IT ACt, 2000

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REVERSE AUCTION MECHANISMFOR FUNDINGUNIVERSAL
SERVICES
By SHYAMAL GHOSH Washington D.C. 1st March
2007
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Contents

• TELECOM REFORMS PROCESS IN INDIA
• REVISED AUCTION PROCESS FOR MOBILE SERVICES
  (2000)
• UNIVERSAL SERVICE OBLIGATION FUND (2002)
• REVERSE AUCTION PROCESS FOR BASIC SERVICES
• (2004)
• REVERSE AUCTION PROCESS FOR INFRASTRUCTURE FOR
  MOBILE SERVICES (2007)
• GROWTH PATH
• CONCLUSIONS

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Background

• Telecom Reforms Process in India
• Learning Process National Telecom Policy 1994
• Duopoly Mode
• (a) Beauty Contest Litigations
• (b) Auction Speculations
• Derailment of Growth
• Revised Reforms Package New Telecom Policy 1999
• (a) License Fee Share of Revenue
• (b) Full Competition Unrestricted Entry without
  
• Spectrum
• (c) Buoyancy of revenues ensured Win - Win
• situation for service providers and
  Government

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Revised Auction Procedure for Cellular Mobile
Services with Spectrum

• Multi - stage Informed Ascending Bids
• Bids for determining entry fee payable upfront
• Three rounds of basic bidding
• Additional rounds if necessary
• No reserved price in first round
• Highest offer of any round is revised price of
  next round
• Spectrum preference for highest successful bidder
  where more than one operator was to be inducted
• License fee and spectrum fees as prescribed

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Universal Service Obligation Fund

• Migration from Roll - out obligation to funding
  approach
• 5 of revenue of operator earmarked for fund
• Coverage -
• All villages with one Public Telephone
• All large villages (gt2000 population) second
  Public Telephone
• Fixed Wire line/ fixed Wireless in high cost
  areas
• Infrastructure for Cellular Mobile Services roll
  out in uncovered areas (under implementation)

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Reverse Auction Process for support from
Universal Service Obligation Fund

• Rural Fixed Wire line/ Fixed Wireless
• Multi-layered Informed Descending Process
• Latin American Model
• Eligibility Eligible Licensed Access Providers
• Concept of Benchmark determination Net cost
• Front Loaded Subsidy
• Equated Subsidy

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Reverse Auction Process for support from
Universal Service Obligation Fund (contd..)

• Rural Fixed Wire line/ Fixed Wireless
• 3 Basic Rounds
• Further rounds if necessary
• Benchmark as reserved price/upper ceiling
• Lowest bid for each round benchmark for next
  round
• Bids to cover all designated areas of specified
  service areas
• Lowest bidder successful
• Roll - out obligation

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Reverse Auction Process for Infrastructure for
providing Mobile Services

• Two part Multi-Layered Informed Descending
  Bidding Process
• Part A Passive Infrastructure
  (Towers/Power/Associated Civil/ Electrical
  Facilities)
• (Shareable)
• Part B Active Infrastructure
• (BTS/Antennas/Backhaul) (Non-shareable)
• Eligibility
• Part A Infrastructure Service Providers/ Access
• Providers
• Part B Access Providers

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Reverse Auction Process for Infrastructure for
providing Mobile Services (Contd)

• Pre - determined Tower Locations/ Specifications
• Uncovered Areas
• Benchmark as reserved price for each part
• Two basic rounds for each part
• Lowest bid for each round as reserved price for
  next round
• Lowest bidder for Part A
• Lowest 3 bidders for Part B ( 25 higher)
• Location of tower prescribed
• Roll - out obligations

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Success of Reforms
Growth
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Size of USOF
(w. e. f 1.4.2002 upto 30.11.2006) ( Rs. 46) (w. e. f 1.4.2002 upto 30.11.2006) ( Rs. 46) (w. e. f 1.4.2002 upto 30.11.2006) ( Rs. 46)
Collection Rs. 14,275 crores ( 3.1 billion)
Allotted for Universal security Rs. 5081 crores ( 1.1 billion)
Distributed Rs. 4232 crores ( 900 million)
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Implementation Status (as on 30.11.06)
Public Access Target Achieved
(a) Village Public Telephone (VPT) (b) Replacement of non functional VPTs (c) Second VPT in larger Villages 5,78000 1,86,000 46,000 5,55,000 1,65,131 34,172
Household access On Demand
(Rural Areas Subscribers) Wait list estimates 2,00,000 15 Million (12.5 million supported by USOF)
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Conclusions

• Need based Customisation of Auction Process
• Incentivise Competition
• Prevent Speculation
• Characteristics of adopted auction process
• Transparent and Explicit
• Equitable and Non - discriminatory
• Specific, predictable and Sufficient

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Thank You