Telecom Reforms: Achieving Higher Growth ASSOCHAM Interaction with TRAI on New Policy Initiatives 18 Oct 2004: New Delhi S C Khanna Secretary General Association of Unified Telecom Service Providers of India

2 What are the targets? Dec 2007Mobile Fixed Broadband & Internet 150 mn 50 mn 9 mn / 18 mn Sep 2004Mobile Fixed 43 mn 44 mn Additions by mn Monthly additions required 3 mn Today’s level2 mn Govt. & Industry efforts need to be stepped-up Mobile & Fixed

3 What are the policy initiatives necessary to fuel this growth? Early resolution of the following: Interconnection issues. Unified Licensing Regime. Spectrum issues. ADC review. High incidence of taxes & duties.

4 1. Interconnection Issues Concept of seeker and provider: all operators to be treated equally Adequate and timely provisioning of POIs Handover of calls Active / Passive links Billing reconciliation Interconnection is a win-win solution for all operators

5 2. Unified Licensing Regime Policy guidelines to address industry concerns on the following: Framework & Registration Charges: Group companies to be treated as Integrated operator: no separate charges for migration of group companies to ULR as they are to be treated as a single entity jointly. Two group companies will not be individual unified licensees. Non-integrated operators not wanting NLD / ILD rights: Company wanting single circle(s) unified license without NLD / ILD should not be asked to pay ULR fee of Rs 107 cr + respective circle(s) fee. Only respective circle(s) fee is payable. Request Govt. to accept TRAI’s DRAFT Recommendations on: Definition of AGR. Reduction in license fee to cover administrative costs only.

6 3. Spectrum Issues Allocation of appropriate and adequate frequency for growth of wireless services. For mobile services as per international standards. Pricing: Entry Fee: Existing CMSPs & UASLs not to pay any additional entry fee for spectrum. Usage Charges: Cost based recovery on actual costs incurred by regulatory authority for management of radio spectrum. Present structure is very expensive. Release / refarming of spectrum from non-telecom users. Funding to be done by government’s resources. Cell-site installation: Uniform policy essential - Local bodies charge arbitrarily high fee (e.g. Rs 2 lakhs / site), no cell sites in residential areas (reason: health hazards), etc.

7 4. ADC Review ADC is not required since there is forbearance on tariffs. Incumbent has regulatory freedom for charging higher tariffs in all areas except rural. USO funds to be effectively utilised for rural access & non- remunerative connections which cause access deficit. Private sector is funding the incumbent which is their biggest competitor. Unanimous view that ADC should be discontinued

8 5. High incidence of taxes & duties Approx. 30% higher costs on account of the following: License 6-10% of AGR. 2-6% of AGR towards spectrum usage charges. 16% on infrastructure equipment. Net effective duty on most telecom equipment at 27.6% or higher. Excise 16%. Service Tax – increased to 10.2%. Telecom services is the highest contributor. Sales tax ??

9 Conclusion INDUSTRY Rapid expansion of networks to reach out to all areas – aggressive rollouts by all operators. GOVERNMENT Immediate regulatory action needed to bring about path- breaking changes mn