Dissecting the Indian Telecom Bill 2023: A Paradigm Shift in Telecommunications Policy

This is historic as it decisively clarifies longstanding ambiguities surrounding the allocation of spectrum for crucial services such as Satellite and Backhaul

Today The Telecommunication Bill, 2023 was introduced in Parliament. This note aims to meticulously analyze the bill's key provisions and evaluate their potential impact on the telecom sector. In this analysis, we will concentrate specifically on the most contentious issues currently facing the Indian telecom sector, exploring how the proposed bill addresses each of these challenges. Therefore, let's systematically examine these issues one by one.

Licensing of OTT

In the revised version of the Telecom Bill, there is a noticeable shift in the approach to licensing Over-The-Top (OTT) services compared to the earlier 2022 draft. Previously, OTT was explicitly categorized under "telecommunication services." In contrast, the revised bill opts for a more inclusive approach, encapsulating OTT within a broader definition of telecommunication. This broader definition, as outlined in section 2(p) of the act, is provided here for reference:

"Telecommunication" is defined as the transmission, emission, or reception of any messages via wire, radio, optical, or other electromagnetic systems. This definition applies regardless of whether these messages undergo rearrangement, computation, or other processes at any stage during their transmission, emission, or reception."

In essence, the proposed draft of the Telecom Bill grants the Government of India (GOI) discretionary power to classify Over-The-Top (OTT) services as "telecommunication services" if it chooses to do so. This is because, by their inherent nature, OTT services align with the broad scope of the term "telecommunication" as defined in the bill.

Exclusive Privilege of GOI

The notable absence of the term "Exclusive Privilege" from the current draft of the Telecom Bill, which was a prominent feature in the Indian Telegraph Act of 1885 and the previous 2022 draft, marks a significant shift. This earlier terminology implied an exclusive right of the Government of India (GOI) to provide, operate, maintain, and expand telecommunication services. In contrast, the new draft pivots around the concept of "Authorization."

This change in language suggests a strategic move towards a more flexible and scalable regulatory framework. By focusing on "Authorization," the government positions itself to adapt more effectively to unforeseen circumstances and evolving challenges in the telecom sector. This approach indicates an intent to streamline the process of managing telecommunication services, potentially enabling quicker responses to technological advancements and market dynamics. It reflects a modernized perspective, aligning the regulatory structure with the rapidly evolving nature of the telecommunications industry, and providing the government with the agility required to navigate future developments in this sector.

Obligation to Verify Users

The current version of the Telecom Bill underscores the obligation for authorized entities to verify the identity of individuals to whom they provide services. This is mandated through the use of biometric-based identification methods, as outlined in Section 3(7) of the bill. The emphasis on such a stringent verification process highlights a focused effort to enhance security and accountability within the telecommunication sector.

For Over-The-Top (OTT) communication applications, this requirement presents a significant regulatory consideration. As it stands, as long as OTT services remain outside the scope of "authorization" as defined in the bill, they are not obligated to adhere to these verification requirements. However, should the Government of India (GOI) decide to bring OTT applications under this authorization framework, these platforms would then be required to comply with the biometric verification mandate.

This issue has been a topic of considerable debate, especially in the context of rising concerns about digital fraud perpetrated through such OTT platforms. The GOI's interest in extending this requirement to OTT communication applications is driven by a need to address these security concerns and to regulate the digital communication space more effectively. If implemented, such a move would represent a significant step in ensuring greater security and authenticity in digital communications, aligning with broader efforts to combat digital fraud and misuse of communication platforms.

Assignment of Satellite Spectrum

The current Telecom Bill demonstrates a significant policy shift by expanding the scope of Schedule 1 to include Global Mobile Personal Communication by Satellite (GMPSC) licenses, as outlined in Section 4(4) of this bill. This schedule is designated for scenarios or services where spectrum is assigned administratively, rather than through auction-based mechanisms.

This expansion is particularly noteworthy for the satellite broadband services sector. Previously, the Department of Telecommunications (DoT) had requested the Telecom Regulatory Authority of India (TRAI) to establish terms for auctioning spectrum for satellite services. However, with the inclusion of GMPSC licenses in Schedule 1, the allocation of spectrum for these services will no longer require an auction. This marks a substantial change in the Government of India's approach towards satellite services, moving away from auction-based allocation to an administrative assignment model.

Additionally, the spectrum used for backhaul in telecom services is also included in this schedule. This change opens up the possibility of granting spectrum in the E and V bands to operators without the need for auctions. However, it's important to note that while telecom providers can use this spectrum for backhaul purposes, they are not permitted to offer direct services to end-users using this spectrum without undergoing the auction process. This distinction ensures that while backhaul efficiency might be enhanced through administrative spectrum assignment, the primary service provision to end-users remains subject to auction-based spectrum allocation, maintaining a level of competitive fairness and market-driven pricing.

No Refund of Fees

The latest draft of the Telecom Bill presents a notable change from its earlier version regarding the refund of fees. In the previous draft, there was a provision for entities to receive a refund of fees if they chose to surrender their license, registration, authorization, or assignment. However, the current draft, specifically in Section 9, has entirely removed this option for a refund.

This change signifies a marked shift in policy, sending a clear message to telecom operators. It indicates that once they acquire spectrum through the auction process, they will not have the option to recoup their expenses by surrendering it prematurely. This implies that all dues, including those that are deferred and payable in yearly installments, remain the responsibility of the operators.

Additionally, this amendment adds a layer of complexity to the invocation of bankruptcy laws. Debts accrued due to spectrum fees cannot be nullified simply by returning the spectrum or license. This makes the financial planning and risk assessment for telecom operators more stringent, as they must now factor in the irrevocability of these fees when acquiring spectrum rights. The removal of the refund option underscores the government's intent to reinforce financial discipline and commitment among telecom operators, ensuring a more stable and predictable spectrum management regime.

Missing Section on Insolvency

The conspicuous absence of a section on "Restructuring, Default in Payment, and Insolvency" in the current draft of the Telecom Bill indicates a deliberate choice by the Government of India (GOI) to address such scenarios separately. This omission marks a significant departure from the earlier approach where the government seemed inclined to provide a safety net for telecom operators facing financial difficulties.

This change is particularly relevant in the context of Vodafone Idea's impending government dues, scheduled for payment in FY25-26. Given the substantial amount involved, there is a possibility of default unless the government intervenes with measures like debt-to-equity conversions or waivers. However, with the absence of specific provisions in the current bill, such interventions seem less likely, or at least not under the purview of this bill.

The earlier approach gave an impression of the GOI's commitment to ensuring the survival and operation of struggling telecom entities like Vodafone Idea, which was crucial for maintaining competitive dynamics in the market. Now, without these provisions in the bill, the government may have to seek empowerment from other legislative acts or frameworks to support telecom operators in distress.

This shift implies that telecom operators can no longer rely on the Telecom Bill as a potential source of relief in cases of financial insolvency or restructuring. It places a greater onus on telecom operators to manage their finances and liabilities prudently, while also signaling a more hands-off regulatory approach from the government in matters of financial distress in the telecom sector. This change reflects a move towards a more market-driven approach, where the financial sustainability and risk management of telecom operators are primarily their responsibility. act can’t be relied on anyome due to absence of this provision.

USOF Renamed as “Digital Bharat Nidhi”

The renaming of the Universal Service Obligation Fund (USOF) to "Digital Bharat Nidhi" in the current Telecom Bill is more than just a change in nomenclature; it signifies a subtle yet important shift in the fund's operational scope. While the primary purpose and character of the fund remain consistent with what was proposed in the earlier 2022 bill, a notable modification has been made in its provisions.

Previously, the fund was specifically geared towards supporting the introduction of "new" telecommunication services, technologies, and products. However, in the current bill, the word "new" has been removed from this clause. This adjustment implies that the Government of India (GOI) intends to maintain broader flexibility in using this fund. It opens up the possibility of not just fostering innovation and new developments in the telecom sector but also supporting the continuation or enhancement of existing services and technologies.

This change, as outlined in Section 25(d) of the proposed bill, reflects a more comprehensive approach to telecommunication development in India. By not limiting the fund's application to only new initiatives, the GOI can leverage it to bolster a wider range of telecommunication services and technologies, whether they are emerging innovations or established systems in need of expansion or improvement. This inclusive approach can play a crucial role in achieving broader telecommunication goals, such as enhancing connectivity, improving service quality, and ensuring that both new and existing telecommunication services align with the evolving needs and aspirations of "Digital Bharat."

Absence of the Definition of “Broadcast Services”

The absence of a specific definition for "Broadcast Services" in the current Telecom Bill, coupled with the integration of the Cable Television Networks (Regulation) Act of 1995 into the amendments of the TRAI Act, indicates a strategic delineation between telecommunications and broadcast services. By not explicitly defining "Broadcast Services" within the Telecom Bill and instead referencing the Cable Television Networks Act for regulatory guidance, the bill creates a clear distinction between the two sectors.

This approach ensures that the Telecom Regulatory Authority of India (TRAI)'s functions and powers in regulating transmission and tariffs related to broadcast services are preserved, as outlined in the Cable Television Networks Act. While this omission may not lead to substantial material changes in the regulation of broadcast services, it does establish a clearer regulatory boundary.

The decision to maintain this separation likely aims to streamline the regulatory frameworks, ensuring that each sector – telecommunications and broadcasting – is governed by its respective legislative and regulatory parameters. This distinction could be beneficial in addressing the unique challenges and needs of each sector more effectively. In essence, while the Telecom Bill focuses on the evolving needs of the telecommunications sector, the regulation of broadcast services continues to be guided by existing legislation, ensuring stability and continuity in regulatory practices for broadcasting.

Conclusion

In conclusion, the revised Telecom Bill ushers in a transformative era for India's telecommunications regulatory framework. The bill's comprehensive scope, encompassing the omission of exclusive inclusion of OTT services under telecommunications, the shift from "Exclusive Privilege" to "Authorization," and stringent user verification requirements, demonstrates the Government of India's dedication to modernizing and securing the telecom sector. Notably, the absence of fee refunds for surrendered licenses and the exclusion of an insolvency section signal a move toward increased financial accountability and a market-driven approach.

The policy shift in satellite spectrum allocation is particularly significant, with the inclusion of GMPSC licenses in Schedule 1 marking a departure from auction-based to administrative assignment. This is a substantial change for the satellite broadband sector and the allocation of spectrum for backhaul purposes.

Additionally, the bill's omission of a section on "Restructuring, Default in Payment, and Insolvency" represents a deliberate strategy by the Government of India to handle such scenarios separately. This absence marks a departure from previous approaches that provided a safety net for telecom operators in financial distress. The change is especially pertinent considering upcoming government dues for entities like Vodafone Idea. Without specific provisions in the bill for financial restructuring or insolvency, the responsibility for managing financial challenges shifts more heavily onto telecom operators, while the government adopts a more hands-off approach in these matters.

The renaming of USOF to "Digital Bharat Nidhi," with a broadened scope, and the distinct regulatory treatment of broadcast services, further underscore the bill's comprehensive approach. Overall, these changes collectively signal a significant step toward creating a dynamic, secure, and forward-looking telecom environment in India, positioning it to effectively navigate the challenges and opportunities of a digital future.