A new dawn for OSPs

Contributed by: Khaitan & Co

5 November 2020 marks a historic date for the outsourcing industry in India. It is the date on which the Government, after months of deliberation and dialogue with the industry, took a step that according to many is likely to change the related regulatory landscape for times to come.

Having said that, the advent of the new ‘other service provider’(OSP) guidelines (New Guidelines) has left many questions unanswered, particularly for entities that were registered as OSPs with the Department of Telecommunications (DoT) under the preceding regime. Through this article, we aim to demystify some of the common enquiries and help such entities re-engineer their operations in line with the new regulatory framework.

Step One – Re-assess

To start with, existing registrants need to re-assess whether their operations fall within the contours of the New Guidelines. The definition of an OSP has been significantly curtailed in comparison to the previous regime and now only includes entities that are engaged in provisioning voice based ‘business process outsourcing (BPO)’ services. By doing so, DoT has manifested its intention to primarily regulate entities that utilise voice-based services, where the propensity of toll bypass is higher.

This is a notable departure as the definition of ‘application services’ under the preceding regime was subject to much criticism owing to its wide, all-encompassing nature and accompanying requirement to obtain registration. With the removal of the requirement to obtain registration certificate under the New Guidelines, the DoT has sought to transcend to a framework that heavily relies on self-regulation. However, in many instances (for instance, where operations are predominantly data- based and voice calls are made sporadically), this determination may not be very straightforward.

End to cumbersome paperwork and compliance

The New Guidelines clarify in no uncertain terms that the previous guidelines have been superseded by the New Guidelines. As a corollary, all registration certificates and sharing permissions issued pursuant to the old guidelines have become null and void. Furthermore, and importantly, all associated compliances such as submission of annual returns, network diagrams, etc. are also not required to be undertaken henceforth. This step away from the ‘license raj’ is welcome and ushers the business-friendly image of DoT with aplomb.

Facilitating utilisation of facilities

With a view to further re-enforce its business-friendly image, DoT has removed the requirement to furnish security deposits in the form of bank guarantees. In the past, bank guarantees were viewed as one of the many roadblocks in availing facilities such as sharing of infrastructure and work from home. While it is also noteworthy that the requirement to obtain such permissions has been done away with in the first place, the removal of bank guarantee requirement sends a strong message to the industry (and particularly foreign investors) as far as ‘ease of doing business’ is concerned. We gather that DoT is in the process of devising systematic procedures to seek return of bank guarantees that were furnished by OSPs earlier.

Use of foreign based call managers

To provide a fillip to foreign investment, as an unprecedented measure, DoT has permitted the use of foreign based call managers to international OSPs. It would be safe to say that this was one of the most criticized shortcomings in the previous regime and obligated multinational companies to create a parallel network for their India operations. International OSPs can now leverage their foreign based call managers after connecting to them via private leased circuits (like MPLS), as long as all laws (particularly data protection and privacy laws) are complied with and call detail records and system logs are maintained at one of the International OSP centres of the entity in India.

Simplified connectivity

Another cost-saving measure that has been green-lit by DoT is the procurement of internet connectivity at a centralised location, so that it can be shared amongst various OSP centres of the same entity. To add to this, it has been permitted to carry internet traffic over private leased circuits to such locations. This will also allow entities to leverage existing interconnections between OSP centres more effectively, as opposed to procuring new telecom resources. It appears that DoT has also permitted PSTN traffic to be carried over leased circuits from one OSP centre to another, with this motive.

Remote working

Lastly and most importantly – to keep up with demands of changing times, which have been propelled by the ongoing pandemic, DoT has facilitated widespread and seamless adoption of remote working practices. To take the previously granted dispensation (of undertaking work from a pre-defined location in India) took the next level, remote working is now permitted from any location in India. In other words, remote agents are no longer confined to the precincts of their homes to undertake OSP related work.

As another notable change, the mode of connectivity between the OSP centre and the location of the remote agent has been made technology neutral. Under the previous guidelines, the requirement to use ‘provider provisioned virtual private network’ was criticized by one and all. Later, this requirement was liberalised in the form of temporary relaxations on account of COVID-19 pandemic and the use of self-configured VPN was permitted. Now, since no mode of connectivity has been prescribed under the New Guidelines, it definitely provides a great deal of flexibility to OSPs. Having said that, there are questions regarding whether interconnection to OSP centre is mandatory, placement of infrastructure like VPN gateways at OSP centre, routing of PSTN calls in case of domestic OSP operations, etc. that need a careful examination to remain on the right side of regulations.

Next steps

The New Guidelines are undoubtedly a giant step for the outsourcing industry in India. The industry, which is a major source of employment and revenue for the economy, was in dire need of incentives and the timing could not have been more apt. By relying on self-regulation, DoT has vested OSPs with the correct degree of autonomy, while ensuring that OSPs do not overstep certain broad regulatory principles like prevention of toll bypass, preservation of records and logs in tamper proof form, etc.

As it is often said, power is accompanied with responsibility and therefore, it is for OSPs to avail dispensations responsibly. For entities that fall outside the ambit of the New Guidelines, while it may pave the way for use of cloud-based technologies, they are deprived of other dispensations that are exclusively available for OSPs. For OSPs, the New Guidelines bring a slew of reliefs but also leave several unanswered questions with regard to their network and operations. One thing is guaranteed for sure – the complexities in the regulatory framework relating to OSPs are far from over and OSPs will need to re-assess at every step.

Contributed by Khaitan & Co

The above article is authored by Harsh Walia (Partner) and Shobhit Chandra (Principal Associate).