Blog Post

TRAI Backs Down On Unbundling Of Last Mile; Recommends Franchising For Growth Of Broadband

The Telecom Regulatory Authority of India (TRAI) appears to have backed down on it’s earlier recommendation of unbundling of last mile, since the government has clearly stated that they’re not keen on unbundling – former Telecom Minister Dayanidhi Maran had said so at TiE Con in 2006. TRAI has, instead, the following recommendations for BSNL and MTNL, the two state owned telcos:

— That the government increase the target fixed for BSNL and MTNL for provision of broadband connections during 2007-08.
— For this purpose BSNL and MTNL should be encouraged to appoint franchisees for providing broadband services to supplement their efforts. There should be total flexibility in developing a commercial model. Close monitoring be prescribed to ensure effective utilization of the local loop.

Currently BSNL and MTNL are both are significantly behind targets, but have around 60 percent of the broadband market – with only 1.45 million DSL subscribers between them. To supplement the franchising model, the TRAI has also recommended that Cable Operators be encouraged to provide broadband, given their large distribution network. Now this is where this entire move appears to be an eyewash – the Quality of Service is a serious issue with cable operators, and private ISPs like Sify and Hotwire have gone down that route and struggled. That’s the last thing one needs – a badly (barely) managed franchise network, just to add to a subscriber base to meet targets, with no focus on quality of service, or open competition. Other desperate measures to reach targets include: considering broadband via DTH, though cost may be an issue; making municipal dwelling units broadband ready; providing subsidy to more than two service providers for rural penetration of broadband, using satellite and other technologies, using the under-utilized USO fund. All this will take time to discuss and implement, but the TRAI has backed down on the unbundling of the local loop, and that’s the real story.

Download the 136 page report here, and synopsis (press release) here.

One Response to “TRAI Backs Down On Unbundling Of Last Mile; Recommends Franchising For Growth Of Broadband”

  1. Issue of licenses for WiMAX and 3G figure high in the list of recommendations made by the Indian regulator TRAI for enhancing the growth of broadband services in India. perhaps this sets the stage for auctions of the prime spectrum in the 2.5-2.6 GHz band which is earmarked for mobile WiMAX services.

    The new recommendations of TRAI come in the face of abysmal growth in broadband subscribers which is evident from the data provided by the regulator itself. Despite an earlier policy issued in 2006, and declaring 2007 as ‘the year of the broadband” the number of broadband subscribers in India stands at just 2.42 million, a reflection of the facts that wishes can not be turned to reality without the basic framework.

    Some of the recommendations made include urging the incumbent wireline holders ( MTNL and BSNL holding 95% of wireline phones) to aggressively promote broadband services and urging the government to auction 3G and WIMAX spectrum at the earliest.
    It has also recognized the role of DTH operators and Cable TV Operators in providing broadband services and the fact that these networks have the potential to reach rural areas. Cable TV subscribers today at 85 million are nearly twice of the wireline telephone falls.

    However while expressing dismay at the low rate of growth of broadband in India, the regulator has neither sought to go into the basic reasons why the penetration is so low, nor bring out concrete measures to address them. It has also stopped short of recommending any measures for DTH and Cable TV operators to increase broadband penetration, which it has recognized form a very important segment.

    The systemic ills begin from the broadband policy itself, where VoIP calls are not allowed to any wireline phone in India. This policy was framed way back in 2001 to protect the turf of incumbent wireline operators. This has no relevance today. There is today no major country with a liberalized telecom structure which prohibits VoIP calls or interconnections.

    The problems of DTH operators arise from the policy framework whereby they are prevented from providing any broadband or value added service. The cable operators can provide internet, but they must possess an ISP license for the purpose. However the latest release from TRAI stops short of recommending any relaxations for these very operators which it recognizes do reach the rural areas.

    The regulator also laments the slow progress of e-governance i.e. the use of broadband by the government agencies themselves. India today stands in stark contrast with its asian neighbors such as Korea (with highest DSL penetration in the world) or the M-Taiwan initiative, the biggest of its kind in the world.

    What is needed is to look beyond vested interests which do not permit one set of operators to provide services such as broadband which are in common domain. Systemic maladies continue to prolong as the high cost of internet backhauls despite previous regulations on the subject.