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Unleashing the digital growth — Developing a framework for digital infrastructure expansion

Quick and reliable data access is one of the critical requirements for economic growth, innovation, and social progress as our world becomes more and more reliant on digital technologies. Thus, governments and private sector organizations worldwide invest heavily in developing and maintaining digital connectivity infrastructure to improve the quality of life and drive economic growth. This makes digital connectivity infrastructure an essential ingredient for businesses, governments, and individuals as our world becomes more dependent on digital technologies.

Especially in India, for escalating the economic growth of the country, the government has set the vision of developing digital infrastructure as a core utility for every citizen, and the Digital India program has been launched. The government has focused on digital services to enhance the last-mile deliveries and bring better transparency and accountability in the governance system. The role of digital infrastructure has assumed an increased importance. Even this year’s economic survey states that in the coming years, availability and spread of digital infrastructure will contribute significantly to economic growth.

Telecom sector has witnessed exponential growth in the past decades. There exists a robust licensing/registration framework, which has evolved over the years, under which various stakeholders operate across various layers of connectivity, including infrastructure creation, network deployment, service provisioning, and application delivery.

The NTP 1999 is a significant milestone in the history of Indian telecommunications, as it recognizes the vital role that telecom infrastructure plays in the growth of the sector and in meeting the growing demand for telecom services. In 2000, the infrastructure provider (IP) category was introduced to promote the growth of telecom infrastructure. The IP model has two categories: IP-I and IP-II, with IP-I limited to providing passive infrastructure, such as towers, ducts, and dark fiber on lease/rent/sale basis to telecom service providers. By enabling infrastructure sharing among different service providers, the IP model promotes cost efficiency, reduces duplication, and facilitates rapid expansion of telecom services to underserved areas.

IP-II could establish digital network, provide transmission capacity, and could lease/rent out/sell end-to-end bandwidth to the other licensees of telecom services. IP-II were required to pay license fee. But IP-II licenses were discontinued effective December 2005.

The advent of Machine-to-Machine (M2M) communication and Internet of Things (IoT) services is paving way for the Fourth Industrial Revolution (Industry 4.0). New-generation mobile technologies like 5G are providing broadband highways with very low latency capabilities, generating enormous use cases across verticals. All this will be requiring existing networks to be upgraded and developing advanced infrastructure with enhanced technologies.

Also as per National Digital Communications Policy (NDCP) – 2018, lot of emphasis is laid on digital infrastructure stating that “Digital infrastructure and services are increasingly emerging as key enablers and critical determinants of a country’s growth and well-being.” The Connect India Mission advocates for creating robust digital communications infrastructure.

The Propel India mission, which states that “There is an imperative need to review the existing licensing, regulatory, and resource-allocation frameworks to incentivize investments and innovation to optimize new technology deployments and harness their benefits.” The NDCP-2018 envisages “Enabling unbundling of different layers (e.g., infrastructure, network, services, and applications layer) through differential licensing” as one of the strategies for fulfilling its Propel India mission.

In March, 2020, TRAI had provided its recommendations on the subject of “Enhancement of scope of Infrastructure provider Category-1 (IP-1).” The same was examined by the legal cell of DoT, who inter-alia opined that:

  • Active infrastructure can be provided only by telecom licensees.
  • IP-1 registration holders cannot be allowed to provide active infrastructure under their IP-1 registration, unless they are shifted to licensing regime.

In this backdrop, the DoT has decided for creation of a new category of license namely the Telecom Infrastructure License (TIL), with a scope to establish, maintain work all equipment for wireless access, radio access and transmission links, except the core equipment and holding of spectrum. IP-1 registration holders may also be permitted to move in this category. TRAI was requested to give a recommendation on this.

The DoT reference to TRAI, also suggests the following broad parameters while formulating the terms and conditions of TIL license:

  • TIL to be lightly regulated.
  • TIL to be a standalone license and not a part of UL.
  • Entities to whom TIL can provide infra services.
  • Amount of license fee to be levied on pass through charges/revenue earned.
  • License fee to be levied on TIL – token amount of Re 1.
  • Nominal entry fee of Rs 10 lakh for pan-India license.
  • PBG of Rs 20 lakh compliance to various security, EMF, confidentiality, etc.

With the above objectives, in February 2023, TRAI has issued a consultation paper on “Introduction of Digital Connectivity Infrastructure Provider Authorization under Unified License (DCIP)” against the TIL, as requested by the DoT, to seek the stakeholders’ views on various issues involved in the creation of this new DCIP category, including licensing, spectrum allocation, interconnection, pricing, and compliance.

The enhancement of scope for IP-Is is also envisaged in the NDCP, 2018, as below:

“Encourage and facilitate sharing of active infrastruc- ture by enhancing the scope of infrastructure providers (IP) and promoting and incentivizing deployment of common sharable, passive, as well as active, infrastructure.”

It is a welcome step. The new category that includes active elements in the infrastructure sector would encourage the necessary investments and speed up the implementation of digital infrastructure connectivity throughout the country.

Additionally, it is only possible to share infrastructure in a fair, transparent, and non-discriminatory manner when it is provided by standalone companies that are not in direct competition with service providers. This is exemplified by the success stories of passive infrastructure in the Indian market. Therefore, promoting the creation of infrastructure by standalone companies through DCIP authorization under the unified license is necessary to enhance telecom infrastructure, and decrease the cost of capital for service providers.

Simultaneously, the DCIP licensee should not be permitted to engage in exclusivity arrangements regarding the deployed infrastructure of any type with a specific licensee, and the infrastructure should be made available to all service licensees in a transparent and equitable manner. Shared infrastructure will result in an economy of scale, leading to reduced capital and operating expenses, and will also prevent the unnecessary duplication of assets, resulting in significant cost saving for the nation.

Under some of the issues flagged by TRAI, it is suggested that active network elements to be allowed for sharing shall include installation of antenna, feeder cable, Node B, radio access network (RAN), and transmission system only. This is appropriate as allowing the sharing of core network nodes is not advisable due to the inherent complexities and challenges involved. The complexity of the core routing and services would make it difficult for a single node to manage multiple PLMN traffic, and implementing different or separate charging mechanisms and lawful interception (LI) provisions would be extremely challenging.

UL licensees may be concerned about the quality of DCIP’s infrastructure and its impact on customer services. To safeguard this, DCIP licensees with the new UL authorization must comply with guidelines on security, data privacy, and quality of service. These requirements on DCIP will ensure better network availability for end-users.

DCIPs should not be permitted to obtain MWB spectrum allocation under their license to avoid conflicts of interest with TSPs. DCIPs should be permitted to purchase equipment only for bands in which they have tie-ups with UL licensees. The Authority must also find ways to encourage purchase of equipment to the extent possible from the domestic manufacturers under the Make in India program and to promote Atmanirbhar Bharat.

Some stakeholders have suggested to maintain a level playing field, and not to impose regulatory levies twice, and pass-through should be allowed. It is suggested that no license fee (LF) on DCIP licensees should be levied to avoid cost increases that would negate the benefits of sharing. Hence, the proposal of TRAI to not levy any license fees on DCIPs is supported; this will encourage and incentivize them and attract more players/investment in the sector.

Also National Digital Communications Policy (NDCP) – 2018, under the Connect India mission with a goal to “Ensure connectivity to all uncovered areas” is set to be achieved by 2022. Also a goal “To provide 1 Gbps connectivity to all Gram Panchayats of India by 2020 and 10 Gbps by 2022” has been set.

Ground reality reveals startling facts. As per TRAI data, Rural tele-density stands at 57.79 percent as on Feb 28, 2023. Because of pure business priorities and lack of wherewithal, TSPs are not able to penetrate further in the remaining unconnected area and contributing enough to enhance the rural tele-density further and extend broadband penetration. While urban internet subscriber density stands at 104.77 percent, in the rural it stands at 38.33 percent. At this pace, one can imagine how long it will take to connect rural India. Because of the reasons, there is apprehension that with lack of investment and priorities of 5G roll out for rural area, this will potentially further widen the digital divide.

It is envisaged that with advent of DCIP, sharing of active infrastructure will reduce the cost for the service providers, which will help them make the rural business case much more doable with affordable tariff for the rural masses.

Also, it is important that digital infrastructure providers are permitted and are made eligible to participate in the USOF tenders. This will not only have significant impact on the viability of rural connectivity in unconnected areas but will also provide sharing of infrastructure, which can be used by multiple service providers at additional delta cost. This will also ensure competitive service offering for the rural communities from multiple service providers.

As an additional significant player, this new category of infrastructure providers will not only bring fresh huge capital, which is critical for the exponential growth of the digital infrastructure in the country but will also encourage lot of innovation in the country for development of innovative and sustainable technological solutions for sharing of BTS/RAN solutions for ensuring continuous reduction of active infrastructure sharing cost.

A new category that creates advanced digital infrastructure, as required, with evolving enhanced technologies including 5G/6G, M2M, IOT and Industry 4.0 so as to speed up connectivity penetration in the country.

Specialized service providers can use this infrastructure, promoting efficient resource utilization by allowing it to be shared among all types of licensees.

In summary, the consultation process should focus on simplifying the licensing/authorization process for the new category of Digital Connectivity Infrastructure Provider. This will create a level playing field and a conducive environment for rapid growth of digital infrastructure in the country, while defining a proper framework for this category.

The article is authored by Sanjeev Kakkar, a Telecom Expert. He has held various CXO level positions in technology companies. Views expressed are personal.

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