Revised Other Service Provider (OSP) Rules- Towards the Path of Liberalization

September 25, 2021/ Pritha Lahiri/ Technology Law

By Pritha Lahiri, a student of Institute of Law, Nirma University.

Background:

Recently, the Department of Telecommunications (DoT) has introduced amended guidelines for the Other Service Providers (OSP). The Other Service Provider (OSP) is a Company registered under the Companies Act, 2013 or Limited Liability Partnership (LLP) that uses telecom resources provided by authorised Telecom Service Providers to provide application services such as telebanking, telemedicine, tele-education, tele-trading, e-commerce, call centre, network operation centre, and other Information Technology enabled services (ITes). These revised simplified guidelines will be replacing the earlier guidelines released back in November 2020 (2020 Guidelines). Former IT and Communications Minister, Mr Ravi Shankar, while introducing the revised rules revealed that India has one of the largest Business Processing Outsourcing (BPO) Industries which is expected to rise by double digits, reaching 3.9 lakh crores by 2025. The amended guidelines are aimed at giving the BPO industry a boost and placing India as one of the world’s most competitive I.T jurisdictions. It is further expected to provide an impetus to India to its Atma Nirbhar Bharat Campaign which seeks to make the country and its people self-sufficient in all ways.

The present article seeks to trace the developments of the released guidelines along with listing down its probable effects on the BPO and the IT Enabled Services Industry (ITes).

Why was OSP Rules Introduced?

In the 1990s, Information Technology Industry in India experienced exponential growth in the country and along with that, a slew of new OSPs, both voice and non-voice based, have entered the market. The sector needed little capital but yielded high profits, prompting a significant number of people and businesses to start their own OSPs. To keep track of the usage of the resources by these OSPs, the Department of Telecommunication (DoT) introduced the first set of rules in 1999 requiring all the OSPs to register themselves. At that time, a regulatory embargo was required considering it was a very new system for everyone and there was a very different requirement on the networks which meant that there was always a possibility of it being misused.

2020 OSP Rules- A brief fact-check:

The 2020 OSP Guidelines was a baby step towards creating a friendly regime for the OSPs. It removed the registration requirement along with removing all the compliance requirements like furnishing bank guarantees. The concept of Remote work was also introduced, providing flexibility to the employees of the industry. The guidelines enabled the use of VPNs to share infrastructure for internal communication providing a secured transmission of information. It also prohibited circumventing the International Long Distance Operator (ILDO) and National Long Distance Operator (NLDO) jurisdictions. While these guidelines proved to be a boon for the industry, it was still silent on topics such as cloud-based hosted contact centres, permissible connectivity between OSPs and remote agents in the event of work outside the OSP centre, and so forth.

Revised OSP Rules of 2021- Key Changes and its implications:

Going a step further, the DoT released revised guidelines for Other Service Providers (New Guidelines), which further simplify and supersede the 2020 guidelines. Following are the key changes in the revised guidelines-

  1. The revised guidelines have defined ‘Voice-based BPO Services’ to refer to the call centre services by the OSPs globally and the calls are made to the customer via Public Switched Telephone Network (PSTN)/ Public Land Mobile Network (PLMN)/Integrated Services Digital Network (ISDN) (Public Network). This clarification has been a welcome move in separating non-voice based BPO from the ambit of the OSP Rules leading to the rules being more specific and avoiding confusion created due to the earlier guidelines which didn’t segregate the BPO Services.
  2. It has given a proper definition to ‘Toll bypass’ to mean the illegal carriage of voice calls between Public Network (a) at the domestic end in India and a foreign country; or (b) of two cities in India, by using the OSP’s network, as opposed to the network of the authorised Telecommunications Service Provider (TSP). The new definition has provided more clarity on the term which will lead to the efficient formulation of call structures.
  3. The 2021 guidelines have also done away with the distinction between domestic and international OSP centres.  This allows a single call centre to service both international and national customers. It has led to the industry adopting a simpler working model with less infrastructure cost.
  4. OSPs can now interconnect using any wide-area networking (WAN) technology over National Private Leased Circuit (NPLC)/MPLS VPN, such as SD-WAN. The reduction of interconnection limitations and the use of distributed architecture could pave way for seamless knowledge transfer as well as allowing players to juggle their resources at their convenience, based on orders and workload.
  5. All OSPs (including domestic OSPs) are permitted to have their Electronic Private Automatic Branch Exchange (EPABXs) at foreign locations. Companies will now be able to use their global EPABX for their contact centres in India, as well as implement global technologies that are not available on Indian EPABXs.

The Guidelines also lower the requirements even more. The amended rules now allow OSP remote agents to connect directly to the customer EPABX or any Centralized EPABX without first connecting to the OSP Centre, reducing the need for various formalities. The amended rules now allow OSP remote agents to connect directly to the customer EPABX or any Centralized EPABX without first connecting to the OSP Centre, avoiding a double hop. Therefore, the new Guidelines has been a success in creating a more friendly regime for the OSP Industry along with providing a conducive environment for positioning India into a major hub for businesses.

Benefits to the OSP Industry:

Greater Ease of doing business

The New Guidelines along with relaxing requirements has also made the Guidelines 2020 simpler which favours the OSPs making it a very business-friendly regime for them. These guidelines will further provide an impetus to the industries in this sector to open up anywhere in India since firms will not need prior permission from the government to commence operations. It is known that higher ranks are given to countries that have the most business-friendly regime, the revised guidelines are here to make a permanent impact on India’s ease of doing business. The new guidelines will certainly help in boosting India’s current rank of 63rd in the ease of doing business.

Attract more businesses

The New Guidelines also debar restrictions on data interconnectivity between OSP centres of the same company, a group company or any unrelated company. A business process outsourcing (BPO) centre with common telecom resources will now be able to serve customers located worldwide, including in India. With the government recognising OSP employees as extended or remote agents, companies providing such services will no longer have to carry the additional compliance burden of providing the details of all such employees to the DoT. The lesser compliance burdens and the relaxed norms will further allow employees to opt for freelancing for more than one company while working from home. The smart move by the Government will therefore attract more workers in this industry along with helping the OSP Industry to expand to a whole new level.

More flexibility to the OSPSs

The New Guidelines combined with the first set of OSP reforms of November 2020, is a significant step in providing flexibility to the OSP industry. The introduction of a Work-from-Anywhere system, as well as access to a hybrid working, would provide it with a huge boost, creating greater access to talent, job creation, and catapulting Indian IT-BPM to the next level of growth and innovation. The new guidelines have further provided more flexibility to the employees by allowing them to connect to the OSP using any form of connectivity. The OSP’s EPABX (Electronic Private Automatic Branch Exchange) can be located anywhere in the world under the new guidelines. The new norms while providing a conducive environment for young talents in the country to grow their skills in this sector is also providing more flexibility to the firms in terms of managing all the resources.

Disadvantages:

While the New Guidelines are seen as a welcome change in the telecom industry, it might bring with it the potential causes of danger.

Firstly, Chapter 2 which deals with the general guidelines for OSPs provides that no registration will be required for OSPs in India. Although in the first instance this might sound like a favourable option, in the long run, non-registration of these businesses can cause more harm since the trustworthiness of a company’s brand image and perception improves when it is registered. As many firms will only hire or work with registered corporations rather than unregistered ones, this has the impact of boosting your business’s future dealings with third parties. As a result, incorporating a company can open up new vistas and opportunities that would otherwise be unavailable.

Secondly, Chapter 2(5) of the 2021 rules clearly specify that the OSPs are required to self-regulate their operations. Giving the OSPs such unrestricted authority has the power to impact these businesses since the OSPs can run their operations according to their whims and fancies. As a result, a neutral regulatory mechanism is needed to keep an eye on the OSPs and ensure that they are operating efficiently.

Conclusion:

The changes introduced by DoT through the New Guidelines is a very clever move. Not only does it provide clarity but it also liberalises the regulations applicable to the OSP industry. The New Guidelines will help these industries to fully employ technology to execute work from anywhere in a seamless manner, as well as have more freedom in how they use their infrastructure and design their service delivery model to better serve the global market.  These reforms will draw more MNCs to India as a desirable destination, resulting in increased Foreign Direct Investment.

References:

[i] Department of Telecommunications, Revised Guidelines for Other Service Providers (OSPs), No. 18- 8/2020-CS-I (Pt.), (Issued on 23rd June, 2021).

[ii] Ankita Gupta, Brief Review of DOT OSP License, Tax Guru, (Dec, 02, 2019), https://taxguru.in/corporate-law/review-dot-osp-license.html

[iii] Department of Telecommunications, Revised Guidelines for Other Service Providers (OSPs), No. 18- 8/2020-CS-I (Pt.), (Issued on 23rd June, 2021), Ch. 1(5).

[iv] Department of Telecommunications, Revised Guidelines for Other Service Providers (OSPs), No. 18- 8/2020-CS-I (Pt.), (Issued on 23rd June, 2021), Ch. 1(10).

[v] Department of Telecommunications, Revised Guidelines for Other Service Providers (OSPs), No. 18- 8/2020-CS-I (Pt.), (Issued on 23rd June, 2021), Ch. 2 (3).

[vi] Department of Telecommunications, Revised Guidelines for Other Service Providers (OSPs), No. 18- 8/2020-CS-I (Pt.), (Issued on 23rd June, 2021), Ch.3 (3).