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NASSCOM recommendation to TRAI to abolish OSP registration

NASSCOM recently made its submission on the TRAI Consultation Paper on the review of terms and conditions for  registration of Other Service Providers (OSPs) recommending it to abolish the OSP regime as it has serve its purpose. In our submission, we have discussed the relevance of the objectives OSP Regulations in 2019.

  1. Providing special dispensation to the BPM Industry:

The OSP Regulations when introduced were a means for BPO units, which required large amounts of telecom resources to obtain what was then a scarce and expensive resource. Given the scarcity and price of bandwidth, such a regulation was required to enable genuine users to obtain resources to conduct legitimate businesses. However, we’ve come a long way since the time when people had to queue up for telephone registrations and reached a space where we not only have an abundance in terms of choices of TSPs but also enjoy one of the lowest telecom tariffs in the world.

Thus, the objective of enabling access to telecom resources has been achieved and the need for a registration regime to enable access to such services is no longer relevant.

Furthermore, given the nascence of the services industry as a whole, these regulations were also seen as a means to facilitate the growth of innovative services such as tele-banking, tele-medicine, e-commerce, tele-trading etc. which were at a stage of infancy in 1999.

In 2019 we believe that this regulation has served this purpose by promoting the services sector and ensuring that services contribute one of the largest components to our economy along with the growth of some of the most innovative start-ups in the services space.

Special dispensation to the BPM sector today therefore does not need to be in the form of an OSP Registration, rather it could be in the form of simplifying the setting up and carrying on of business in India which would allow start-ups and entrepreneurs in providing world class services based out of India.

  1. Statistical Information

The requirement / need for statistical information alone should not justify the imposition of a mandatory registration regime with strict compliance conditions. The Government of India has numerous alternate means by which it can obtain statistical information on BPMs. For instance, annual returns required to be filed under the Companies Act, 2013 and various other filings made by companies could serve to provide the requisite statistical information. In addition, exports of BPM services can also be tracked through the software-export (SOFTEX) forms, Import Export Codes (IEC), etc. which are filed with the Reserve Bank of India (’’RBI’). This is another source that the Department of Telecom (‘DoT”) can use for statistical information.

In addition, the DoT can also require TSPs to submit to it the list of bulk telecom resource users. This would indicate the number of enterprises using telecom resources as well as usage patterns allowing the DoT to corroborate the data made available to it from other sources.

As highlighted above, there are several alternate ways in which the same information may be submitted / obtained, obviating the need for the imposition of the OSP regime.

  1. Ensuring activities of OSPs do not infringe upon jurisdiction of licensed TSPs

The objective of the OSP regime is to ensure that (a) OSPs do not encroach upon the jurisdiction of licensed entities and (b) there is no leakage of revenue for the Government.

The worry at the time when the OSP Regulations were introduced was that OSPs may encroach into the jurisdiction of licensed entities by providing connectivity themselves which is otherwise the prerogative of a licensed entity. Such connectivity would be motivated by the possibility of diverting expensive international calls by using data connectivity as opposed to using the traditional public switched telephone network (PSTN) route which would result in revenue loss for telecom operators and in turn the government.  Therefore, there was a need to ensure that the jurisdiction of TSPs is protected and that OSPs do not use the resources of TSPs to offer their own services / use means other than traditional resources which were allocated for particular purposes.

This no longer remains a real concern in today’s day and age where almost all telecom traffic is now carried on the Internet (including voice traffic through Voice over Internet Protocol (VoIP), or Voice over LTE (VoLTE). As applications have shifted from voice to data, the marginal cost of voice telecom traffic over data has become negligible. Therefore, segregating voice and data traffic is no longer relevant. In fact, it is also time that the DoT relooks at its restriction on IP and PSTN connectivity since this restriction does not exist in most parts of the world.

The current market realities when looked at alongside the NDCP where the DoT has laid out that ‘the objective of revenue maximisation will be replaced by the objective of universal coverage’ makes it clear that this is no longer a pressing issue.

The OSP regime was also used by the DoT as a tool to monitor activities of OSPs from a security perspective. Given that national security remains paramount, we believe that if the DoT is desirous of being able to monitor the activities of enterprise customers, it can be done by various other means resulting in a lower burden for both DoT and industry. One way this has been done successfully is where the regulator puts the onus on the licensed entities to ensure compliance. For example, RBI has designated certain banks as Authorised Dealer Banks who have been given the onus to ensure compliance with the RBI Regulations.

Similarly, the Hon’ble Authority itself has already operationalised such a regime in terms of the Telecom Consumer Commercial Communications Preference Regulations, 2018 (’TCCCPR’) where the obligations have been imposed on the operators and the implementation of such obligations viz. the customers / end users has been left to the operators to determine as they deem fit in the form of Codes of Practice.

Therefore, we believe that the DoT can, through TSPs, ensure that the enterprise customers do not violate telecom licensing norms. In fact, the Unified License already imposes several obligations on TSPs regarding bulk telecom connections.

Recommendation: The OSP registration should, therefore, be abolished and the DoT can ensure compliance with its objectives indirectly, i.e. through TSPs. This is our main suggestion to this CP.

The above view is not based merely on the fact that the objectives of the OSP Regulations are no longer relevant, but also that simplifying the regulatory framework for the IT / BPM industry will be extremely beneficial for the country. Over the last few years, India has been competing with other countries for investments to establish outsourcing centres / outsourcing of IT contracts. There are several countries today that allow  interconnection of IP/PSTN traffic akin to the OSP Regulations. Businesses established in other jurisdictions avoid the compliance costs and take special efforts to prevent IP/PSTN mixing as per OSP Regulations. Eliminating the OSP Regulations will, therefore, give a fillip to the ease of doing business for the IT/ITeS sector in India.  The IT – BPM industry in India not only provides the highest employment in the private sector but is also an industry that has made a phenomenal contribution to India’s GDP, exports, employment, infrastructure and global visibility. Thus, there is need for intervention by the Government to focus on ensuring that we retain our competitive advantage compared to other jurisdictions.

Further, we have highlighted the practical challenges that are faced during the implementation of the OSP Regulations. Our detailed submission is enclosed.

Regards

Policy Team


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