CCI WORKSHOP: SESSION I WITH STAKEHOLDERS

COMPETITION ISSUES IN THE TELECOM SECTOR

Communication between Regulators: Chairman of CCI highlighted the importance of formal lines of
communication between the CCI and other regulators including the TRAI and the DoT, as also
enshrined in Section 21 and 22A of CCI Act.

Regulation and Anti-Trust in Telecom Sector in facilitating Digital India (by Secretary of DoT)

i. Increasing focus on non-price competition

 From the consumer’s perspective: Focus is shifting to aspects such as network quality,
spectrum, Quality of Service, seamlessness of coverage, difference between promised and
actual speed of data, efficient response to consumer complaint, international roaming packages,
ease of making payments, OTT tie-ups etc.
 From a Macro Perspective
- increasing focus on not just market share, but concentrated evaluation of customer share,
revenue share, spectrum share.
- Assessment of entry barriers: high entry investment costs encourage an oligopoly and move
the market towards an monopoly
- It is difficult to be a niche player in all License Service Area and survive.
 From a Public Utility Perspective: In comparison to Water or Power where the government or
regulators play a role in fixing of prices, the Telecom Industry has followed the Doctrine of
Four-Variants: wherein as so far as the price is considered for consumers, the market forces
are sufficient to take care of competition and the consumer.

ii. Reforms in Telecom Sector

 Industry Point of View
- From a previously state-owned sector, it now has a 3+1 market structure, wherein
BSNL-MNTL have a 11% market share and the other 3 key players hold the rest.
- Post 2010, there have been auctions for spectrums.
- Sharing and harmonising of spectrums is permitted.
- Sharing of active infrastructure among players is seen.
- Virtual Network Operator license is being issued.
 Consumer Point of View
- Mobile number portability is allowed
- Consumer base has exponentially increased: India has the highest data-usage in
the world.
iii. Aspects to be considered by the Regulators
 Relationship between OTT and Telco: Whether it is symbiotic or competitive?
 Issues of Net Neutrality
 5G Spectrum: It will be introduced on a non-standalone basis (through 3G/4G) and
eventually on standalone basis.
 IoT and M2M: addressing issues of data privacy and security.
 Vertical Integration
 Unbundling
 Challenges of Financial Capacity

iv. Role of TRAI and CCI

While TRAI is a sector-specific body, which would set the rules in order to ensure fair play and a level-
playing field for actors in the market, the CCI has a cross-sector role in assessing the anti-competition
issues across sectors. The collaboration of the CCI, TRAI, DOT and I&B ministry is essential to
achieve all their objectives.

I. Existing threats to competition in India (Airtel)

While the low-cost set-up is suitable for consumers, the industry as a whole is financially stressed,
and their sustainability and survival, and their ability to invest is a question-mark.

Identified 5 key factors to be addressed:

i. Comparative Industry Structure

Current Telcom Market has a 3+1 structure as it uses the Rule of Three (as mentioned in the Market
Report of CCI). There is enough choice to the customers to choose from market players, and the
regulators have the authority to intervene in order to ensure pro-competitive practices. (Eg: Mexico)

ii. Financial Health

The cash flow in the industry is affected, creating an overall debt. The need of relaxations was
highlighted through a series of recommendations including reducing licensing fee to 3%, removing
USOs, bringing down SUC to 1%, removing regulatory levy on GST among others. The speaker
addressed the impact of this on the 5G rollout if the financial stress is not addressed.

iii. Anti-Competitive Behaviours

It was proposed that the CCI should closely observe new patterns of behaviour, such as the following:

 Leveraging the state power for providing exclusive access to one operator by way of right
of way, land etc as it can become a monopoly when the same advantage only gives to
one player
 Creation of wall garden of software and hardware platforms, by creation of exclusive
operating systems
 Entering into exclusive contract with vendors for development and supply of technology,
thereby disallows other market players in the market, the access to such technology can
hinder competition.
 Vertical integration with players in other services such as content OTT etc should be
closely observed.

iv. Creation of a level-playing field

Currently OTT has no specified rules in terms of license fees, security compliance needs, thereby,
making it an uneven playing field for other players in the market.

v. Unbundling of License

There is a need for more certainty in the licensing regime.

II. Addressing the Financial Health of the Industry (Vodafone)

Revenue generated in the telecom sector has been low due to the bad finances which are a result of
high tax rates. The need for relaxations to address this stress through nationalisation of levies and
taxes was highlighted, in order to have positive cash flow within the sector. To improve the financials
of the sector, positive closure on price consultations triggered by TRAI was suggested in order to
create stability in the sector in order to boost investments.

III. Proposed collaboration between Internet Companies and Telcos (Google)

The increasing internet usage in India was highlighted, while also observing the need to assess the
exclusionary and exploitative practices with respect to privacy through the Data Protection Legislation.
Collaboration of Telcos and Tech Companies through vertical integration can help accelerate
competition - Google is introducing a ‘Google for India’ 10 Billion USD Fund in order to launch
affordable smartphones for India in collaboration with Jio Platforms.

IV. Importance of Regulatory Aspects and checks in enabling competition (Jio)

India is a data driven market, where in an average of 12GB is used per month by a consumer. There
is a shift in user behaviour, and it has been possible because healthy competition in the market,
affordable carriers, efficient 4G technology, robust network expansion by TSPs and the regulatory
market. Certain potential regulatory concerns were also highlighted:

 Fair allocation of spectrum: there must be a timely and predictable availability of 5G

Spectrums for sustainable growth. The allocation should be through a fair auction.
 Creation of a level-playing field in licensing of spectrums
 TSPs’ tax relaxation
 Addressing the disparity between TSPs and OTTs: Currently OTTs have no obligations or
regulation and the creation of a balanced framework is the need of the hour. Issues of data
privacy, national security and feasibility should also be addressed.

V. Spectrum and Promotion of Competition (Parag – Qualcomm)

Improper spectrum management: Currently, the market is seeing the problem of spectrum lying idle
despite several rounds of auctions. The high price dissuades the operator from participating in the
auction. Therefore, the barrier to entry is making the market less competitive, and the prices of the
spectrum set are not true reflections of the market price.

Increasing Reserve Price of spectrums: the price of the spectrums is constantly rising since after a
particular auction when an operator takes a portion of the band, the TRAI doesn’t re-evaluate the
valuation of the spectrum, thereby elevating the price in the subsequent auction. This creates a
hesitation in the mind of the operator in participating in subsequent auctions given the high rate of the
spectrum.

Suggestions

 Rationalisation of Price: Every round of auction should take place using valuation metric as
decided by TRAI. If the spectrums are priced at a market evaluated amount, this becomes the
reference point for furture auctions, which becomes a challenge. The pricing should be done
on the reserve price, not having a link to the previous auction price. This would also help in
promoting responsible behaviour on the part of the operator, as he would more mindful of his
participation in an auction given the possibility of a decrease in price.

 Need for Secondary Market for Spectrums: Spectrum trading to players who need the same,
makes the market more robust. If a certain player is not using the available spectrum, the
government can take its residual value as a credit which could be swapped for something
which is potentially more useful.

 5G and Vertical Integrations: There is a need of band specific spectrum caps and adequate
spectrum availability to all 4 players in order to ensure harmony and fair competition in the
market.

VI. Net Neutrality and 5G (Facebook)

The non-price factors including data as a public good is increasingly play a significant role in
determining competition practices and have to be assessed in order to determine ‘harm’. It is
important to assess digital markets using an ‘evidence-based approach’ as propagated by the CCI to
avoid over-interference and stifling growth and innovation.

Moreover, it is important to contextualise the factors to assess competition. Data is used to determine
usage by users. The nature of data is non-rivalrous, equative and easy to replicate, therefore its
important to assess as to when data can itself create entry barriers. Data needs to be closely
observed, when it created an ‘entry barrier’ causing a foreclosure in the market.

Therefore, platform neutrality is essential and should be closely observed post – 5G as well.

VII. Challenges in Fast-Track 5G (TV Ramachandran)

 Widening Scope of Industry: Modern Telecom Network Is based on package switching and internet
protocol and therefore, new rules need to developed in accordance with the new digital market.
 Re-examine the level-playing field: Players in the field are currently the Telcom pipe and core
network infrastructures which can continue to be governed by TSP or Telcom licensing. However,
the modern services flowing through this pipe needs to be legitimately proved as internet content
and appropriately treated.
 Important to treat unequal’s in an unequal manner: Therefore, the characteristics of the ISP-TSPs
and of modern digital services should be assessed in order to determine their rights. (Rights of
TSP-ISP under Section 4 of the Telegraph Act – Right to Interconnection, Right of Way, right to
numbering resources, right to own core infrastructure etc. Therefore, under the licensing regime, if
the entities are differently placed and have differences in entitlement and obligation, the conditions
for them should also be different.
 Policy Desired for fast-tracking 5G: Given the porous nature of 5G into sectors beyond Telecom, it
is essential to create a policy, keeping its scope and reach mind. The policy should include the
following:
 Increased availability of fibre.
 Rationalise spectrum pricing outcomes from auctions. The Auction rules and the
determination of setting of reserve prices should be revealed.
 Facilitation of private networks for non-telecom verticals: TSP have the ability to set
up private network for industry verticals like healthcare. This should have a
specialised licensing process. For eg – in Germany, 70 private licenses have been
issued to companies like Lufthansa.
 E-band for back hall needs to be done to supplement fibre.
 Need for unlicensed spectrum is required for the use of hotspots and to determine
download capacity. Current broadband in India has the scope of improvement, the
need is of millions of Wi-Fi hotspots and more de-licensed spectrum. There is further,
a need to proliferate PM Vani Public Wi-Fi Hotspot to at least 10 million.
 Need to leverage SAT-Com policy, to give access to 5G in underserved areas and
difficult terrains.

VIII. Strengthening of market for infrastructure providers to enable competition (TR

Dua)

Importance of State Policy and Sharing Concept: By 2022, India will have 2.2 Million VTSs. The
current tower density is 0.42/ per 1000 whereas the goal is to have 1/per 1000.

Challenges:

 Right of Way: Despite the RoW rules brought in by the centre in November 2016, there still is
the challenge of exorbitant fee in terms of application fee, registration fee, sharing fee, rentals
etc demanded by the state.
 Lack of Uniform Guidelines: despite the indication by the centre in determining uniform
guidelines, the states have not prioritised the same.
  Poor E-mechanisms; there is no online forum for documentation processes which makes it a
tedious process.

Regulators’ Point of View:

 Enhancement of infrastructure sharing: This would lead to lower cost of deployment of ICT
broadband network to achieve widespread and affordable access to broadband. This would
further create an ease in entering market, given the low barriers to enter any operator,
reduced CapEx and OpEx, low service price and availability of effective and optimised
resources.
 National Digital Communication Policy 2018: This also has highlighted the need for active
infrastructure sharing by the DoT.

IX. Role of institutions in enabling competition – Brijesh

 Need for Institutional Change: there is a gap between the TRAI and the DoT, which needs to
be bridged in order to fasted the broadband delivery. Competition is maintained when there is
proper economic value pricing and enough business returns. The license service provider has
not envisaged the roll out of network, its cost and dealing with incumbent telecom operators.
Previously, when optimisation of resources took place using VPN etc, there were constant
notification regarding its impermissibility which led to high cost and players leaving the
market.
 Availability of Resources: there is a need to make the IP addresses and domain name
available and handle them in a strategic manner. In the past, when infrastructure started
rolling out, the capacity utilisation was less than the optimum and infrastructure sharing was
critical but not practiced.

Suggestions:

 Periodic Review: The advent of 5G, and other technological changes to be made creates too
many unforeseeable variables that become a hurdle in codifying them in contract. It was
suggested that like the Union Budget, there is a need to create a process to look at service
offering and business liability every few years.
 Institutional Entities: There should be some authorised entities to offer advances rolling on
viability, legality of new services that will emerge from 5G.