONSUMER BENEFITS Indian customers have benefitted by Worlds lowest tariffs (Fallen from Rs 32 /min to Rs 0.30 /Min) due intense competition (Benefit to Aam Aadmi: Over1,00,000 Cr/year) Citizen connectivity and empowerment, which cannot be estimated in value terms.
2.
RAPID GROWTH IN INDIAN TELECOM MARKET Due to the Policies, favoring promotion of Telecom Sector over revenue generation, Indian Telecom Market has become Worlds fastest growing market, with subscriber addition of 1618 million/month, ahead of Chinas 8Million/month) and Worlds second largest Telecom Market, after China. Since 2005, Indian subscribers have thus grown from 9.83Cr to 74.21Cr (Oct 2010) and similarly, Tele-density has grown from 8.95% to 62.51%), empowering masses.
1.
Consistent Policies since 1999 aimed at maximizing growth and competition rather than revenue, and minimizing tariffs.
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3.
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SPIN OFF BENEFITS TO ECONOMY: Huge indirect gain from impact on GDP Growth Rate High Service Tax accruals (30% of total Service collections coming from Telecom sector alone) Huge investments by Telecom Service providers and Manufacturers. Indian Telecom has turned out to be third biggest
Thank You
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Source : TRAI 25