EXHIBIT 10.5
CONSULTATION PAPER NO. 2001/2
TELECOM REGULATORY AUTHORITY OF INDIA
CONSULTATION PAPER
ON
"INTERNATIONAL LONG DISTANCE SERVICES"
--------------------------------------
3rd September 2001, New Delhi
PREFACE
1. Following the announcement under the New Telecom Policy (NTP) 1999 that
international Long Distance (ILD) Service would be opened up, the
Government has more recently announced that this Service will be opened
up for private participation from 1st April, 2002. The Government has
sought TRAI's Recommendations on the modalities for opening up of the
ILD Service with specific reference to certain key issues. These
include terms and conditions of the license, number of players in this
field, selection criteria, license fee structure and other license
conditions.
2. In our country, liberalization of the telecommunications sector started
in the early I 990s. The opening up of Cellular Mobile Service sector
was followed by private participation in Basic Service and the National
Long Distance Service Sectors. While the liberalization of the ILD
Sector raises some issues similar to those arising in these other
cases, it also raises certain policy issues specific to the ILD
Service. Until some years ago, most countries operated International
Services through Government owned monopolies and used the surpluses
from this as well as Domestic Long Distance Services to subsidize Basic
Services. The situation has now changed in a large number of countries,
following adoption by them of other accommodating policies, including
tariff re-balancing and more detailed interconnection regime. As we
proceed to liberalize the ILD sector in India, here too we need to
consider these aspects of the matter. In the area of International
Services, some additional policy considerations become very relevant
due to aspects such as call-back, bypass and the fact that not all the
revenues are generated domestically.
3. The TRAI has identified the following issues as key determinants of the
policy regime under which the ILD Service Sector will be liberalized:
(a) Type and nature of competition
(b) Selection criteria
(c) Types of services to be permitted
(d) Terms and Conditions of the license
(e) License Fee Structure
(f) Carrier selection, interconnection regime and other technical issues
4. This paper gives information on the existing global scenario regarding
the ILD Sector, and provides a background for considering the various
policy/operational issues relating to the ILD Sector. Each Section of
the paper ends with a list of questions addressing various issues that
need to be addressed by TRAI before the recommendations sought by the
Government are provided. The objective is to solicit the views of
various stakeholders including Service Providers, Consumers, Consumer
Organizations or anybody else interested in the subject.
5. Since the Recommendations to the Government are to be made in a
time-bound manner, we would like to have the comments and views on any
or all issues raised in this paper on or before 30TH SEPTEMBER, 2001.
For further clarifications, Adviser (Fixed Network Division), TRAI may
be contacted on telephone number: 6166930. The fax number is 6103294
and e-mail is: trai@del2.vsnl.net.in. Submissions in electronic form
would be appreciated.
Sd/-
M. S. Verma
Chairman
New Delhi
3rd September, 2001
LIST OF CONTENTS
SECTION TOPIC PAGE NUMBER
1 INTRODUCTION 1
2 GLOBAL SCENARIO 3
3 TERMS AND CONDITIONS OF LICENSE 15
4 LEVEL OF COMPETITION 20
5 SELECTION CRITERIA 26
6 STRUCTURE OF THE LICENSE FEES 29
7 TECHNICAL ASPECTS 32
INTERNATIONAL LONG DISTANCE CARRIAGE SERVICES
1 INTRODUCTION
1.1 For opening up of the Telecom Service Sector, policy makers generally
consider the Local, National Long Distance and International Long Distance
Networks segments as separate entities. The sequence in which these three
segments are opened up for private participation varies from country to country.
However, a large number of countries have either introduced or are considering
to introduce competition in the International Long Distance Service sector, as
it is considered to be one of the most lucrative segments of the Telecom
Network, where private sector participation can benefit the customer in terms of
price reduction and improvement of Quality of Service (QOS).
1.2 In our country, the liberalisation process in the Telecom Service sector
started in early 1 990s. Liberalisation in the Cellular Mobile preceded that in
Basic Services, and the National Long Distance Services (NLD) sector is now
being opened up. The Government has now decided to open up the International
Long Distance Segment of the Telecom Service sector and has sought
Recommendations of TRAI on the issue of ILD License. Annexure l contains the
Government's reference to TRAI on this matter, which seeks recommendations on:
a) Terms and conditions of the license
b) Number of players in this field
c) Selection criteria
d) License fee structure
1.3 The Government has already made the policy decision that the
International telecom sector will be opened up for private participation. In
this context, one of the important questions to be considered will be to
examine, what kinds of services may be allowed to be provided by the ILDO. For
example, should the ILD 1 License provided under the liberalised environment
include in addition to Telephony Services, Lease Line Services and Multi-Media
Services including data and video services. Likewise, there is a need to
consider the Nature of Competition and Number of ILDO Operators, Conditions for
Eligibility and Selection of Operators, License Fee Structure and Technical
Aspects.
1.4 Chapter 2 gives information on the Global Scenario, and provides a
background for considering the various policy matters raised in this paper.
Chapter 3 discusses the issues relating to Terms and conditions of License.
Chapter 4 addresses the issue of Level and Nature of Competition, e.g. the
number of International Long Distance Service Providers. Selection Criteria are
covered in Chapter 5, Chapter 6 discusses the Structure of License Fees, and
some technical issues are raised in Chapter 7. Each Section contains at the end
a list of questions which address the various policy matters that need to be
considered for meking policy recommendations with respect to liberalisation of
the ILD sector in India.
2
2. GLOBAL SCENARIO
2.1 This Section provides a background to a number of policy considerations
that are relevant to liberalisation of the International Long Distance sector.
This background is provided in terms of the global scenario pertaining to these
maters. Before proceeding with these details, it would be useful to take a look
at the Network statistics of the incumbent Indian international Long Distance
Operator, namely, VSNL, which are indicated in the Table 1 below:
TABLE 1. VSNL'S PAID MINUTES AND NETWORK STATISTICS, 1995-96 TO 1999-2000
SI Item 95-96 96-97 97-98 98-99 99-2000
No
1. Telephone Paid 114.8 138.5 168.5 193.5 224.6
Minutes(in Crores)
2. Transit Paid 0.670 0.524 0.745 0.905 0.427
Minutes
(in Crores)
Number of Internet Users 4151 20042 90042 213045 366432
4. Number of 12873 14184 15431 17922 19722
International
Telephone Circuits
5. Number of 245 402 603 661 659
High Speed Data
Circuits
6. Total International 4473 5285 6436 7176 7230
Operator's (i.e.
VSNL's Revenue (in
Rs. Crores)
Source: VSNL Annual Reports
3
BACKGROUND
2.2 Until recently most countries operated international Services through
Government owned monopolies and used the profits from Long Distance Services to
subsidise Basic Servi~es i.e., Local rental and call charges. In many countries
such as Japan (KDD), Australia (OTC), India (VSNL), Thailand (CAT), the monopoly
ILD Services were operated by an entity different from the National Telecom
Operator. In a number of Commonwealth countries, a private company, Cable and
Wireless, operated the Services either under license or in partnership with the
Government. In our neighbouring countries, such as Myanmar, Sri Lanka and in
certain African countries like Zimbabwe etc., the National PSTN Operator also
operated the International Services. In the 1990s, when the telecom reform
process gained momentum, some countries permitted competition by licensing a
second Operator to offer International Services; e.g Satel Indo (Indonesia
1994), China Unicorn (China 2000). In some countries, the incumbent National
PSTN Operator was allowed to enter the International market as a second operator
e.g., Telstra in. Australia; NTT Japan (1998). In some instances, this was done
indirectly by enlarging the scope of the licenses of the existing Cellular or
PSTN Operator to include ILD Operations like in Zimbabwe and Uganda.
2.3 During the 1990's, particularly in the second half of the decade, there
has been a sharp rise in the number of countries that have introduced
competition in the ILD sector, and the policy regime has allowed much larger
number of operators, including open competition. This can be seen from Table 2
below.
4
TABLE 2. COUNTRIES WHICH HAVE ALLOWED COMPETITION IN THE ILD SECTOR, 1990
TO 1998
1990 1995 1998
Japan, New Zealand, Japan, New Zealand, Japan, New Zealand,
UK, USA UK, USA UK, USA
Australia, Canada, Australia, Canada,
Columbia, Chile, Columbia, Chile,
Denmark, Finland, Denmark, Finland,
Korea, Malaysia, Korea, Malaysia,
Philippines, Sweden Philippines, Sweden
Austria, Belgium,
Brunel, DPR Congo,
Dominican, Republic, El
Salvadore, France,
Germany, Ghana,
Guatemala, Hong Kong
(China), Indonesia,
Ireland, Israel, Italy,
Mexico, Netherland,
Norway, Peru, Russia,
Somalia, Spain,
Sweden, Switzerland,
Uganda, Ukraine
SHARE OF ABOVE FOUR SHARE OF ABOVE FOURTEEN SHARE OF ABOVE THIRTY
COUNTRIES IN ILD COUNTRIES IN ILD NINE COUNTRIES IN ILD
ORIGINATING originating ORIGINATING TRAFFIC: 74%
TRAFFIC: 35% TRAFFIC: 46%
Source: ITU
2.4 A number of salient features emerge when we consider the countries that
have opened their 1LD sector to competition.
5
(A) COUNTRIES THAT HAVE INTRODUCED COMPETITION IN ILD INCLUDE BOTH THOSE
WITH LARGE AS WELL AS SMALL SHARES IN GLOBAL INTERNATIONAL TRAFFIC
2.5 Table 3 below shows the top 20 ILD operators in terms of total traffic in
1998. While most of the companies in this list are from countries mentioned in
Table 2 above, we also have companies from China, Saudi Arabia, and India, i.e.
countries which do not figure in Table 2. The top 20 companies account for a
bulk of the global ILD market, and a comparison of Tables 2 and 3 shows that
there are several countries in Table 2 which have allowed open competition
without necessarily a large presence in world ILD sector.
2.6 Table 3 shows that the Indian ILD operator, VSNL, is also in the top 20
operators of international traffic. This is mainly because of the incoming
traffic, which far outweighs the importance of outgoing traffic for VSNL. For a
comparison, the top 20 ILD operators in terms of outgoing international traffic
are shown in Table 4 below.
6
TABLE 3. TOP 20 INTERNATIONAL TELECOMMUNICATION OPERATORS RANKED BY 1998 TOTAL
MINUTES (OUTGOING PLUS INCOMING) MINUTES OF INTERNATIONAL TELEPHONE TRAFFIC
OPERATOR (COUNTRY) INTERNATIONAL TELEPHONE TRAFFIC, MINUTES 1998 INTERNATIONAL
TELECOM REVENUE
BOTH WAYS OUTGOING INCOMING TOTAL CHANGE
(US $M) (97-98)
Total Change Total Change Total Change
(m) (97-98) (m) (97-98) (m) (97-98)
1 AT&T (United 15,113 4.0% 10,452 1.2% 4,661 11.0% 7,533 -9.8%
States)
2 Deutsche Telekom 10,747 3.0% 4,711 -2.1% 6,036 7.4% 3,357 -16.4%
(Germany)
3 MCI WorldCom 10,257 2.0% 7,195 -1.6% 3,062 11.6% 4,243 -10.5%
(United States)
4 France Telecom 7,300 9.0% 3,400 9.7% 3,900 8.3% 1,859 -17.3%
(France)
5 BT (United Kingdom) 6,350 10.2% 2,710 4.5% 3,640 14.9% 924 -14.2%
6 Telecom Italia 5,289 9.5% 2,339 5.9% 2,950 12.6% 1,438 0.6%
(Italy)
7 Sprint (United 4,795 6.4% 2,916 4.4% 1,879 9.8% 18,202 1.1%
States)
8 DGT (China) 4,212 4.5% 1,712 4.9% 2,500 4.2% 2,200 3.0%
9 Hongkong Telecom 3,818 3.8% 1,718 -2.1% 2,100 8.2% 1,995 -17.7%
(Hongkong Sar)
10 Tselefonica (Spain) 3,704 16.1% 1,803 15.1% 1,901 17.0% 813 -3.9%
11 Swisscom 3,680 - 1,901 -2.9% 1,779 3.3% 1,379 2.2%
(Switzerland)
12 KPN (Netherlands) 3,443 6.0% 1,606 4.6% 1,837 7.3% 847 -23.6%
13 Telmex (Mexico) 3,286 -12.8% 880 -12.8% 2,406 -12.8% 879 -24.3%
14 C&W Com. (United 2,670 36.2% 971 27.3% 1,699 41.8% 0 36.0%
Kingdom)
15 Belgacom (Belgium) 2,621 0.0% 1,271 -5.1% 1,350 5.3% 548 22.2%
16 PTA (Austria) 2,270 16.2% 1,130 13.5% 1,140 19.0% 424 2.0%
17 Singapore Telecom 2,251 25.6% 1,161 23.2% 1,090 28.2% 1,267 7.3%
(Singapore)
18 KDD (Japan) 2,200 3.3% 1,105 0.2% 1,095 6.6% 1,903 -5.0%
19 Teleglobe (Canada) 1,905 3.1% 1,145 3.0% 760 3.2% 631 -18.3%
20 VSNL (India) 1,679 21.2% 422 9.6% 1,257 25.7% 1,600 11.8%
TOP TWENTY 99,062 6.0% 51,252 2.7% 47,810 9.7% 35,660 -7.3%
SOURCE: ITU FOR TABLES 3 AND 4
TABLE 4. TOP 20 INTERNATIONAL TELECOMMUNICATION OPERATORS RANKED BY 1999
MINUTES OF INTERNATIONAL OUTGOING TRAFFIC
OPERATOR (COUNTRY) INTERNATIONAL OUTGOING INTERNATIONAL
TELEPHONE TRAFFIC TELECOM REVENUE
FISCAL (MILLION) % (M US $) % AS % OF
YEAR CHANGE CHANGE TOTAL
1998-99 1998-88 TELECOM
REVENUE
1 AT&T (United States) 31 Dec 10,900.0 4.3% 4,921.0 -7.7% 7.9%
2 MCI WorldCom (United 31 Dec 8,306.0 15.4% 3,489.0 27.1% 8.6%
States)
3 Deutsche Telekom 31 Dec 3,860.0 -18.1% 1,493.5 -53.1% 8.0%
(Germany)
4 Sprint (United States) 31 Dec 3,640.0 24.8% 825.0 -10.5% 4.1%
5 France Telecom (France) 31 Dec 3,200.0 -5.9% 1,333.5 -24.7% 4.6%
6 BT (United Kingdom) 1 Apr 2,679.0 -3.9% 1,143.5 -10.9% 4.6%
7 Telecom Italia (Italy) 31 Dec 2,390.0 2.2% 1,359.2 -9.4% 4.7%
8 Tselefonica (Spain) 31 Dec 1,935.0 14.5% 836.4 7.8% 3.4%
9 China Telecom (China) 31 Dec 1,760.0 2.8% 1,703.5 -26.2% 6.2%
10 Hongkong Telecom 1 Apr 1,668.3 -0.8% 2,005.7 -17.9% 55.0%
(Hongkong Sar)
11 KPN (Netherlands) 31 Dec 1,625.0 1.6% 756.5 -6.1% 7.8%
12 Swisscom (Switzerland) 31 Dec 1,440.0 -24.3% 875.3 2.5% 11.8%
13 Belgacom (Belgium) 31 Dec 1,288.0 1.3% 601.9 -11.5% 14.6%
14 PTA (Austria) 31 Dec 1,178.0 4.2% 386.7 -4.3% 9.8%
15 Teleglobe (Canada) 31 Dec 1,130.0 -1.3% 423.3 -32.8% -
16 KDD (Japan) 1 Apr 1,096.2 -1.4% 1,458.8 -19.3% 27.8%
17 Telmex (Mexico) 31 Dec 1,063.1 3.9% 1,206.9 27.2% 12.0%
18 Etisalat (United Arab 31 Dec 963.3 10.1% 583.4 14.3% 34.6%
Emirates)
19 STC (Saudi Arabia) 31 Dec 932.6 16.4% - - -
20 Chungwa Telecom 30 Jun 897.5 8.7% 1,303.1 55.4% 21.2%
(Taiwan-China)
TOP 20 51,952 2.7% 26,706.2 -10.3%
7
(B) A POLICY OF OPEN COMPETITION DOES NOT NECESSARILY IMPLY A LARGE
NUMBER OF OPERATORS
2.7 The fact that the policy regime allows open competition does not
necessarily imply induction of a large number of ILD operators in this sector.
Table 5 below shows that the number of ILD operators may be similar for both
those countries which have allowed open competition and others. Hence, it is
noteworthy that the number of operators depends not only on the policy regarding
open competition but also on economic factors, such as the market size, and the
terms and conditions of entry and operation.
TABLE 5. NUMBER OF INTERNATIONAL LONG DISTANCE OPERATORS WITH
SIGNIFICANT MARKET SHARE IN SOME COUNTRIES
COUNTRY NO. OF
OPERATORS NAME OF OPERATOR
Australia 2 Telstra, Optus
China 2 China Telecom; China Unicorn
Korea 3 Korea Telecom
DACOM Corporation
ONSE Telecom
Japan 3 Kokusai Denshin Denwa Co Ltd., (KDD)
International Telecom Japan Inc (ITJ)
International Digital Communications Sinc
(IDC)
UK 3 British Telecommunications plc, C&W Comm,
Kingston Communication (Hull) plc
USA 5 AT&T, MCI Worldcom, Sprint, WorldxChange,
Pacific Gateway Exchange Inc.
Indonesia 2 PT Indosat; PT Satelindo
Source: APT H
2.8 Another noteworthy feature in this regard is that even if the number of
licensees may be large, the actual number of service providers are not as many.
For instance, if we consider the situation in the European Union, as on 1st
August 1999, there were 490 Operators authorised to offer International Network
Services, but only 187 were actually offering these services (please see Table 6
below).
8
TABLE 6. NETWORK OPERATORS AND SERVICE PROVIDERS WITH LICENSE FOR
INTERNATIONAL LONG DISTANCE SERVICES IN EUROPEAN UNION AS ON 1ST
AUGUST 1999 AND PROVIDING ONE OR MORE OF THE LICENSED SERVICES
Country Network Operators and Network Operators and Service Providers
Service Providers actually offering one or
authorised to offer more Licensed Services
Belgium 25 11
Denmark 4
Germany 10 2
Greece 1 9
Spain 14 1
France 15 2
Ireland 21 15
Italy 4 11
Luxemburg 15 4
Netherland 82 4
Austria 33 63
Portugal 10 0
Finland 18 16
Sweden 59 1
UK 179 41
Note: In European countries, there are two type of Licenses i.e., one for
facilities based operation and the second only for Service provision. The latter
are a kind of resellers of call minutes. In some countries, Operators have
common License for all Services.
2.9 Table 6 includes Network Operators who install, manage and operate their
own facilities i.e., Transmission and Switching Systems to provide public
telephony/ Network services. Service Providers are a kind of resellers, who
purchase Network capacity i.e., lease line or minutes of use and offer services
to their customers. Operators engaged exclusively in activities like call-back,
calling card operators or billing and marketing of International traffic are not
included in Table 6. However, in certain countries, the total number of
9
licensees may be over-estimated as a common license is provided to operators
which are allowed to provide a particular service but may plan to remain only in
a limited market segment and not provide all the services that the license gives
it the flexibility to offer.
(C) COMPETITION IS INTRODUCED THROUGH ILDOS AS WELL AS THROUGH RE-SELLERS
2.10 As indicated in Table 6, a number of countries have also permitted
Resellers or Service Providers in the market. This results in greater
competition in certain regions of the country, depending on the number of
resellers in that region. it also increases the number of the licensees
operating in the country to provide International Telecom Service, thus
providing greater choice to the customers.
(D) TARIFFS HAVE GENERALLY DECLINED FOR INTERNATIONAL TRAFFIC, A TENDENCY
THAT HAS GOT ENHANCED DUE TO GREATER COMPETITION
2.11 In general, enhanced competition also implies reduction in tariffs. For
the International telephony sector, this decline has taken place also due to the
tariff re-balancing exercise that is underway in a large number of countries. In
the European Union, the average price of International Long Distance calls
between year 1997 and 2000 has declined by 32% for Residential Users and 34 %
for Business users. Within this period in India, which has the same rate for
business and residential users, International call charges have declined by 32.8
to 34.7% depending upon the ILD category (geographical slab).
(E) GROWTH OF OUTGOING MINUTES OF INTERNATIONAL TRAFFIC DIFFERS ACROSS
COUNTRIES, INCLUDING THOSE WITH OPEN COMPETITION
2.12 Though there is a general decline in International tariffs, the outgoing
International traffic has not necessarily increased for all countries, including
some with open competition. This is because the outgoing International traffic
depends also on the relative decline in tariffs in different countries, economic
10
prosperity of a country, and the possibility of call-back due to arbitrage in
traffic. Thus, while in general there has been an increase in outgoing calls
from countries which have Iiberalised in recent years, this is not a uniform
picture across all such countries (please see Table 7 below).
TABLE 7. OUTGOING MINUTES IN SELECTED COUNTRIES WHICH INTRODUCED
COMPETITION BETWEEN 1995 AND 1998 (IN MILLION MINUTES)
COUNTRY 1995 1998 1999
Austria 901 1250 1178
Belgium 1106 1460 1590
France 2850 4043 4386
Germany 5238 5900 7385
HK (China) 1692 1880 2720
Indonesia 206 310 251
Ireland 407 885 1015
Israel 266 661 804
Italy 1839 2285 2500
Mexico 950 1316 1563
Netherlands 1459 1805 2150
Norway 437 461 567
Peru 63 99 111
Russia 897 1038 1008
Spain 1063 1803 1934
Switzerland 1733 2034 2256
2.13 There are a number of other policy issues which need to be considered in
the context of the liberalisation of the International telecom sector. These
include, for example, duration of the license, types of "tele" and "bearer"
services permitted for the ILD operator, methods of issuing licenses (bidding,
beauty parade, any other), whether equal ease of access is available to the
subscribers the evolution of the market share of the incumbent after opening up
of the market. These are addressed below.
2.13.1 DURATION OF THE LICENSE
The duration of license for International Telecom Service may vary from
country to country. For example, New Zealand provides Licenses for unlimited
11
period. Singapore provides licenses for 10 to 20 years depending upon status as
Reseller or Network Operator. Malaysia provides Licenses fo Network facilities,
Network Services and Content Application Services for 10 years duration. For
application Services it is 5 years.
2.13.2 TYPES OF "TELE" AND "BEARER" SERVICES THAT ARE ALLOWED FOR THE
ILD OPERATOR
Bearer services are a type of telecommunication services that provides
the capability for the transmission of signals between user-network interfaces.
Some of the examples of bearer service include service provided include circuit
switched 3.1 KHz audio bearer service; ISDN user access with circuit switched 64
kbit/s unrestricted and circuit switched 3.1 KHz audio bearer services; and 64
kbit/s, 8KHz structured for speech.
Teleservices are a type of telecommunication services that provides
complete capability, including terminal equipment functions, for communications
between users according to established protocols. It includes telephone,
telefax, videotex and videotelephony services.
In conjunction with bearer and teleservices, a set of supplementary
services like Calling Line Identification, call forwarding, call waiting, advice
of charge etc. are also available.
European Union and many other countries allow various types of
teleservices and bearer services.
2.13.3 WHETHER EQUAL EASE OF ACCESS IS PROVIDED TO SUBSCRIBERS
When multiple operators are part of the market, a level playing field
requires that the subscribers have equal ease of accessing any of the operators.
This may be through dynamic call-by-call selection or through preselection of
the operators by the subscribers. Experience has shown that often the incumbent
12
is reluctant to introduce Equal Ease of Access, i.e., he does not favour
introduction of additional digits required to be dialled for Carrier Selection
as also Pre-selection. However, in India this process is already progressing in
the National Long Distance Sector. The issue will have to be tackled also for
the ILD sector. The Figure below shows the percentage of population in European
Union countries which have choice of selecting more than one International
Carrier i.e. percentage of population with Equal Ease of Selection in
International Long Distance Services.
GRAPHICS OMITTED
13
2.13.4 THE EVOLUTION OF THE MARKET SHARE FOR THE INCUMBENT AFTER OPENING UP.
By definition, the market share of the incumbent will fall after the
market is opened up. But the extent of this decline can vary, depending on a
number of factors, including the time period of market opening and the
competitive strategies used by the incumbent. Such differences in market share
can be seen in the chart below which provides a view of the Incumbent Operator's
market share in international Long Distance Services in years 1997, 1998, 1999
and 2000 (projected) in various countries of European Union. In certain other
cases, such as for Hong Kong, Japan, and the United States, the decline in
incumbent's market share has been larger than the general picture shown in the
figure below.
GRAPHICS OMITTED
14
3. TERMS & CONDITIONS OF LICENSE
3.1 TYPE OF SERVICES AND TECHNOLOGIES
3.1.1 In developing countries, including India, more than 90% of
International traffic is at present voice telephony. Volume of telecommunication
data traffic is, however, picking up fast. Voice Services through Internet
packet Networks are also likely to be offered in a big way in the near future,
particularly in the developed countries. One important policy issue is whether
to give different licenses for Voice and data services or to allow several
selected tele and bearer services under the license of International Long
Distance Operators. Yet another possibility is to adopt a technology neutral
approach and grant the License for bearer Services. Since ILD is essentially a
Carriage Service, most of the developed countries have not specified any
teleservice, as these Services are mainly derived from the Customer's Premises
Equipment (CPE), which is provided by the Access Providers.
3.1.2 Limiting licenses to a specific type of bearer or tele service, may
lead to sub-optimal utilisation of the costly international bandwidth if it
involves building separate international backbones for different tele services,
such as voice, data, video etc. In a highly competitive and rapidly changing
technical environment, Operators may find it difficult to prepare optimum
business and corporate plans if they are restricted to a particular service or
technology. Further, the Licensor and Regulator may find it difficult to monitor
violations of the license conditions. On the other hand, proliferation of
technologies can lead to difficulties in Interconnection arrangements and
maintenance of QOS standards, as some of the nascent technologies do not
guarantee Quality of Services for real time traffic generated by voice and video
services. Unregulated service without any QOS guarantee on a particular segment
of the Network can lead to undesirable commercial practices, and problems for
operators who provide end to end Services.
15
3.1.3 It is worth careful consideration at this stage as to whether existing
license formats, which specify Network architecture such as PSTN, PLMN and also
protocols such as GSM, CDMA etc, should be adopted for ILD Licenses as well.
Issues like fixation of tariffs for such Services, principles to be followed for
revenue sharing between Interconnecting Operators etc. also require discussion.
While Considerable progress has been achieved in addressing these issues for
PSTN based circuit switching techniques, there is a need to develop principles
and concepts for packet switching (VOIP) technologies, when they are employed to
carry real time voice.
3.2 INTERCONNECTION AND NETWORK DEFINITION
3.2.1 International experience shows that in the ILD market, both Facility
based and Non-Facility based Operators have been permitted in a number of
countries. The latter are called Re-sellers or Virtual ILDOs. Generally in
developing countries where infrastructure availability is restricted, re-sellers
as ILDOs were not permitted in the first phase of opening up of the ILD market.
3.2.2 The Interconnection issues depend on the nature of the Network
architecture allowed for ILD Operators. Three possible options in this regard
are the following:
A) CONFIGURATION I
The scope of International Long Distance Network is defined as
consisting of International Gateway Switches, International Circuits and
National connectivity to the nearest gateway switch of the NLDOs, as shown in
the Figure "I" in Annexure II.
B) CONFIGURATION II
The scope of International Long Distance Network is defined as consisting
of International Gateway Switches, International Circuits and National
connectivity to the Access Providers at the Telecom Circles through leased
16
lines, as shown in the Figure "II" in Annexure II. It would then by-pass the
network of NLDOs. This may create some techno-legal problems.
C) CONFIGURATION III [EXISTING VSNL CONFIGURATION]
VSNL, the incumbent International Long Distance Operator has
International Gateway switches at all Metro and some other stations like
Jallandhar, Ernakulam, Kanpur and Gandhinagar (Ahmedabad). Generally all Level I
TAXs have direct Routes to more than one Gateway Switch of VSNL. This may appear
similar to a Interconnection with an NLDO. Many of the Level II TAXs also
generally have direct routes to at least one Gateway switch based on traffic and
techno-economic considerations. This may appear similar to connectivity to BSOs.
At present VSNL switches do not have direct connectivity to Cellular Networks.
In this approach, we will have to permit installation of International Switches
generally at Level I LDCAs i.e., roughly one in each State. This could result in
by-passing the NLDO's infrastructure giving rise to legal and regulatory issues.
3.2.3 The present Draft License Agreement for NLD Services does not provide
for direct connectivity of ILDOs with Access Providers. NTP'99, however,
mentions about such an option. The Draft License Agreement for new BSOs mentions
that for International Long Distance call, the BSO shall access International
Long Distance Operator through National Long Distance Operator only.
3.2.4 If the ILDOs are permitted to set up multiple gateways and inter-link
them, there may not be much difference between the first configurations above.
It is also noteworthy that any decision in this regard should be considered for
application to VSNL also.
3.2.5 Configuration "I" above could allow the ILDO to provide Services with a
minimum investment i.e. with the establishment of a single gateway switch. All
17
other facilities could be leased, and as traffic increases, additional gateways
could be established. Number of Point of Interconnections at minimum level could
be specified as one with each NLDO. As such Roll-out could be immediate and
there may not be a need for any mandatory Roll out obligations.
3.2.6 Under configuration "II" above the ILDO would be able to pick up
traffic directly from the Access Providers, by-passing the NLDO, because the
ILDO would establish Points of Presence (POP) in all territorial Circles where
BSOs and CMSPs are licensed. The ILDO could have various options i.e. to
establish POP by leasing transmission capacity from the NLDO/infrastructure
Providers, or lease both switching and transmission capacity from the NLDO, or
to lease switching capacity from NLDO and transmission capacity from
Infrastructure Providers, or establish its own infrastructure. In this
configuration, there may be a need to have Roll-out obligations along with
associated time periods so that advantages of competition to telecom users are
not confined to pockets of high revenue generating Telecom Circles only.
3.2.7 Under configuration "III", the number of Interconnections with the NLDO
and Access Provider's Switches will depend upon traffic thresholds. For example,
if traffic from any Level II TAX station to ILDO justifies direct connectivity
with say a minimum of two 2Mb/s streams, the same will be required to be
provided by ILDO. For all Level I TAXs, direct Route in any case will be
mandatory. In this configuration too, there may be a need to have Roll-out
obligations along with associated time periods.
3.3 TIME PERIOD OF LICENSE
3.3.1 Time Frame for the License Should be such that it provides an adequate
time to achieve a reasonable return of investment and to plan for the disposal
of assets. A short license period raises the problem of the disposal of the
Network at the end of the license period. The closure of the business may not
18
affect users substantially if other ILDOs take over quickly. However, the
Networks may not be easily disposed off as they are likely to become rapidly
obsolescent because of technology change.
3.3.2 Basic and National Long Distance Services are licensed for a period of
20 years, with a provision for extension of the license period. The issue arises
whether a similar time period should be provided for ILDOs also.
3.4 The discussion leads to following set of questions:
QUESTION 3A) WHAT ARE THE TYPE OF TELE AND BEARER SERVICES THAT SHOULD BE
PERMITTED AS PART OF ILD LICENSE PROVIDED UNDER THE LIBERALISED ENVIRONMENT?
CONSIDERING THE FACT THAT TELE SERVICES ARE BASICALLY DERIVED FROM BEARER
SERVICES BY THE CUSTOMER'S PREMISES EQUIPMENT (CPE), WHICH IS PROVIDED BY BSOS,
IS THERE A NEED FOR THE ILD LICENSEE TO SPECIFY TELE SERVICES? WILL IT NOT BE
ADEQUATE, IF IT SPECIFIES CERTAIN BEARER SERVICES AND OTHERWISE ADOPTS A NEUTRAL
APPROACH IN SO FAR AS SPECIFIC TELE SERVICES ARE CONCERNED?
QUESTION 3B) VSNL HAS INTERNATIONAL GATEWAY SWITCHES AT A FEW METRO CITIES, SUCH
AS MUMBAI, DELHI, CHENNAI, CALCUTTA ETC. WILL IT BE THE MOST APPROPRIATE
ARCHITECTURE WHEN THERE ARE MULTIPLE ILDOS? SHOULD WE MANDATE A SIMILAR
ARCHITECTURE FOR PRIVATE ILDO?
QUESTION 3C) THREE DEPLOYMENT OPTIONS OF INTERCONNECTIVITY, VIZ A) WITH NLDOS
ONLY, B) DIRECTLY WITH ACCESS PROVIDERS, AND C) THE EXISTING VSNL DEPLOYMENT
PRACTICE, HAVE BEEN DISCUSSED IN THE, CONSULTATION PAPER? WHICH OF THESE OR ANY
OTHER SHOULD BE THE PREFERRED OPTION AND WHY?
QUESTION 3D) SHOULD A SET OF ROLL OUT OBLIGATIONS BE IMPOSED ON ILDOS SIMILAR TO
THE PATTERN OF BASIC SERVICE AND NLD LICENSES ALONG WITH ASSOCIATED PENALTIES
FOR NON-COMPLIANCE FOR ESTABLISHING SERVICES AND POPS?
QUESTION 3E) WHAT SHOULD BE THE LICENSE PERIOD FOR AN ILD LICENSE?
19
4. NATURE OF COMPETITION
4.1 Competition in a market depends on the number of players and the
flexibility provided to these players to operate in the market. The determinants
of competition in ILD may be considered in terms of:
a) Type of competition, that is whether only operators or carriers who
own facilities such as switches (POP) be allowed to compete or switchless
Re-sellers of International bandwidth shall also be permitted to enter the ILD
market as is the practice in developed countries such as USA/Canada.
b) Level of competition, i.e., whether we permit a limited number of
players in the first phase and then open up unlimited competition including
Re-sellers in the second phase.
c) Time period for implementing the policy regime for competition.
4.2 TYPE OF COMPETITION (ILD OPERATORS CARRIERS OR RE-SELLERS):
4.2.1 Competition can be introduced either through Facilities-based or
Non-Facilities Operators. Facilities based competition involves licensing of
Operators, who operate their own facilities. Non-Facilities based competition,
would entail competition by Operators who do not operate their own facilities,
but lease them from facilities based operators.
4.2.2 Three different entities may be considered in this context.
a) International Long Distance Operators (ILDs), who build their own
Network to provide bearer or carriage services to other operators such as NLDOs
and Access Providers.
20
b) Switch based re-sellers, who lease transmission systems from both
International National Infrastructure providers.
c) Switch-less re-sellers who purchase bulk minutes from International
Carriers and offer Services to their customers i.e. they do not have their own
transmission system or switching system.
4.2.3 ILDO is essentially a Carrier's Carrier. One policy issue to consider
is whether to make it mandatory for the ILDOs to establish switching facilities
in the country. For inland facilities, ILDOs can either build their facilities
or lease them from Infrastructure Providers.
4.2.4 As far as International links are Concerned, the minimum facility
required by a facility based ILDO can be an earth station and gateway switch
connected to the National/International Networks. Non-Facility based Operators
can lease switch as well as circuit capacity from others, basically selling
switched bearer service to other operators such as NLDOs/BSOs/CMSOs.
4.2.5 Availability of adequate wholesale capacity with the existing
Infrastructure Providers or International Backbone Providers are essential
pre-requisites for the introduction of Non-Facilities based competition
International trends show that Re-sellers are generally permitted in more mature
markets, where infrastructure is well developed and tele-density is high. The
consultation process needs to address the option of whether to permit Re-sellers
as the ILD Sector gets opened up, and the appropriate timing of the same.
4.3 LEVEL OF COMPETITION
The level of competition depends on the number of operators in a
particular market. The number of operators may be pre-determined by the
policy-maker in case of limited competition (duopoly/ oligopoly) or left to the
market forces, in the case of unlimited competition. The focus in this paper is
to determine the policy regime regarding the level of competition, because the
21
actual number of ILD operators in the market does not necessarily depend only on
what the policy permits. This is evident from a comparison of the policy regime
and number of ILD operators in various countries, shown in Section two of this
paper.
4.3.1 LIMITED COMPETITION:
We define Limited competition to mean fixing the number of
players. This can lead to Duopoly or oligopoly as described below:
4.3.1.1 DUOPOLY:
A duopoly market structure means only two powerful operators A number
of countries have a duopoly market structure in the first phase of
liberalisation of the ILD market. The duopoly market structure limits
competition and provides a profitable market to the new entrant. At the same
time, by reducing the extent of competitive pressure, the incumbent gets a
longer time to adjust to the changed environment. However, the prices tend to
remain higher than under a situation of greater competition and this implies a
larger burden on the consumer.
4.3.1.2 OLIGOPOLY
In an oligopolistic market structure, normally three or four operators
with significant market power are present. The oligopoly market may arise either
due to the policy maker specifying that only a limited number of operators will
be allowed in the market or because the market may itself give rise to a limited
number of operators, under the entry and operating conditions specified by the
policy maker.
In the latter situation i.e. where the policy maker does not specify a
limit on the number of operators, the focus is not on determining the number of
22
operators but on the entry and operating conditions. These issues are raised
under the sub-section "Unlimited Competition".
In oligopoly/ multipoly, the operators face greater competition than
duopoly and therefore have lower profit opportunities. The relatively higher
competition, however, reduces prices faced by Consumers and provides greater
incentives to operators for being innovative in terms of their service and price
packages.
4.3.2 UNLIMITED COMPETITION OR MULTIPOLY
4.3.2.1 In Unlimited competition, market forces determine the number of
players which may lead to multipoly i.e. a large number of players and none of
them enjoying a significant market power. The key policy considerations for
unlimited competition include specification of entry conditions, performance
obligations and operational restrictions. Potential Operators will assess the
attractiveness of the options vis-a-vis the obligations and barriers before
entering the sector.
4.3.2.2 The main reason to specify the entry conditions is to discourage
the entry of operators that are not capable and serious. A disadvantage of such
conditions is that entry costs would add to the cost of service Provisioning.
Also, there is no methodology for fixing the optimal level of entry barriers,
which will complement and not Oppose market forces. The issue of eligibility
criteria is addressed in more detail in the next section.
4.3.2.3 The full competition scenario envisages no entry barriers and
licenses are available on demand. In unlimited competition, competitive forces
could ensure cost-effective methods of delivering Bearer Services, and passing
on the benefits to customers. Competitors could apply innovative techniques to
capture market shares. However, unrestricted entry may raise a number of issues
pertaining to the viability of Operations, appropriate interconnection regime
and regulation of Service Quality and tariffs.
23
4.4 Time period for implementing the policy regime for competition
There are two possible ways of introducing greater competition. One is
to phase-in more and more competition in different stages over time. Another is
to allow either unlimited competition or a limited number of ILDOs, say four
five in the initial phase of opening up the market. While several countries have
increased competition in stages, a number have quickly opened up to unlimited
competition , as shown by the information in Section two of this paper.
4.5 In the light of the discussions in pre-para, the following
questions are brought our for public consultation:
QUESTION 4A) SHOULD IT BE MANDATORY FOR ILDOS TO ESTABLISH SWITCHING FACILITIES
IN THE COUNTRY? SHOULD WE GO IN FOR FACILITIES BASED COMPETITION ONLY?
QUESTION 4B) SHOULD NON-FACILITY BASED COMPETITION BE PERMITTED? IF YES, WHAT
SHOULD THE TERMS AND CONDITIONS FOR NON-FACILITY BASED OPERATORS OR RESELLERS?
SHOULD RESELLERS BE PERMITTED TO PURCHASE SWITCHED MINUTES OF CALL TIME NOT ONLY
FROM ILD OPERATORS (FACILITY BASED), BUT ALSO FROM NLDOS?
QUESTION:4C) SHOULD THERE BE LIMITED OR UNLIMITED COMPETITION? IN CASE OF
LIMITED COMPETITION POLICY, WHAT SHOULD BE THE MECHANISM TO RESTRICT ENTRIES AND
IS IT REASONABLY POSSIBLE TO ARRIVE AT THE OPTIMUM NUMBER OF OPERATORS IN THE
ILD SEGMENT?
24
QUESTION:4D) IF UNLIMITED COMPETITION IS INTRODUCED, SHOULD THIS BE PHASED IN
OVER A SPECIFIED PERIOD OR BE INTRODUCED FROM THE BEGINNING ITSELF?
QUESTION: 4E) SHOULD THE OPTION OF INFRASTRUCTURE LEASING INCLUDE THE LEASING OF
SWITCHING CAPACITY FROM NLDOS?
25
5. SELECTION CRITERION
5.1 The licenses will offer International Long Distance Services
exclusivity to the ILDOs for a given time period. Selection can be through a
bidding process, or alternatively by prescribing and announcing a set of
criteria for selection. Such criteria may include provision of Entry Fee and/or
Technical and Roll-out requirements.
5.2 ELIGIBILITY CRITERIA:
5.2.1 Certain eligibility criteria may need to be specified to ensure
that nonserious entities do not enter the market. These criteria may focus on
various attributes such as those specified for the Basic Services and National
Long Distance Operators.
5.2.2 One criteria to consider is whether to allow entry to only those with
a proven track record in the field of Telecommunication Services. Similarly
sound financial background is another criteria worth considering. Under this
criteria, the promoter of a company may be required to have a combined net worth
above a particular threshold. Adequacy of experience in the field may also be
considered important and thus, for example, it may be required that the
applicant or at-least one or some of the constituents of a group or joint
venture having a certain percentage of the total equity in the applicant
company, should have experience of telecom sector.
5.2.3 An Entry Fee may be considered for the purpose of keeping non-serious
players out. Entry Fees get determined by the policy objectives , including the
competition strategy adopted for the market. In case of limited competition,
Entry Fee may be determined through bidding. In contrast, in the case of
unlimited competition where licenses are available on demand, Entry Fees may be
pre-decided amounts, to be paid by all licensees. Alternatively, the Entry Fee
could have a linkage to the expected revenues from the licensee's areas of
operations, i.e. it may be fixed considering the market potential.
26
5.3 SELECTION CRITERIA:
5.3.1 The technical proposal may be evaluated on the basis of various
criteria such as ownership parameters, performance record, sector experience,
transmission facilities, Points of Presence and other parameters considered
relevant by the Licensor Regulator.
5.3.2 In case limited competition is to be introduced either through
duopoly or oligopoly multipoly, a detailed evaluation process should be in place
to select and award the stipulated number of licenses. Both the technical and
financial proposals will need to be evaluated. After evaluation of the Technical
proposals, the qualifiers may be allowed to bid in accordance with a
pre-announced bidding methodology.
5.3.3 Another issue requiring some consideration is whether there should be
some disabilities pre-emptions from Participating in the process of obtaining
the ILDO License. For example, should parties having acquired the incumbent's
(VSNL) equity in the course of its disinvestments, be allowed to bid for this
license. The rationale in prescribing the disability would be to avoid conflict
of interest as well as concentration of market power.
5.4 In the light of the discussions in this section, the following
questions come up for discussion
QUESTION: 5A) WHAT SHOULD BE THE ELIGIBILITY CRITERIA? SHOULD IT INCLUDE
FINANCIAL PARAMETERS AND MINIMUM EXPERIENCE OF ILD OPERATIONS ELSEWHERE. SHOULD
IT ALSO INCLUDE THE COMBINED NET WORTH OF PROMOTERS ABOVE A PARTICULAR
THRESHOLD, A MINIMUM PERCENTAGE OF STAKE IN THE TOTAL EQUITY, A STIPULATED
NUMBER OF YEARS OF EXPERIENCE IN TELECOM SERVICE SECTOR PARTICULARLY IN LONG
DISTANCE OPERATIONS, OR ANY OTHER CRITERIA?
27
QUESTION: 5B) IN CASE LIMITED COMPETITION IS PREFERRED, SHOULD THE CRITERIA FOR
FINANCIAL SELECTION INCLUDE BOTH. ENTRY AND ANNUAL LICENSE FEES PAYMENTS?
QUESTION: 5C) SHOULD AN ENTRY FEE BE SPECIFIED OR SHOULD IT BE SUBJECT TO
BIDDING? WHAT SHOULD BE THE OPTIMUM LEVEL OF THE ENTRY FEE IF IT HAS TO BE
SPECIFIED?
QUESTION: 5D) SHOULD THE SELECTION CRITERIA INCLUDE TECHNICAL PARAMETERS? IF THE
ANSWER IS IN THE AFFIRMATIVE, THEN WHAT PARAMETERS SHOULD BE INCLUDED AND WHAT
WEIGHTAGE SHOULD BE GIVEN TO THE PARAMETERS TAKEN INTO ACCOUNT?
QUESTION: 5E) SHOULD THE PARTIES ACQUIRING VSNL EQUITY THROUGH THE DISINVESTMENT
PROCESS, BE PERMITTED TO OBTAIN LICENSES FOR NEW ILDOS?
28
6. STRUCTURE OF THE LICENCE FEES
6.1 GENERAL CONSIDERATIONS
A License Fee having one or more of the following components may be
prescribed:
i) One Time Entry Fee
a) Operators to pay a Fixed Entry Fee to obtain a license.
b) Entry Fee may be linked to roll-out performance
ii) An Annual License Fee
An annual License Fee based on a percentage of Gross collected Revenue less
'pass-through' revenue is payable
(iii) USO Levy
USO levy is also applied, either separately or as part of the annual
License Fee.
The details of these components may need to be determined by the policy
maker.
6.2 FACTORS IMPORTANT FOR CONSIDERATION OF THE LICENSE FEE STRUCTURE RELATING
TO ILD LICENSES
6.2.1 Till full tariff re-balancing takes place, the International Services will
generally be the most remunerative part of the telecom business. The opportunity
for business development in the ILD sector is also higher, since a number of
advanced Services are often available with a matching clientele.
29
However the business scenario is changing with an increase in competition in the
sector, and a decrease in tariff for International calls.
6.2.2 The above factors are relevant in a consideration of the Entry Fee
and Revenue Share License Fee for ILDO.
6.3 ESTIMATING GROSS REVENUES FOR LICENSE FEE
6.3.1 A definition of adjusted gross revenue for determining License Fee
has already been arrived at in the case of revenue sharing arrangements of NLD
operators. This is the gross collected revenue of the Operator for all licensed
activities less the deductions on account of `pass through' revenue.
6.3.2 This approach, however, is inapplicable in the case of incoming
International calls, because these calls emanate from the Operators in other
countries, and calculating the relevant revenue from these calls may not be a
straight forward exercise. Incoming traffic to India is higher than outgoing
traffic. The settlement regime through accounting rate mechanisms also do not
provide any reliable estimate of total revenues. Call back and Reverse Call
revenues introduce additional complications. For example, it may be possible for
an ILDO in India to enter into a bi-lateral settlement agreement with a remote
International Operator and thus maximise the amount retained abroad and minimise
the payment to the Indian ILDO.
6.3.3 Based on the above, there may be a need to treat outgoing call
revenues separately from incoming call revenues. The License Fee could be
applied separately for these two type of revenues. For the incoming part,
traffic could, for example, be measured and settlement worked out on the basis
of the standard accounting rates arrived at between VSNL and the other
Operators, or some other alternate formula. One such possibility is the payment
of a fixed license fee on each unit of incoming call minutes.
30
6.4 QUESTIONS
The following questions emerge from the foregoing discussions:
QUESTION 6A) WHAT FACTORS SHOULD BE TAKEN INTO ACCOUNT WHILE DETERMINING THE
LICENSE FEE FOR ILD OPERATIONS?
QUESTION 6B) HOW SHOULD LICENSE FEE BE ESTIMATED? FOR EXAMPLE, SHOULD IT BE A
CERTAIN PERCENTAGE OF THE ILDO'S REVENUE? WHETHER THIS PERCENTAGE SHOULD BE THE
SAME AS WAS FIXED FOR NLD SERVICES?
QUESTION 6C) HOW SHOULD THE REVENUE ON INCOMING CALLS BE DETERMINED AND INCLUDED
IN GROSS REVENUE OF THE ILDO FOR THE PURPOSE OF ARRIVING AT THE LICENSE FEE
PAYABLE BY THE OPERATOR?
31
7. TECHNICAL
7.1 All Long Distance Carriers i.e., both National and International, are
examining the technical feasibility of deploying VOIP techniques based on packet
switching instead of PSTN or circuit switching techniques in their Backbone
Network, because of the possibility of sharing the same IP Backbone for both
data and voice. Although this may be effectively implemented in developing
countries after a longer period, in developed countries, the data traffic is
about to overtake voice traffic. The possibility of transmitting voice over
IP-based Networks, with the associated opportunities, such as voice and data
integration, constitutes a milestone in the convergence of the communication
sector. The key issue is that IP-based Networks, are increasingly being used as
alternatives to the circuit-switched telephone Networks and the likelihood of
ILDOs deploying this technology in their Network has to be taken into account.
We discuss the main issues after introducing certain relevant terms in use.
7.2 TERMS IN USE
7.2.1 Voice-over-IP (VOIP) refers to the transmission of voice, fax and related
Services over packet-switched IP-based Networks. VOIP is different from Internet
Telephony. VOIP is a technology, whereas Internet telephony is a Service,
provided to the public on the Internet. VOIP and Internet telephony are not
permitted in India at present.
7.2.2 The Public Internet: (also referred to as the Internet): The global,
public, IP-based meta-Network created by the interconnection of many public and
private IP-based Networks.
7.3 ISSUES RELATING TO VOIP
Greater volumes of IP Telephony now travel over managed, private IP
Networks as opposed to the public Internet. It is estimated that the total
volume of Voice over Internet Protocol (VOIP) traffic carried over International
Networks in 2000 may have been around 4 billion minutes, or just over 3 per cent
32
of the global total. This percentage is much lower for developing countries. IP
based Networks are designed for non real time data traffic and still do not
guarantee QOS for voice. Due to its lower Quality of Service, it is not a
preferred mode when QOS is an important issue.
7.4 IMPACT OF VOIP ON THE PUBLIC TELECOMMUNICATION OPERATOR
7.4.1 If telephony via internet or VOIP is allowed, one major impact on
Public Telecommunication Operators is likely to be loss of income from
International calls, both direct (loss of collection charges) and indirect (loss
of settlement payments). There are, however, a growing numbers of public
Telecommunication Operators that have chosen to offer IP Telephony Services,
even though this may cannibalise their existing revenue streams. These Operators
include Telecom Egypt, GamTel (Gambia), Matav (Hungary), Cesky Telecom (Czech
Republic) and CAT (Thailand).
7.4.2 Voice over IP (VOIP) gateways can provide not only Basic telephony
and Fax Services but will also enable several value-added Services, e.g.,
cal!centers, integrated messaging, least-cost routing etc. These will increase
marketing flexibilities and provide additional sources of revenue. However, VOIP
gateways are largely proprietary products and they do not inter-work if one
operator has one product and the other a different product.
7.5 INTERCONNECTION ISSUES
Two issues relating to interconnection are likely to arise.
7.5.1 CARRIER SELECTION
7.5.1.1 The Telecom users could have the option of selecting the ILDO of their
choice on the pattern of NLDO option recommended by TRAI. Options available
could be Dynamic Carrier Selection (Dial around) in which the Carrier is
33
selected through a dialling procedure in which '1OXY' is to be dialled after
'00' and prior to International significant number. `XY' would represent the
selected carrier code. Pre-selection is another option in which the user informs
his Access Provider about his choice of the ILDO., and all ILD calls by the user
automatically get transferred to the chosen ILDO.
7.5.1.2 To enable the ILDO to collect traffic, the user should be able to
express a choice of the carrier. Difficulties, however, arise in permitting a
simultaneous choice of the ILDO and NLDO. These difficulties relate to existing
limitations in storage and analysis of the additional digits required for
Carrier Selection. At present, it is difficult to provide for a selection of the
ILDO and the choice would have to be left to the NLDO. National and
International services would be offered as a package by the NLDOs. Further
studies are being conducted on the possibility of providing a pre-selected
choice of the ILDO in addition to a choice of NLDO and should it be possible,
additional costs would be involved. If a technical solution can be found, a
decision as regards who will bear this cost and in what manner, will have to be
taken.
7.5.2 BILLING
Differential rates and concessions are likely to be offered by the ILDO,
and this has been one reason for giving the responsibility of billing to the
ILDO itself. However, various alternatives are available for collecting ILD
charges from customers, e.g., collection may be through the NLDO or through the
Access provider.
7.6 Based on the discussions of the pre-para, the following questions emerge
for public discussion:
QUESTION 7A) SHOULD ILD OPERATOR BE PERMITTED TO DEPLOY VOIP NETWORK INSTEAD OF
PSTN FOR CARRIAGE OF INTERNATIONAL VOICE TRAFFIC?
34
QUESTION 7B) IN CASE THE ANSWER TO THE PREVIOUS QUESTION IS IN THE AFFIRMATIVE,
THEN HOW TO REGULATE THE QUALITY OF SERVICE ON VOIP LINKS? SHOULD A DEGRADED
PERFORMANCE ON ILD LINK BE ACCEPTABLE WITH A REDUCED TARIFF?
QUESTION 7C) WHETHER EXISTING REGULATORY FRAMEWORKS WILL BE ADEQUATE FOR IP
BASED NETWORKS? WHAT QOS STANDARDS SHOULD BE APPLICABLE UNTIL ITU STANDARDS
BECOME FULLY MATURE?
QUESTION 7D) WHETHER VOIP BASED NETWORKS NEED SPECIAL CONSIDERATIONS ON ISSUES
LIKE NUMBERING, ROUTING, ADDRESSING, INTER-OPERABILITY AND QOS?
QUESTION 7E) CAN ILD OPERATOR BE ALLOWED TO ENGINEER TWO NETWORKS, ONE BASED ON
PSTN WITH QOS GUARANTEES AND OTHER BASED ON VOIP WITH NO QOS GUARANTEE? HOW TO
REGULATE QOS AND INTERCONNECTION IN SUCH A SCENARIO?
QUESTION 7F) SHOULD THERE BE CARRIER SELECTION OF ILDO? IF YES, WHAT SHOULD BE
THE MODALITY OF ILD ACCESS I.E. PRE-SELECTION OR DIAL AROUND OR BOTH?
QUESTION 7G) WHAT SHOUTD BE THE TECHNICAL ARRANGEMENT AND RESPONSIBILITIES FOR
BILLING FOR ILD CALLS? WHERE SHOULD THE CALL DATA RECORDS (CDR) BE GENERATED FOR
EXAMPLE, SHOULD THESE BE GENERATED BY ROUTERS IN ADDITION TO THE SWITCHES?
35
ANNEXURE I
No. 10-19/2001-BS-l
Government of India
Ministry of Communications
Department of Telecommunications
Sanchar Bhawan, 20-Ashok Road
New Delhi 110 001.
To
The Secretary,
Telecom Regulatory Authority of India,
Jawahar Vyapar Bhawan, Janpath
New Delhi 110 001. Date: 12.03.2001
Subject: Recommendations of TRAI on the issue of license for International
Long Distance Telephone Service - Regarding
The Government has decided to open the International Long Distance Service
sector for private participation from April' 2002. For this purpose the
Government has to decide the terms and conditions for issue of the license.
In terms of Clause 11(1)(a)(ii) of the TRAI Act 1997, it is requested that
the recommendations of the TRAI may be given on the:
b) Terms and conditions of the license
c) Number of players in this field
d) Selection criteria
e) License fee structure
The recommendations should also include other facts of license
conditions.
It is further stated that the Government has already decided, except for
Cellular services, free and open competition in other services such as National
Long Distance service, Basic services, GMPCS etc.
It would be appreciated if TRAI can give the recommendations at the
earliest so that new players can be inducted by 1st April 2002.
Yours faithfully,
Sd/
(P.K. Mittal)
Deputy Director General (BS)
Tele: 3710437/FAX: 3372061
36
ANNEXURE II
ALL ILD Calls through NLDO only
GRAPHICS OMITTED
37
ALL ILD calls from APs directly to ILDO ANNEXURE II
(Note: This is presently not permitted as per NLD and Basic
Service Licence conditions)
GRAPHICS OMITTED
38
Present arrangement with VSNL ANNEXURE II
(BSNL presently is the NLD) (contd.)
GRAPHICS OMITTED
39