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Telecom regulator wants USO subsidy for all firms

Telecom regulator wants USO subsidy for all firms
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First Published: Fri, Apr 13 2007. 12 36 AM IST
Updated: Fri, Apr 13 2007. 12 36 AM IST
Operators such as Bharti Airtel, Spice Telecom and Tata Teleservices may benefit from a recommendation of the Telecom Regulatory Authority of India (Trai), that all cellular service operators sharing infrastructure be extended support from the government’s Universal Service Obligation (USO) Fund.
In a round of bidding for USO Fund support last month, most of the subsidies on offer in the form of rent-free towers for five years, was won by Bharat Sanchar Nigam Ltd (BSNL), India’s biggest phone firm, and its private rivals Reliance Communications, Hutchison Essar, Idea Cellular and Reliance Telecom.
BSNL had qualified for space on towers in 44 out of the total 81 clusters the USO Fund administrator had put up for bidding; Hutchison Essar in 27; and Idea Cellular at 26.
Most of the remaining spaces on towers were taken by Anil Ambani’s Reliance ADAG group, whose Reliance Communications won space at 35 areas and Reliance Telecom at 24, taking the total for the group to 59.
In comparison, Bharti Airtel, which demanded a higher subsidy than its rivals, got space just at 10 areas while Spice Telecom and Tata Teleservices failed to get any space on the 7,800 towers spread over the 81 clusters being set up under the project that the government expects will expand cellular networks into rural areas.
Trai raised concern over the fact that just three operators were being provided free towers and other passive infrastructure, such as sheds for housing electronic equipment to control radio base stations of cellular networks, which account for up to 65% of capital costs of setting up a network.
Trai pointed out that the scheme will lead to “asymmetric treatment” for the remaining service providers who, it feared, will not be able to compete with those who get access to towers for free.
“Financial incentive in some form will also be required by service providers (who are) not beneficiaries of USO Fund support to set up passive infrastructure. This will ensure fair play, generate competition and discourage any form of cartelization,” it said.
The telecom regulator suggested that the remaining operators be also provided a subsidy equal to 80% of that under the USO Fund scheme, if the towers were being shared.
Analysts said Trai suggestion, if accepted by the department of telecommunications (DoT), could increase the level of competition in rural areas.
“Providing for a slightly reduced subsidy achieves competition without negating the original bidding process,” said Prashant Singhal, industry leader for telecom at management consultant Ernst & Young.
Calls to DoT secretary D.S. Mathur for comment were not returned.
In other recommendations, the telecom regulator suggested that operators be allowed to share the majority of their active infrastructure, such as radio transmitters, cables, and antennae, to reduce the expense of setting up new mobile networks in rural areas.
As of now, only passive or ‘dead’ infrastructure, such as sheds, towers and the power supply, are allowed to be shared between operators.
Industry experts pointed out that with the inclusion of all the active components—excluding exchanges and intra-city cabling networks—nearly 85% of the cost of setting up a new network can be shared by more than one operator. In rural areas, where the usage levels are likely to be low, such sharing is seen as an effective model to keep costs low.
Trai also suggested measures to ensure non-discriminatory sharing between operators, many of whom had accused the state-owned BSNL of blocking efforts to rent space on its towers.
“All licensees must announce on their website the details regarding the existing and future infrastructure installations available for sharing with other service providers,” it said, setting a time limit of 30 days for the infrastructure-owner to respond to sharing requests and conclude a deal.
“At this stage, the mode of commercial agreement is being left to telecom service providers. However, the Authority could consider standard commercial format in future if process of infrastructure sharing does not pickup,” it added.
India’s cellular network, with some 166 million subscribers, is the fastest growing in the world by number of customers added every month. But such expansion has been mostly limited to its cities and small towns accounting for just over half the country’s area.
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First Published: Fri, Apr 13 2007. 12 36 AM IST