A Need for Reform: Current Legal and Regulatory Framework Baneful to Ease of Doing Business in Satellite Services Sector

Introduction 

Due to the exigencies created by the COVID-19 pandemic, a worldwide upswing has been observed in global internet use, with many enterprises opting for ‘internet first’ models and customer opting for online transactions. Also, to avert potential health risks to employees, businesses have also increased their dependence on modern automated and interconnected devices (often deployed in remote locations) to monitor business indicators and complete routine operations with limited human intervention. In view of the increasing global data requirements, and impending transition to 5G connectivity (coupled with rising fiberization of telecom networks), global corporations are also looking to leverage satellite technologies for data access and developing satellite internet solutions for global deployment. Such solutions also expected to power new-age technologies such as the internet of things (IoT) and machine to machine communications (M2M), particularly for activities like supply chain management, smart grids, railways, internal security, smart agriculture and healthcare etc., and to extend new services and superior connectivity to remote regions. 

In India, satellites systems are ubiquitous in the context of ‘direct-to-home (DTH) television services. But aside from DTH, the use of satellite technologies in other spheres (like internet access) has not picked up. This is attributable to the complex and burdensome legal and regulatory framework regulating satellite use in India which negatively affects the ease of doing business in this sector. In this article, we have highlighted some key aspects of this framework and have also identified areas requiring urgent reform.  

Key Pitfalls in Current Regulatory Framework  

The SATCOM Policy of 1997 and the norms and guidelines of 2000 specify the rules for satellite use in India. Also, the Indian Telegraph Act, 1885, the Indian Wireless Telegraphy Act, 1885, and the telecom licenses and directives issued thereunder specify conditions for the provision of telecom services through satellites and ownership/use of wireless equipment leveraging satellite connectivity. Stakeholders operating in this sector have time and again raised concerns that aspects of this framework are onerous and require reform to promote sectoral growth. These aspects are as below: 

• Restrictions on the use of international/foreign satellite systems 

New age private satellite communication systems (e.g., for provision of broadband connectivity) are reliant on the use of an international non-geosynchronous network of satellites or ‘constellations’ that are used to provide services globally. However, such business models may be faced with regulatory hurdles in India where the regulatory framework disincentivises the use of foreign satellites for Indian operations and prefers the use of government-owned ‘INSAT’ system or other Indian satellites.  

Though the use of foreign satellites to provide services in India is not disallowed, specific governmental approvals must be secured. Such approvals are often difficult to obtain since their grant is contingent on the government’s satisfaction that requisite satellite capacity cannot be alternatively secured on Indian satellites and that foreign systems being leveraged have substantial Indian participation (by way of equity or in-kind contribution). Also, these approvals have to be periodically renewed, such as when satellites are upgraded, which creates an additional burden. In this context, even though sectoral regulators like the Telecom Regulatory Authority of India (TRAI) have been advocating an ‘open sky policy' to allow service providers to work with any international or foreign satellite, the Indian government’s stance granting favourable treatment to Indian satellite systems continues to persist. 

• Licensing related restrictions 

The restrictions on foreign satellite use for Indian operations are even more pronounced where telecom services (e.g., broadband) are sought to be provided through satellites. For context, obtaining telecom ‘licenses’ is necessary to offer telecom services in India. For satellite-based telecom services (e.g., data services through VSAT), licensing norms seemingly require the sole use of the INSAT system for securing satellite capacity. This effectively negates the possibility of leveraging foreign satellites for such services, thus foreclosing several commercially beneficial ventures.  

The licenses also mandate provisioning of services within a ‘closed user group’, which potentially impairs large scale service deployment thus affecting economies of scale. Additionally, entities must also secure separate licenses for providing internet services in India to users (in addition to licenses for setting up satellite networks), which further adds to the compliance burden. Other onerous licensing conditions (e.g., relating to securing Standing Advisory Committee for Frequency Allocation (SACFA) and other clearances from multiple authorities, geographical restrictions on earth station deployments, compulsory equipment testing and certification, and periodic reporting etc.) similarly affect the ease of business in this sector.  

• High Deployment Costs 

Entities deploying satellite services in India are also faced with huge deployment and operational costs that are driven up by high periodic regulatory fees for spectrum use and satellite capacity allotment, and other recurring costs to secure and maintain requisite clearances from multiple authorities. Due to the prohibitive costs and other regulatory pitfalls as above, the full potential of satellite services has not been realised in India, and this remains an untapped sector. 

Way forward 

The Indian government is cognisant of the challenges faced by the satellite sector. Recent governmental policies (e.g., the National Digital Communications Policy, 2018) have recognised the need to overhaul this regulatory regime to promote the ease of doing business and facilitate leveraging of satellite technologies for fostering the growth of new-age technologies like IoT and M2M. TRAI has also instituted multiple consultations (relating to the use of satellite systems in IoT and backhaul connectivity) to propel reform and is also looking into the feasibility of permitting the use of foreign satellite for operations on Indian territory and other licensing reforms to reduce compliance burden. Further, the government is also examining the legal and regulatory issues surrounding the business models being explored by potential new entrants for the deployment of satellite services in India. Considering the current regulatory issues, it is critical for major industry players and new entrants, to actively engage with the government on such issues and participate in stakeholder consultations to drive favourable regulatory outcomes. 

Authored by:

Harsh Walia (Partner), Abhinav Chandan (Partner) and Aditya Ayachit (Senior Associate), Khaitan & Co.