Helping Hand For Telecom | Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC PDF Download

Introduction:

Telecom Sector:

• Telecom sector currently has a subscriber base of 1.2B.
• India is currently the world’s second-largest telecommunications market and has registered strong growth in the past decade and half.
• It contributes 90% of non tax revenue and is second largest revenue contributor.
• The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector.
• The deregulation of FDI norms has made the sector one of the fastest growing and a top five employment opportunity generator in the country.
• Package includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100% FDI through the automatic route.
• The wide set of measures proposed entail reforms for the ailing sector by way of granting moratorium on unpaid dues, redefining Adjusted Gross Revenue (AGR) prospectively and cutting in Spectrum Usage Charges.

Strength:

• Strong demand: World’s second largest in terms of telecom network, internet subscribers as well as app downloads; telecom sector likely to have economic value of $217 billion by 2020
• Increasing data usage: India is also one of the largest data consumers (an average 1 GB data per day per user) globally
• Good telecom infrastructure: Large telcos have been investing on network infrastructure to improve customer experience for last few years
• Fast-tracked reforms provide room for growth: National digital communications policy, 2018 aims to attract $100 billion worth of investments in the sector by 2022
• Proper value addition

 Weakness:

• Intense competition: Cut-throat price war among telcos has led to consolidation in the industry as well as declining overall profits for last couple of years
• Lot of freebies were added which cannot be taken back.
• Debt and finances: Incumbents are currently having unsustainable debt levels owing to intense competition in the industry.
• Late adoption of 4G and advanced wireless technologies: Due to regulatory uncertainties and delayed spectrum auctions, India were late to the 4G. Though world moves towards the first commercial deployment of 5G in 2019-mid, India to be a a late adopter of 5G services

Opportunity:

• Mobile penetration: unique mobile subscribers to the total population is expected to reach around 63% in 2025.
• Increase in internet users: Rise in mobile-phone penetration along with decline in data costs is expected to add 500 million new internet users in India.
• Untapped rural market: Rural tele-density reached 58.8% and 44.6% of the total wireless subscribers are from rural market
• Exploring adjacent businesses in an evolving environment: Moving beyond traditional telecom business to wider digital consumer space like content and mobile banking solutions

Challenges facing Indian telecom sector are:

• Financial Health of the Sector: Gross revenue has dropped by 15% to 20% for the year 2017-18 over the preceding year for the incumbents and overall sector revenue has dropped. Also, there is drop in voice and data revenue per user
• Limited Spectrum Availability: Available spectrum is less than 40% as compared to European nations and 50% as compared to China. Hence, it is imperative that spectrum auctioning at sustainable prices is the need of the hour. Also, government auction spectrum at an exorbitant cost which makes it difficult for mobile operators to provide services at reasonable speeds.
• High competition and tariff war: Competition heating up post entry of Reliance Jio. Other telecom players have to drop in tariff rates both for voice and data
• Lack of Telecom Infrastructure in Semi-rural and Rural areas: Service providers have to incur huge initial fixed cost to enter semi-rural and rural areas. Key reasons behind these costs are lack of basic infrastructure like power and roads, resulting in delays in rolling out the infrastructure.
• Poor fixed line penetration: India has very little penetration of fixed line in its network whereas, most of the developed countries have a very high penetration of fixed lines
• High Right-of-Way (ROW) cost: Sometimes, states governments charge a huge amount for permitting the laying of fibre etc.
• Lack of trained personnel to operate and maintain the cellular infrastructure.
• Delays in Roll Out of Innovative Products and Services: Substantial delays in roll out of data-based products and services are hampering the progress of telecom sectors. This is primarily due to the non-conducive environment resulting out of government policies and regulations.
• Low Broad Band Penetration: Low broadband penetration in the country is a matter of concern and the government needs to do a lot more work in the field to go up in the global ladder.
• Over the top services: Over the Top (OTT) applications such as WhatsApp, OLA, Viber and so on do not need permission or a pact with a telecommunications company. This hampers the revenue of telecommunication service provider.
• License fee: The license fee of eight per cent of the Adjusted Gross Revenue including five per cent as Universal Service Levy (USL) is one of the highest in the world.

Measures needed:

• Infrastructure Sharing: Since telecom business is heavy on capex and as much as 40%– 60% of the Capex is utilized for setting up and managing the Telecom infrastructure. By sharing infrastructure, operators can optimize their capex, and focus on providing new and innovative services to their subscribers.
• Availability of Affordable Smart Phones and Lower Tariff Rates: This would increase tele penetration in rural areas.
• Curb on predatory pricing: government should fix a minimum price to save the industry from price war
• Lower License fee: The license fee of eight per cent of the Adjusted Gross Revenue including five per cent as Universal Service Levy (USL) is one of the highest in the world.
• Reduce reserve price for spectrum auction: In the past, some of the operators participated recklessly in these auctions leading to exaggerated prices — much above their true valuations. Reasonable reserve prices for the market mechanisms induce “truthful bidding”, and not leading to “winners’ curse” as witnessed in some of the previous auctions.
• The government should increase the network area through optical fibre instead of copper which is expensive. This is necessary to ensure last mile connectivity.
• The government needs to prepare a ground for easy right-of-way permissions and lower cost of right-of-ways
• The government should spend large on R&D and create an environment that makes India capable of manufacturing and even exporting hardware components like mobile handsets, CCTV Cameras, touch screen monitors etc.

Conclusion:

The telecom sector in India have to deal with various challenges like maintaining the sufficient spectrum, Adoption of new technologies faster to be able to use new features and techniques to serve the customers with better and feature rich service, Government and regulatory agencies, various mobile handsets available from various companies brings lot of issues and content partners etc. Also, it is evident from the current scenario that the Voice alone will not be sufficient to generate revenue and hence the focus is required to be shifted towards various data services.