The Indian telecom sector has witnessed several important developments during the past year, marked by the passing of the much-anticipated Telecommunications Act, 2023, as well as evolving growth dynamics and significant technological advancements. With the recent conclusion of the 5G spectrum auction, India is poised to unlock a wide range of opportunities across the telecom domain. Industry experts discuss the evolution of the sector, the key growth drivers, the major challenges and the way ahead for the sector…
How would you assess the progress in the telecom sector over the past one year? What have been the key milestones?
Tilak Raj Dua
India is on track to become a global leader in the telecom sector. The Telecommunications Act, 2023 is a remarkable initiative shaping the sector. It focuses on various aspects such as authorisations in place of licensing, right of way (RoW), standards and public safety for telecom networks, and incorporating the regulatory sandbox for encouraging and facilitating innovation and technological developments. Further, by notifying the draft RoW Rules, 2024, the government has taken a significant step for the regulation, establishment and maintenance of telecom networks.
Significant strides have been made to enhance digital infrastructure and broadband penetration. As of May 2024, 200,000 public Wi-Fi hotspots have been successfully established under the PM-WANI initiative, which was launched in December 2020. The National Broadband Mission 2.0, which has the ambitious goal of achieving universal broadband connectivity, is also under way.
Meanwhile, 5G roll-out in India has been the fastest in the world. Launched in October 2022, it is currently available across all 28 states and eight union territories of the country.
Under the “Make in India” initiative, the telecom industry exported equipment worth Rs 1.49 trillion during 2023-24. Meanwhile, the PLI scheme for telecom and the networking equipment sector has been instrumental in fostering domestic manufacturing capabilities. With an outlay of Rs 121.95 billion over five years, this incentive has strengthened the local value chain and promoted self-reliance in the telecom industry.
Akhil Gupta
During the past one year, the telecom sector in India has undergone significant transformation and progress by way of deep proliferation of 5G across the country. The key milestone achieved by the industry last year is making 5G services available in over 75-80 per cent of the geography and getting a very significant amount of data traffic offloaded to 5G. With this, India has become one of the largest countries globally with regard to 5G networks.
T.V. Ramachandran
The year 2023 will go down in the annals of the Indian telecom sector as the year of the remarkable 5G roll-out, thanks to the proactive support of the government and the strong play of private entrepreneurial initiatives. While 5G had been launched in October 2022, the trailblazing roll-out took place during 2023, with 400,000 base stations launched by December 2023 and 131 million subscribers acquired.
The successful connection of over 220,000 gram panchayats through optical fibre cable (OFC) and a large government funding for BharatNet’s connection of all 640,000 villages is an epoch-making initiative.
Another historic milestone has been the Telecommunications Act, 2023, which came into effect on December 24, 2023. This transformative legislation, the first such after the Indian Telegraph Act of 1885, paves the way for expeditious installation of digital infrastructure, accelerated development of modern satellite communications and innovative internet applications and content.
Dr Mahesh Uppal
The Telecommunications Act, 2023, passed in December, is perhaps the most important milestone.
What are your views on the new Telecommunications Act, 2023? How will it impact the sector?
Tilak Raj Dua
The Telecommunications Act, 2023 represents a pivotal step towards establishing a robust and future-oriented telecommunications framework in India. It provides a more modern and comprehensive legal structure.
The act calls for explicit authorisation from the central government to establish, operate, or maintain telecom networks, provide telecom services, or possess radio equipment. This new licensing regime aims to streamline processes and provide a clear regulatory framework for the sector.
It also addresses the critical issue of infrastructure deployment by providing a mechanism for obtaining RoW for laying telecom infrastructure on both public and private property. This provision is crucial for expanding network coverage and improving connectivity across the country.
To safeguard user interests, the act empowers the central government to implement measures such as requiring prior consent for receiving specific messages and establishing a do-not-disturb registry. Additionally, the Universal Service Obligation Fund is renamed as the Digital Bharat Nidhi, with its scope expanded to include funding research and development initiatives in the telecom sector.
The new act is poised to become a catalyst for accelerating internet and broadband penetration in the country. It will contribute significantly to the growth of the digital economy. Besides boosting investor confidence and attracting foreign direct investment, it is expected to deliver tangible benefits to consumers, including improved connectivity, wider service choices, and potentially lower tariffs.
Akhil Gupta
The new Telecommunications Act, 2023 will have a far-reaching impact on the sector in times to come. One of the main reasons for this is the vesting of power regarding framing of rules for RoW and other operational matters with the central government. This will bring much-needed uniformity across the nation with respect to rules and norms for telecom services and telecom-related infrastructure. These would help in removing hurdles and result in quicker roll-out of networks.
T.V. Ramachandran
The Telecommunications Act, 2023 brings clarity on many important issues:
- Modernising the obsolescent licensing regime based largely on a “command and control” approach to a modern facilitating authorisation framework,
- Administrative allocation of satellite spectrum and certain other types of spectrum. This would further incentivise the space industry and investments in satellite communications.
- Simplified and clear RoW framework.
- Rights and duties of telecom users.
- Spurring of universal service and innovation/research and development (R&D) through a Digital Bharat Nidhi and regulatory sandbox.
- The act also clearly leaves over-the-top (OTT) out of telecom. This was also separately clarified by the ministry openly and transparently in a leading newspaper. The facilitating draft rules for RoW and Digital Bharat Nidhi have also been released.
Dr Mahesh Uppal
It replaces two colonial-era legislations – the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933. The act outlines the future approach to spectrum and RoW for infrastructure deployment. It signals a move towards authorisation from the current practice of licences. However, there are indications that not all industry players find it sufficiently unambiguous or uncontentious. An important gap is the need for clarity on how licences would differ for various services. Another gap is the confusion about the regulatory approach to OTT services, where the act and government officials seem to contradict each other.
How is the 5G landscape evolving in the country? What are the key gaps? What is the future outlook?
Tilak Raj Dua
India’s 5G deployment has demonstrated remarkable pace and scale. Within a span of just eight months of its launch, the country achieved a significant milestone of 200,000 5G sites spanning over 700 districts. This rapid adoption positions India at the forefront of 5G technology and is poised to catalyse innovation across diverse sectors, including healthcare and agriculture. There are a few gaps though. These include the limited utilisation of street furniture as a platform for small cell installations; delayed approval processes; and limited availability of backhaul and electricity supply. The implementation of the central RoW Rules is still work in progress. There are 17 states where charges for usage of pole/street furniture for small cells and aerial OFC are still not aligned with the central rules.
The outlook for the expansion of the 5G landscape is positive. Some of the key recommendations are the identification of small cell deployment locations, reducing the time taken during the approval process and facilitating bulk clearances of applications, and ensuring the clearance of EB connections on a priority basis and the availability of backhaul.
Akhil Gupta
As mentioned earlier, the 5G landscape has evolved very well in India. There are still some gaps – particularly due to lesser propagation of higher spectrum being used for 5G. However, such gaps – both in terms of overall coverage as well as in geographies where 5G has been rolled out – are being plugged rapidly. I believe that by next year, we should have virtually seamless 5G networks across the country and data traffic will increasingly move to 5G with the availability of more and more 5G-enabled smartphones.
T.V. Ramachandran
5G adoption is expected to cross the 250 million mark by March 2024, driven by more affordable devices. Telcos are also focusing on 5G fixed wireless access (FWA) to improve business viability. However, it should be understood that FWA is a good short-term solution, but a far more sustainable long-term solution is fixed broadband.
Bharat Sanchar Nigam Limited (BSNL) 4G (pan-India) and Vodafone Idea Limited 5G (select circles) are expected shortly, which could lead to more efficiency, cost optimisation, better pricing and ultimately benefit consumers.
Dr Mahesh Uppal
5G access and usage is growing exponentially. However, a key gap is the absence of use cases – beyond faster browsing and downloads – for individual users. So, while the industry is poised to exploit, individual users might be reluctant to use 5G, if it comes at a premium pricing. Fortunately, 5G players have resisted the temptation to price 5G higher than 4G.
What are the key sector challenges that remain unaddressed?
Tilak Raj Dua
India’s aspiration to lead the global telecommunications industry is confronted by several hurdles. Teledensity in India presents a stark contrast between urban and rural areas. While the urban market boasts a penetration rate of 133.41 per cent, indicating substantial saturation, the rural market remains largely untapped with a teledensity of only 59.59 per cent. Prolonged approval processes for telecom projects impede timely execution and hinder overall sector development.
To maintain network availability at over 99.5 per cent, it is necessary to have continuous electricity supply. Almost 30 per cent of the opex for telecom towers goes into electricity tariffs. Meanwhile, incidents of mobile tower passive equipment thefts have raised serious concerns as they impact the infrastructure industry.
Non-availability of input tax credit on telecom towers has defeated the government’s primary purpose of introducing GST. Besides telecom towers, infrastructure assets such as DG sets, battery banks, electric equipment and ducts are collectively considered passive infrastructure. The interpretation of exclusion of telecom towers from the definition of plant and machinery is leading to huge exposure, amounting to approximately. Rs 180 billion. The revised definition would pave the way for availing input tax credit on telecom towers and accessories, which would provide much-needed relief to telecom IPs.
Last but not least, protecting consumer data and ensuring secure transactions is a paramount challenge that requires attention and investment.
Akhil Gupta
While most of the difficult issues facing the industry have been sorted out, the key challenge that remains before the industry is very low returns on capital employed (ROCE) despite the recent increase in tariffs. We all are aware that telecom as an industry needs continuous and large capital deployments for network roll-outs as well as the implementation of new technologies. This is only possible when the financial health of the sector is good and robust. I believe that for an acceptable situation vis-à-vis the ROCE required for the sector, ARPUs will need to rise to at least Rs 300 per customer per month in the foreseeable future.
T.V. Ramachandran
Despite the successes, the sector still faces a few significant challenges. Key among these are:
- Broadband penetration in the rural areas remains quite low at 40 per cent as against 107 per cent in urban areas.
- The deployment of adequate public WiFi hotspots and implementation of the government’s flagship PM-WANI programme remain a big challenge, as the NDCP targets 5 million public Wi-Fi hotspots by 2020 and 10 million hotspots by 2022. Also, the Bharat 6G Vision of 50 million hotspots has not yet been achieved.
- Although the Telecom Act mandates administrative assignment of spectrum for satcom services, there is uncertainty pending the TRAI’s consultation process for the assignment of satellite spectrum.
- Lack of adequate support for effective private 5G for enterprises, which is important for the digitalisation of the industry to leverage the potential geopolitical advantage in manufacturing. New use cases urgently required for improving 5G business viability.
Dr Mahesh Uppal
There is an urgent need for clarity on licensing/authorisation. We need to understand why we are lagging behind in satellite communications, Wi-Fi hotspots and VNO services. This will enable us to create an appropriate regulatory regime for their growth.
Going forward, what will be the key focus areas for telcos in the next two years? What are the key trends that will shape the sector?
Tilak Raj Dua
To solidify India’s position as a global telecom leader, several strategic imperatives must be addressed. To achieve ubiquitous connectivity, infrastructure capable of delivering higher speeds of broadband up to 50 Mbps must be developed. Further, with 80 per cent of data traffic being generated indoors, there is an urgent requirement for the implementation of model building by laws to meet consumer demand. The key focus should be on the integration of in-building solutions with existing buildings and infrastructure, especially in older constructions.
Rapid and widespread 5G deployment is essential for bridging the digital divide. Achieving universal 5G coverage within the next five years will necessitate innovative infrastructure solutions, including the strategic utilisation of street furniture to optimise network efficiency.
Satellite communications offer a viable solution for connectivity in remote regions where terrestrial infrastructure, such as towers and fibre optic cables, is hindered by geographical constraints. India currently holds a modest 2 per cent share of the global space market. However, the nation possesses the potential to significantly expand its footprint, aiming for a 9 per cent market share by 2030.
India’s role as a global telecommunications front runner necessitates substantial investment in research and development. With 6G technology already in its testing phase, a concentrated effort on advancing cutting-edge technologies is crucial to maintain a competitive edge.
Akhil Gupta
The key focus areas for telcos in the next two years will have to be quality of networks – especially 5G coverage and capacity. With rapidly increasing availability of 5G smartphones, a very significant percentage of data traffic will have to move to 5G from 4G. Another key trend that would shape the sector will be home broadband – both fibre-to-the-home (FTTH) and FWA – on 5G. Considering the impediments in the widespread roll-out of FTTH across the country, I believe that FWA could become a very strong use case for 5G, and enable rapid and deep proliferation of broadband to Indian homes. This would be particularly important for households outside the main cities where FTTH roll-outs would become very difficult and uneconomical.
T.V. Ramachandran
The telecom sector’s outlook is inextricably linked with the potential and performance of the broadband sector and the use of emerging technologies, viz., artificial intelligence, machine-to-machine and internet of things in various segments such as health, transportation, safety and security, agriculture, etc.
Going forward, telcos will have to focus more not only on the quality of service but also on the quality of experience of their customers. Tariffs are continually rising and will have to keep rising for mobile business viability. However, an inevitable fallout would be that customers as well as TRAI would be more and more demanding on the quality front.
While mobile data consumption is expected to rise in the next few years to 62 GB (or 3x times) per sub per month, the current trajectory of a steep rise in fixed broadband will cause a tsunamic rise in data consumption by 20 to 30x, as already witnessed in the US, Europe and other developed economies.
India is reliant on obsolescent Wi-Fi technologies; hence, the delicensing of the full 6 GHz spectrum band is urgently needed to enable modern and advanced Wi-Fi, viz., Wi-Fi 6E and Wi-Fi 7 to complement mobile broadband, inside buildings and also serve as a viable complement to 5G in rural areas.
We believe that the government should continue to play a powerful facilitating role by supporting the introduction of new technologies, enhancing competition and liberalisation in all segments of telecom and promoting digital services through lower entry barriers and light-touch regulation to enable affordable and ubiquitous broadband access to all. This would be a powerful catalyst for Viksit Bharat.
Dr Mahesh Uppal
I believe the key focus areas for telcos are expanding access, increasing capacity and improving quality. Despite impressive growth, we still see major gaps in all three areas.