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Digital Shift: Industry associations pitch for expanding broadband reach

March 15, 2017

The telecom industry rode through various ups and downs during the past year. On the one hand, the government took concrete steps to address some long-pending issues such as right of way (RoW) and spectrum harmonisation. On the other, the delayed spectrum auction and increased competitiveness negatively impacted the industry. Members of key telecom associations share their views on the industry’s achievements, key issues and challenges, as well as their expectations for the coming year.

How did the sector perform during 2016?

Rajesh Chharia

As far as the government’s achievements are concerned, the Digital India programme is an achievement. While the government is taking steps towards its implementation, policies in this regard are yet to be formed. The performance of the sector, especially in terms of internet penetration, has been sluggish.

Umang Das

It has been an action-packed and absorbing year. Multiple initiatives were taken by the government and industry players to address a wide range of issues, from customer concerns like call drops to policy initiatives like the RoW policy. Steps were taken for boosting the growth of telecom infrastructure, which is the bedrock for achieving the vision of inclusive growth and socio-economic transformation through Digital India. the Department of Telecommunications’ (DoT) “all band” spectrum auction was a path-breaking initiative and a key resource input for the growth of mobile services. India’s mobile sector, which was considered “spectrum starved”, is now “spectrum plenty”, post the auction in 2016.

The government took several initiatives to accelerate telecom infrastructure growth by enhancing the availability of government land and buildings. It also directed the state governments to provide their properties for telecom towers. In fact, some government departments and institutions like the Department of Posts and the Ministry of Defence released their telecom infra policies largely in line with the central government directives to facilitate the allotment of their land.

The Gazette announcement of RoW 2016 has been another landmark initiative. The RoW rules have a provision of time-bound approvals, single-window clearance and defined application fees, charges, etc. for the installation of towers and fibre roll-out. These rules have the potential to drive implementation at the state and municipality levels.

The telecom ministry led from the front to overcome concerns regarding tower emissions and to spread awareness amongst the public on the subject. DoT launched the “Awareness Program on EMF Issues and Telecom Towers”, which was spearheaded by the telecom secretary himself, who, along with other senior DoT officials, the state chief secretary and WHO medical experts, travelled extensively and conducted workshops across cities. Further, in order to demonstrate the actual EMF emission levels, live tests were conducted at operational tower sites in Dehradun, Hyderabad, Mumbai, Chandigarh, Jaipur and Guwahati.

N.K. Goyal

The country has 30-40 handset manufacturing units. However, we often fail to analyse the real value addition made by them. Also, we need to see whether we are really focusing on the end-to-end manufacturing of mobile phones or terming just the assembling of semi-knocked-down components as manufacturing.

Rajan S. Mathews

It was a fruitful year for both the COAI and the telecom industry. We witnessed greater synergy between the industry and the government, and a lot of issues were tackled jointly. The industry tackled the concern over call drops and network quality with alacrity, taking the 100-day plan forward in agreement with the government and over-achieving all its targets, including investments and the number of base transceiver stations (BTSs). To address the problem of call drops, operators added 351,000 BTSs in the past 12 months.

T.V. Ramachandran

The year 2016 stood up pretty well with its impressive list of achievements. The biggest telecom event of the year was undoubtedly the entry of Reliance Jio Infocomm Limited (RJIL). It was a mind-boggling launch, far ahead of any global precedent, featuring a nationwide state-of-the-art packet-switched network, the fastest-ever addition of 50 million subscribers in a record 83 days. Of course, the debut had its concomitant issues of interconnection, fair competition and regulatory compliance, but these will hopefully smoothen out as the sector moves forward.

The year commenced with one of the best-ever consultations by the Telecom Regulatory Authority of India (TRAI) on the framework for implementing the BharatNet initiative. It was also marked by some innovative consultations on broadband proliferation through public Wi-Fi networks. The regulator and DoT conducted consumer outreach programmes for spreading awareness about EMF radiations from mobile tower antennas.

The government published a gazette notification spelling out uniform rules to be followed across India for installating overground mobile towers and underground optic fibre cables. These installations will facilitate the roll-out of broadband networks.

In another significant move, the government made enough spectrum available through the largest-ever auction, offering over 2500 MHz of spectrum in seven different bands. A highly noteworthy achievement was the harmonisation of the 1800 MHz spectrum band, which led to more contiguous spectrum becoming available to the industry.

The year also saw the roll-out of 4G services by existing operators as well as by RJIL. Another major highlight was the government’s decision to mandate satellite communications-based connectivity for 6,000 remote villages as a part of the BharatNet roll-out. The year also witnessed the beginning of the long-overdue consolidation of the sector. Reliance Communications, Aircel and Maxis are involved in one move.

A major disappointment during 2016 was the fact that no spectrum was sold in the 700 MHz band because of the high reserve price, which, otherwise, could have well catapulted India from its rock-bottom position in global broadband rankings to a top premier slot. The second big disappointment was the regulation against free data and the banning of Facebook’s Free Basics. Whatever be the theoretical regulatory arguments behind these actions, on a practical policy-cum-regulatory basis, it is indisputable that both these concepts would have, in an internet-starved country like India, promoted both internet adoption and usage.

What are the key challenges facing the industry? How can these be addressed?

Rajesh Chharia

A key challenge facing the industry is that the development of technology and policy is not going hand in hand. As long as the government does not take action to change the existing policies in sync with upcoming technology, new applications cannot be developed and service providers will not get the encouragement to extend connectivity to rural areas.

Umang Das

Consolidation in the mobile industry and emerging market requirements have brought in tough competition amongst operators. The cost pressure due to increased competition will equally get reflected on infrastructure providers. They would have to adopt sharing as a key strategy and provide shared end-to-end common infrastructure. There will be a need to redefine age-old conventional definitions of active and passive infrastructure in view of the evolving market environment from pure voice-oriented networks to voice, data and broadband networks.

Due to the large traffic volumes expected over the next four to five years, operators are expected to offload a large amount of traffic to micro sites, small cells and Wi-Fi, which may render the macro sites tenancy growth lesser than expected. Therefore, we will need policy clarity to enable infrastructure providers to play a significant role in ownership, sharing and maintenance of end-to-end common telecom infrastructure, and contribute further to cost optimisation for operators.

In addition, the EMF and tower infra awareness programmes must be extended to the district and block levels. They will need to be backed up by detailed rules and regulations at the policy level and should not be left to interpretation.

N.K. Goyal

Companies in India have to bear the burden of significant compliance costs. For instance, in the case of mobile phones, six different approvals have to be obtained from the Bureau of Indian Standards (BIS) for battery cells, batteries, chargers, phones, regional languages and the specific absorption rate (SAR). In addition, manufacturers have now been asked to add panic buttons and comply with e-waste requirements. There is also a lack of government labs to conduct tests. Multiplicity of authorities is another challenge.

Rajan S. Mathews

One of the key challenges is the need to address the various regulatory imbalances and ensure regulatory neutrality between telecom service providers (TSPs) and over-the-top players. This can only be resolved by the authority with the “same services, same rules” principle and by introducing equality in terms of pricing. TSPs undergo multiple audits by DoT, TRAI, the Competition Commission of India, the Securities and Exchange Board of India and the Comptroller and Auditor General, leading to significant costs. TSPs are required to pay a percentage of their adjusted gross revenue (AGR) as licence fee instead of the erstwhile per subscriber-based licence fee. It is important to define the gross revenue and AGR for the computation of licence fee to avoid ambiguities. Streamlining these costs would ensure healthy competition, thus increasing the options for customers.

T.V. Ramachandran

The biggest challenge, going forward, will be access to capital for the enormous capex requirements arising from the need to increase 4G roll-outs and enhance broadband availability to realise the goal of Digital India and upgrade networks to meet the demand for improved QoS. Industry experts estimate that the sector would need to pump in at least Rs 5,000 billion over the next five years. With the intense competition in the market and acute erosion of operating margins, the prospects for funding the networks seem quite bleak. The industry already has a staggering debt burden of over Rs 3,000 billion.  A way in which the government can help is by reducing the burden of various levies and taxes on the sector, which today total over 25 per cent.

Second, most of our problems flow from the huge investments necessary for buying spectrum. Here, we need a complete change of mindset towards spectrum pricing. If spectrum is subjected to exorbitant initial prices, either it has not been bought and put to use, or it has been bought at a high price but cannot be put to use as no money is left for investing in networks.

Third, the industry needs to urgently reinvent itself with new technologies and business models. Carriage, content, applications, technology and manufacturing have to increasingly operate in an environment of coopetition rather than hostility and confrontation.

What are your views on the prevailing policy and regulatory environment? What is your regulatory wish list for 2017?

Rajesh Chharia

The prevailing policy environment does not match the pace of technological development in the sector. In my view, the regulatory wish list should comprise policies that are user-friendly. Currently, the government is thinking in a piecemeal manner; instead, it should be talking in a holistic manner.

Umang Das

The government has taken multiple initiatives, released policies and issued directives to expedite tower roll-outs. While some of the states have aligned their policies with DoT’s directives and guidelines, they will now have to be detailed further as provided by the RoW policy. The fundamental inclusion of infrastructure providers (IP-1s) will have to be incorporated in these policies with implementable rules for municipalities.

With the advent of smart cities and the scope of multiple applications of the same infrastructure for connectivity, public Wi-Fi, street lighting, surveillance and security, there is an obvious opportunity to have common infrastructure. DoT policies must, therefore, be clearly spelt out so as to optimise the creation of shared infrastructure. TRAI’s recent recommendations on in-building solutions and DAS are undoubtedly a positive step in this direction. In order to give a push to broadband and ensure the availability of high-speed data services across the country, TRAI released a consultation paper on public Wi-Fi. In addition, the BharatNet project has received a big push this year and around 30,000 gram panchayats have been connected.

This project, along with the public Wi-Fi facility, will undoubtedly be game-changers for the country. We will need a viable public-private partnership policy model to achieve meaningful benefits for consumers in rural and far-flung areas.

N.K. Goyal

Successive governments talk about making India a manufacturing hub for mobile phones and electronics and even frame the schemes for achieving it. However, it always looks like a distant mirage. Given the current magnitude of electronics and telecom imports, these would soon surpass oil imports. Now we have on record a policy statement of achieving net zero imports by 2020. The government also wants sub-Rs 2,000 smartphones made in India.

Rajan S. Mathews

The government has provided the much-needed support by clearing several long-pending issues like uniform RoW, spectrum sharing and trading guidelines, and spectrum harmonisation. Also, the successful auction of spectrum has helped it garner Rs 657.89 billion. This is a major step towards future advancement in mobility and will help us move closer to our teledensity target. Taking forward the industry’s commitment of providing the best services, operators rolled out 4G LTE networks. The government was able to harmonise spectrum as per global standards. The states need to harmonise and implement the ROW guidelines.

T.V. Ramachandran

The sector has had a phenomenal period of major reforms, policy decisions, and regulatory consultations, recommendations and actions.

DoT took remarkable steps towards establishing the foundation for Digital India through adequate spectrum allocation, the promulgation of rules for the installation of digital infrastructure on a pan-Indian basis and organising a powerful all-India campaign regarding EMF emissions from mobile towers and handsets.

During the year, the regulator undertook the task of streamlining the existing regulatory and policy framework in a number of areas including QoS, interconnection, captive VSATs, regulatory framework for audiotex, voicemail, unified messaging, etc. It also framed new regulatory guidelines in the areas of public Wi-Fi, VoIP/internet telephony, free data, net neutrality, M2M, USSD-based framework for mobile payments, cloud computing, etc. Almost every month saw a major regulatory action or consultation. The industry was kept on its toes all the time and had a tough time indeed in keeping pace with the superactive regulator.

What is your outlook for the sector? What will be the key growth drivers?

Rajesh Chharia

The future will be driven by digitisation and Digital India. The government is also promoting a cashless economy. However, a cashless and digital economy will be possible only when there is connectivity. Currently, we are lagging behind in a lot of aspects. There are around 40,000 villages in India where simple telephony services are still not available. Therefore, our main objective should be how to extend broadband connectivity to the rural areas. Telephony has lost its sheen now. Bandwidth and the internet are the basic drivers of future growth. Therefore, in the future, the key growth driver is going to be broadband.

Umang Das

The outlook for the industry is undoubtedly positive. There is a huge scope for the growth of digital infrastructure, which will be the fundamental basis for the success of all our ambitious national programmes such as Smart Cities and Digital India. Quoting from a Deloitte report, new customer segments such as government and infrastructure are expected to emerge in the near future. The Digital India initiative presents a gamut of opportunities for telecom tower companies.

The future will be bright if we have clear policies towards creating such infrastructure for multiple services and clearly viewing infrastructure as a fundamental layer to enable service providers to reach their multiple services to consumers. This, coupled with a strong push for partnership between infrastructure providers with state, municipal and local bodies, will be the key to success. Such partnerships can play a very significant role in the host of programmes the government has recently initiated.

Another key enabler will be the availability of uninterrupted green power. The industry on its own initiative has made significant progress in this regard and around 90,000 telecom tower sites, which is close to 25 per cent of the installed tower base of our TAIPA membership, have been made diesel free. Besides energy efficient solutions at individual sites, hybrid renewable energy solutions have been introduced based on site-wise feasibility. However, in order to promote renewable energy solutions on a large scale, TAIPA has been advocating the availability of green power through the MNRE, encouraging the setting up of mini-grids or micro-grids, solar/alternative renewable energy-powered independent power generating companies that can have tower and telecom companies as their anchor customers, besides the local community. Setting up such large centralised plants with the appropriate policy backup can make operations viable and sharply accelerate the induction of renewable energy and green power, and also prove to be a key enabler for the growth of the telecom and infrastructure industry.

We are also confident that industry players will bring global best practices to India and the sector will move towards adopting newer technologies like small cells/fibre-based sites.

Rajan S. Mathews

The future looks bright for the rapidly emerging telecom sector. Positive government policies, emerging business dimensions, penetration in untapped areas, rapid growth in data consumption, etc. will keep the sector alive, buzzing and vibrant. Digital India will perhaps be the biggest growth driver, coupled with the ambitious plans for financial inclusion at all levels. It will not be an exaggeration to say that the ground is being prepared for a new era of development where the telecom industry will be the catalyst for growth. Specific aspects such as mobile money, M2M technology and cloud computing will further boost the sector and, in turn, aid in the overall growth of the economy.

The COAI and the telecom industry are committed to work towards a digitally connected India.

T.V. Ramachandran

I see 2017 as the year of broadband. This is despite the fact that India today is languishing in this area, as per the International Telecommunication Union, with a low rank of 132 among 187 countries in terms of fixed broadband penetration and 156 among 179 countries for mobile broadband penetration. With the various path-breaking policy and regulatory initiatives in 2016 and the large-scale roll-out of 4G, I believe that India has passed the point of inflection and the journey in the year 2017 would surely be towards improving our broadband rankings considerably.

With the government notifying RoW rules, there would be a big push to the deployment of broadband infrastructure including optic fibre cables and towers. Adequate availability of broadband spectrum in the recent auctions will facilitate the deployment of a large number of 4G/long term evolution base stations to provide higher broadband speeds. With the industry set to invest heavily and operator capex expected to increase to $34 billion between 2016 and 2020, the growth of broadband is likely to happen.

In addition, the growing trend of increasing affordability of data tariffs, coupled with the availability of cheaper smartphones and increased operator investments in improving network coverage, is likely to continue, which augurs well for consumers at large.

Data consumption will continue to rise with the average Indian consuming data for using social media, watching movies, gaming, etc., while data tariffs are expected to reduce further due to increasing competition. It is also expected that 2017 will usher in bundled voice and data plans, with more innovative and segmented packages being offered to customers.

The consolidation process that took off in the past year is likely to reach a more advanced level in 2017. This will help improve the financial health of the industry.

New technologies and new categories of services in areas such as IoT and M2M, with a new category of service providers, namely M2M service providers, are likely to take firm root. Issues relating to privacy and cybersecurity will become serious areas of concern.

Due to reducing revenues in the business-to-consumer space, operators may change their strategy and focus more on the enterprise side to push revenues. Also, the current market trends may drive collaboration and partnerships to be forged between operators and content providers/aggregators/platform providers/OTT players.

In sum, the Indian telecom sector is likely to remain as vibrant and exciting as it is today, if not more so.

 
 

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