The Indian telecom sector continued on a growth trajectory during the past year on the back of growth in the 3G and 4G markets and an improved policy and regulatory environment. However, some issues still need to be resolved, such as those pertaining to the infrastructure and equipment segment, desealing of mobile towers, right of way (RoW), domestic equipment manufacturing, etc. Despite the significant challenges, the sector is preparing to take the next step towards growth, driven primarily by data services. Industry leaders share their views on sector achievements, key issues and challenges, as well as the future outlook…
How has the telecom sector progressed in the past one year?
The past year was not very good. While a number of commitments were made by the government, the policies did not emerge as per the announcements made, especially with regard to the Digital India, Start up India and Skill India initiatives. Policies need to be matched with government commitment. The industry is happy with the announcements but the same kind of intent is not visible in the lower bureaucracy. This is a major issue which has kept industry confidence low.
The year gone by has been very eventful for the sector. The most striking aspect is the Department of Telecommunications’ (DoT) proactive role in resolving challenges, whether it was with operators or infrastructure providers. This is very praiseworthy and is also a recognition of the fact that digital infrastructure and passive infrastructure are fundamental to the Digital India dream. When policymakers talk directly to stakeholders the credibility of what they say increases. The government has taken the right steps in this direction.
In the past one year, the industry’s focus continued to be on providing better services to consumers. While next-generation technologies are being rolled out, there is still no guarantee that the speed promised will be delivered. Meanwhile, the Telecom Regulatory Authority of India has been very active recently and has issued several new consultation papers. The auction of the biggest chunk of spectrum to date in the country is on its way.
However, it is surprising that successive governments talk about promoting telecom/
mobile/electronic manufacturing and many initiatives are launched to this end, but there is no real progress on the ground. Meanwhile, rural penetration continues to be low despite the fact that we have the required technology, sufficient monetary resources as well as policy intent.
The past year has been one of the most significant for the sector, second only to the year when the New Telecom Policy (NTP) was announced. It is also significant that the first set of metro mobile networks, which were commercially launched in end-1995, touched 1 billion mobile connections last year. Achievements on the spectrum front during the year were probably the most impactful. Inadequate spectrum per operator has been the bane of this sector right from its inception. Spectrum e-auctions of the past two years have alleviated the situation but it is still far from satisfactory. Against this background, it is creditable that preparations for the biggest auction, to be held in September 2016, have been completed. Meanwhile, spectrum sharing and spectrum trading policies announced this year have led to the much-needed market consolidation.
Some of the other major milestones are:
- The launch of Digital India concurrently with the increased focus on BharatNet.
- The launch of 4G networks, putting us at par with global technology advancement.
- The staggering growth in mobile data with improved operating results for all.
- The announcement of the framework for the machine-to-machine (M2M) policy and the increased focus on internet of things (IoT).
- Award of payments bank licences to some mobile operators, highlighting their key role in financial inclusion.
- Acceptance of e-Aadhar authentication for mobile subscriptions, which will help achieve secure ubiquity of mobile connectivity.
- Significant advances on the net neutrality debate.
- Thrust on improving quality of service (QoS), especially with respect to call drops.
In addition, the unique measures taken by the government to facilitate mobile towers on its properties and the initiation of action to notify uniform tower installation and RoW rules is also a key achievement. This is most essential for the proliferation of broadband.
What are the biggest achievements of the government in the sector?
The single biggest achievement of the government is its remarkable strides in spectrum reforms which is a key resource for the sector.
Positive investor sentiment in the sector is also due to the demonstrated thrust of the government towards growth and development. Due to this, investments in the form of foreign direct investment (FDI) have increased significantly in the telecom sector. From May 2014 to June 2015, the sector attracted FDI of about Rs 110 billion. While the sector is still reeling under an enormous debt burden, the overall health of the sector has started to improve.
While the enabling role of the government has been the primary factor, the role of the private sector in increasing broadband penetration in the country is highly noteworthy. Mobile service providers have evolved to become the
single largest provider of broadband in the country. They have made significant investments in technology, spectrum and infrastructure (a cumulative sum of Rs 8.5 trillion approximately) to ensure the increased proliferation of mobile and broadband services.
What are the key challenges that the industry is still facing?
The biggest challenge is that broadband penetration in the country is still quite low. To add to this, the government wants to impose a licence fee on internet service providers (ISPs). Such an imposition will have a cascading effect on the industry. The second challenge is that the government has allowed infrastructure sharing among operators, but infrastructure sharing among ISPs, national long-distance service providers and international long-distance service providers has still not been enabled. This is why the industry is not able to use its network structure in an optimal way. The third challenge is that policy and technology are not evolving at par with each other. While technology is advancing rapidly, policy issues that were present two decades back continue to plague the industry even today.
The key challenge is that there has to be an alignment of issues between governments at the central, state and municipality levels.
Second, the definition of passive infrastructure needs to be expanded to include end-to-end infrastructure that takes care of the requirements of operators, as well as of the upcoming smart cities. Infrastructure will have to be dealt with on a high priority basis, almost like an essential service, so that service roll-out can be speeded up. Moreover, there should be uniform policies across states so that the sector is not caught up in unnecessary legal cases and the Digital India initiative can be better facilitated.
I would like to reiterate that the government has recognised these challenges and, therefore, some very good work has happened in the past year. However, much still needs to be done.
Some issues that require the attention of policymakers are:
- Implementation of preferential market access and its extension to the private sector.
- Allocation of some spectrum for domestic technologies as per already existing provisions of the spectrum policy.
- Imposition of cess on telecom revenues for research and development.
- Coordination between states for investments.
- Recognition of what constitutes manufacturing. We have some companies that claim to be “making in India” by just taking a shed on rent for six months-a year and not making investments in plants, machinery, human resources or research and development.
- Implementation of mandatory specifications made by Telecom Engineering Centre, DoT.
- Constitution of a government body to release International Mobile Equipment Identity numbers (required for mobile manufacturing) instead of encouraging the monopoly of a single private player.
- Encouragement of local manufacturing in a true sense. There is a need for thousands of local brands “making in India” instead of a small group of 10-15 brands only.
- Implementation of a uniform tower policy to ensure that mobile growth is not hampered.
The biggest challenge before us is the expeditious enhancement of broadband penetration, which is currently quite low. There are barely 150 million broadband users in the country, of which about 20 million are fixed broadband users. We are far short of our target as laid down by the NTP, 2012. Challenges in broadband proliferation are fourfold: spectrum availability, hurdles in roll-out of tower and optical fibre cable (OFC) infrastructure, high duties and levies on the sector, and inadequate digital literacy and regional content.
While the government has been taking steps to overcome spectrum deficiency, one of the challenges to increased broadband penetration continues to be the serious difficulties in rolling out OFC and towers. To ensure QoS and delivery of high-bandwidth services, a strong backbone and backhaul infrastructure is essential. For India’s extremely price-sensitive market, it is also essential that such infrastructure is scalable at low capex and low opex. Unfortunately, in many states, local bodies, municipalities and state governments follow policies which make getting RoW quite challenging. In addition, the charges levied are exorbitant. The same is the case for tower installations. We understand that the government has initiated suitable steps in resolving RoW issues. This needs to be fully supported by all stakeholders.
The third challenge is maintaining business viability while meeting the ever-increasing demand for enhanced affordability. The sector is already delivering one of the lowest mobile tariffs in the world while reeling under a debt burden of about Rs 3.8 trillion. Also, the sector operates with one of the highest load of duties and levies globally – 24.5-28.5 per cent. If this factor is corrected, it would help improve the uptake of broadband immediately.
Lastly, the need for increased public awareness and ability to use broadband services is also a challenge. Regional/Local content development should be strongly incentivised.
What is the sector outlook for the next one-two years?
The sector has been progressing and will continue to progress at its own pace. There is no special impetus being lent to it because of policy support. While providing good QoS at the lowest cost is the industry’s aim, it is possible only with government support. In my opinion, the government should view the sector from the bottom up. If a small service provider is serving at the district level and a large service provider is serving the whole country, then the large player should not be favoured by the government at the cost of the small service provider. In sum, the government should play the role of a facilitator to enable the industry to achieve its goals.
The network roll-out requirement has gone up multifold as data traffic increases exponentially. As networks will have to cater to the data requirement, we cannot take a narrow view of voice-based sharing like we did earlier. Infrastructure will have to be viewed as an end-to-end plug-and-play model to ensure that customer and operator requirements for data networks are met.
From the infrastructure segment’s point of view we do not see any conflict of interest with policymakers or the regulator. However, implementation will be key. The central government is taking some correct steps by dealing directly with stakeholders. However, there continues to be a huge gap between the centre’s intent and its reflection at the state level. Thus, partnerships between the centre and the industry are required. Unless this is done, these objectives will remain only objectives.
The prospects of the telecom sector are inextricably linked with the potential and performance of the broadband segment. With 1 billion citizens waiting to be broadband connected, spectrum deficiencies getting overcome, difficulties in rolling out fibre network and towers nearing resolution and the enormous opportunities from Digital India, the potential of broadband is truly remarkable. It would, however, be naive to expect that in one-two years we would be able to completely close the gap between us and comparable economies. We might accomplish global parity in the next five-seven years. However, the great take-off could well happen in the next couple of years.
Other major prospects would be the growth of 4G as well as M2M and IoT. The net neutrality issue would also be more or less amicably settled in India and there would be an upsurge in positive partnerships between over-the-top players and telecom/internet operators. I also foresee great contribution from the sector in financial inclusion, with the rise of payments banks.
On the whole, due to ongoing market consolidation, the financial health of the sector would improve significantly while the vibrancy of competition would remain high. One could well say that, for Indian telecom, the best is yet to come.
“The government should play the role of a facilitator to enable the industry to achieve its goals. Policies need to be matched with government commitment with regard to the Digital India, Start up India and Skill India initiatives.”
Rajesh Chharia, President, Internet Service Providers Association of India
“The central government is taking some correct steps by directly dealing with stakeholders. However, there continues to be a huge gap between the centre’s intent and its reflection at the state level.”
Umang Das, Vice Chairman, Tower and Infrastructure Providers Association of India
“Successive governments talk about promoting telecom/mobile/electronic manufacturing and many initiatives are launched to this end. But there is no real progress on the ground.”
N.K. Goyal, President, CMAI Association of India and Chairman Emeritus, TEMA
“While the government has been taking steps to overcome spectrum deficiency, one of the foremost challenges in increasing broadband penetration continues to be the serious difficulties in rolling out OFC and towers.”
T.V. Ramachandran, President, Broadband India Forum