This article is written by Kapil Nikam, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here he discusses “Most Important Agreements and their Clauses for a Telecom Service Provider”.
India’s telecommunications sector has been growing. India’s communication consumers are the second largest across the world. As per Wikipedia source, approximately total subscribers as of 31st July 2019 are 1.183 billion. In worldwide India’s tariff rates are also low. After 1991 India has accepted mix economy therefore a lot of private players also enter in telecommunication business. The telecommunication sector covers telephone, internet and television broadcast industry. Telecommunication Regulation Authority of India is the regulatory authority to govern the rules and regulations in the telecommunication sector.
We came across various news in the past, in relation to scams under the telecommunication sector. There are various types of agreements are to be entered in relation to the telecommunication sector. In the present article, we are going through the most important agreements and their clauses for the telecom service provider. Most of the agreements need to be entered as per guidelines and regulations framed by the TRAI.
Following are the most important agreements for a telecom service provider:
- License Agreement
- Security and Business Continuity Agreement.
- License Agreement for Internet Services
We will review some important clauses in the aforesaid agreements.
1. Unified License Agreement
This agreement is executed between the Department of Telecommunication Government of India: The Telecommunication Department permits the license to respective Company o Service Provider for providing unified access services, mobile services, basic services to the Service Area as specifies in the License Agreement. This Agreement is an important agreement for Service Provider as well as Department Telecommunication Department (DOT). Under Section 4 of the Indian Telegraph Act DOT has exclusive right to grant the license for the aforesaid services.
Some important clauses in the License Agreement are:
- Recital: In recital clause brief description in relation to the license rights is describes, TOD has a right to grant a license if a tender process is floated specification is given and also how Licensee approach to the TOD and both parties agree to execute the agreement.
- License fee: Details regarding License Fee has mentioned in this Whether license grants exclusive or non-exclusive basis that is also stated in this clause. This clause should be specific.
- Validity: in this clause period of validity is mentioned as the tenure of the license period. The validity period generally begins from the date of Effective Date as mentioned in the agreement.
- Terms and conditions: It is mentioned that Licensee shall comply with all the terms and conditions as specified in the agreement. The licensee and agreement are governed by the provisions of the Indian Telegraph Act.
- Ownership of Licensee Company: It is mentioned that the Licensee Company shall not exceed 74 per cent equity and shall follow FDI norms and compliance framed by the government from time to time. Both direct and indirect investments shall be count for the cap of foreign direct investment. Other contains also mentioned in this agreement such as what is the minimum paid-up capital of the Company, Licensee shall into ate the DOT in case of a change in name of the company under the provisions of the Companies Act, 2013. Also, declaration about paid-up capital and compliances relating thereto specify in this agreement.
- Scope of the Services: This is one important clause in the unified license agreement which specifies the scope of the agreement whether it operates and maintains to telecommunication services, whether it is an exclusive or non-exclusive basis. It also covers the service area and geographical boundaries regarding the Services. It specifies that the licensee shall use the equipment as per international standards and norms.
- Renewal of License: This clause specifies the License may be extended. However, renewal rights exclusive with TOD and they follow prescribed norms and guidelines for renewal.
- Modification in terms of License: This clause states that DOT has a right to modify this agreement in the security interest of state or larger public interest.
- Restrictions on Transfer of License: This clause stipulates the restrictions on the transfer of license, the licensee can not transfer the license to any third party without prior permission of the DOT. The licensee may with prior approval transfer and if any specific conditions are there then it is specifically stated in this agreement.
- Required to furnished information: It is stipulated that the Licensor shall provide and furnished information to the licensor or TRAI as and when required.
- Penalty/Suspension revocation and termination clause: This is one of the important clauses in this agreement which specifies revocation and termination conditions and also imposes a penalty, it is mentioned that penalty shall not impose more than INR XYZ limits. In case of any breach procedure for show cause notice and time frame for replying to the same, hearing of licensee specifies in this clause.
- Force Majure: it is mentioned that either party can not claim damages in the event of an act of god such as l war or hostility, civic commotion fire flood, epidemic. Notice the procedure mentioned in this agreement.
There are some important clauses in this agreement which are as under:
- Spectrum related charges
- license Fee
- space segment charges
- Adjusted Growth Revenue
- Bank Guarantees
- Technical Condition
- Quality of Service
- Operation details
Readers can read standard draft agreement which is available at the website of DOT for better understanding and in-depth knowledge regarding aforesaid clauses in Unified License Agreement.
2. Security and Business Continuity Agreement
We will visit some important clauses in the Security and Business Continuity Agreement – This agreement entered between telecom service providers and the vendor of Equipment, Products, and Services. The purpose of this agreement is to ensure that equipment and services provided should be secure and enable the vendor to have access to system, network and data information. Following are the important clauses in this agreement:
- Scope: This clause sets out the mechanism for supply equipment and services and how to grant access to Telecom Service Provider (TSP) System, network, equipment, data and facilities and Telecom Service Providers’ information for installation, provision, and maintenance by the vendor.
- ISO certification: It stipulates that the Vendor shall have ISO 27001 certification to fulfil its obligations under the contract.
- Security Requirements: This clause in relation to the security requirements such as vendor shall be authorized to access the TSP systems, single point contact, details of the authorization process, details of vendors Contract Personnel who have to need to access. It also covers risk analysis which is done by the Vendor.
- Service Continuity Assurance: This clause specifies that the Vendor shall ensure all tools, skills resources for keeping the TSP’s system operational.
- Access to TSP Systems: By this clause TSP allows the vendor to get access as contemplated in the agreement. The vendor also makes certain representations that his Contract Personnel shall have unique user identification and password. Also ensures that they will never share user identification and password to anyone, there shall not be any corruption or modification in TSP systems and TSP information, Vendo shall take reasonable efforts that no viruses or malicious code, spyware are introduced.
- Conditions for Equipment Vendors: It is specified that supplied equipment has been subjected to testing and safety norms.
Thre are some important clauses in this agreement which are as under:
- Additional Security Tests for Telecommunication Equipments
- Cryptography related Security Issues
- CDMA Network Managers
- Escrow Mechanism
- Regulatory matters
- Intellectual Property Rights.
Foregoing is the main clauses in Security and Business Continuity Agreement.
3. License Agreement for internet services
In this agreement DOT grants license to the licensor for internet services. Most of the clauses which are similar to the License Agreement mentioned hereinabove we are not going to reproduce said clauses. Following are some important clauses apart from said clauses:
- Set-Off Clause: This clause is related to recoverable payable by the licensee to the licensor against the license agreement or otherwise modalities of Set-Off mentioned in this clause.
- Way Leave: This clause stipulates that licensee shall arrange its Right Of Way. However, DOT issues notification concerning telephone lines.
- Obscene Material and applicability of cyberlaw: In this article, it is ensured that objectionable material or content which infringes copyright, Intelectual Property Right and international and domestic cyber laws shall not carry in its network.
- Quality Assurance: Telecom Regulatory Authority of India can check and major quality of service.
Following are other important clauses in said agreement:
- Termination for Insolvency.
- Termination for convenience
- Engineering details.
- Dispute Resolution clause.
- Compliance Mechanism.
Aforesaid clauses are the important clauses in the License Agreement for Internet Service.
The telecommunication sector is one of the growing sectors. There are multiple types of agreements relating to the service provider that needs to be entered between the parties. We have seen three important agreements in relation to service providers in this article.
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