The Indian telecom sector showed initial signs of stabilisation in 2018 as the consolidation phase came to an end with the completion of the merger between Vodafone India and Idea Cellular. The industry shrunk from 9-10 operators in each circle just a few years ago to four major operators in 2018 – Vodafone Idea Limited, Bharti Airtel, Reliance Jio Infocomm Limited and Bharat Sanchar Nigam Limited. Although the sector is still languishing under debt and financial stress, industry experts believe that consolidation has augured well for the sector after some initial pain. It has also provided the four major players an opportunity to exploit economies of scale and compete rationally.
As the industry took its first steps towards stability, the government found it opportune to usher in a new phase of digital revolution in the country. It launched the National Digital Communications Policy (NDCP), 2018 with a view to create a robust digital communications infrastructure and support the expansion of next-generation technologies such as 5G, artificial intelligence, internet of things (IoT), cloud and big data.
As per the provisions of the policy, the Telecom Commission, the highest decision-making body in the Department of Telecommunications (DoT), was renamed as the Digital Communications Commission. The move was in line with the government’s vision of a digitally empowered economy and society. It also extended the remit of the commission to include data privacy, security and cybercrime, which are currently the IT ministry’s areas of responsibility.
Besides the launch of the new telecom policy, several other policy initiatives were announced in 2018. These included the policy roadmap for 5G, the framework for providing in-flight connectivity and the net neutrality norms. Significant activity was witnessed on the regulatory front as well. The Telecom Regulatory Authority of India (TRAI) released its recommendations and initiated consultations on several pertinent issues. A look at the key policy and regulatory moves during the past year…
Key policy moves
New telecom policy
The NDCP, 2018 aims to attract $100 billion in investments in the Indian telecom sector, generate 4 million jobs and increase the sector’s contribution to the GDP from 6 per cent in 2017 to 8 per cent by 2022. The policy also aims to provide universal broadband access through the implementation of initiatives such as BharatNet (providing high speed broadband connectivity to gram panchayats), GramNet (connecting key rural development institutions), NagarNet (deploying 1 million public Wi-Fi hotspots in urban areas) and Jan W-Fi (deploying 2 million Wi-Fi hotspots in rural areas). The policy talks about implementing a “fibre first initiative” to expand the reach of fibre to homes, enterprises and key development institutions. It lays emphasis on the fiberisation of at least 60 per cent tower sites against 20 per cent at present. The NDCP proposes to accord critical and essential infrastructure status to telecom infrastructure. This will bring communication infrastructure at par with other connectivity infrastructure like roadways and railways. Looking to provide financial relief to the sector, the policy suggests a review and rationalisation of taxes and levies including the licence fee, the Universal Service Obligation Fund levy and spectrum usage charges, which should reflect only administrative costs. The policy also aims to converge the infrastructure for IT, telecom and broadcasting by making amendments to the Indian Telegraph Act, 1885, and other relevant laws, and formulating a policy on encryption and data retention.
Policy roadmap for 5G
The high-level steering committee set up by the government to frame the 5G roadmap for India submitted its much-awaited report in August 2018. The committee gave several suggestions on spectrum policy, regulatory policy education and awareness promotion, application and use case labs, India’s participation in formulating international standards, development of application layer standards, and 5G trials. The committee also promoted the early allocation of 5G spectrum and lower spectrum pricing, and proposed to increase the quantum of 5G spectrum available. It further suggested that the government should provide financial support to telecom operators for backhaul, site acquisition, civil works and 5G trials. It also recommended that most guidelines on regulatory matters should be promulgated by March 2019 to facilitate early 5G deployment.
Relief measures for the sector
In an attempt to bring some respite to the stressed telecom sector, the union cabinet in March 2018 approved several relief measures. The government eased the spectrum holding limit from 25 per cent to 35 per cent in a service area or circle, paving the way for significant consolidation activity in the sector. Further, as a one-time measure, the cabinet extended the payment tenor for auctioned airwaves from 12 years (including a two-year moratorium) to 16 years.
In-flight connectivity
The government notified the Flight and Maritime Connectivity Rules, 2018 in December allowing Indian and foreign airlines and shipping companies operating in the country to provide in-flight and maritime voice and data services in partnership with a licensed Indian telecom operator. As per the rules, in-flight and maritime connectivity (IFMC) can be provided using telecom networks on the ground as well as through satellites. The IFMC licences will be granted against an annual fee of Re 1 for a period of 10 years and the licensee will have to pay the licence fees and spectrum charges based on the revenue earned through service delivery.
Approval of net neutrality norms
In July 2018, the Digital Communications Commission approved TRAI’s recommendations on net neutrality, supporting open and non-discriminatory access to the internet. The regulator had also suggested the prohibition of practices such as blocking, degrading, slowing down and granting preferential speeds or treatment to any content. The commission added that certain emerging and critical services would be kept out of the purview of these norms and set up a committee under DoT to examine what these critical services will be.
Data protection framework
The much-awaited draft of the Personal Data Protection Bill, 2018 was released in July 2018 along with a report by the committee of experts under the chairmanship of Justice B.N. Srikrishna. The provisions of the bill are applicable to entities within India that process personal data, as well as entities that are set up outside India but process data belonging to Indian citizens. The bill deals with the collection and processing of personal data, consent of individuals, penalties and compensation, and code of conduct. It proposes setting up of a data protection authority of India, an independent regulatory body responsible for the enforcement and effective implementation of the law. The bill also stipulates strict penalties for non-compliance with the regulations.
Others
In another significant move, the government clarified that tower infrastructure providers will be considered as licensees under the right-of-way rules. Further, in an effort to boost the domestic manufacturing industry, the government increased the import duty on telecom equipment from 10 per cent to 20 per cent.
Key regulatory moves
Penalty for predatory pricing
In a significant move, the regulator in February 2018 announced a penalty of Rs 500,000 per tariff plan per circle on operators indulging in predatory pricing. TRAI stated that a tariff plan will be considered predatory if it is below the operator’s average variable cost over a certain period. It also modified the definition of significant market power, needed by an operator for its plans to be considered predatory, to 30 per cent market share in terms of either subscriber base or gross revenue in any particular circle. However, in December 2018, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) cancelled these regulations, stating that the norms were issued arbitrarily and without effective consultation. The regulator plans to challenge the TDSAT verdict in the Supreme Court.
Recommendations for the next round of spectrum auctions
In August 2018, TRAI submitted its recommendations on the spectrum reserve price, the quantity to be auctioned and the conditions for the next round of auctions. It recommended that the entire available spectrum should be put on sale in the forthcoming auction. Further, it suggested that the price of spectrum in the 800 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz bands determined in the previous auction, indexed with the marginal cost of funds-based lending rate, should be considered as a possible value during spectrum valuation in these bands. TRAI also proposed spectrum auction in the 3300-3600 MHz band at a pan-Indian reserve price of about Rs 4.92 billion per MHz for providing 5G services for the first time in the country. According to the regulator, there should not be any roll-out obligations for this band and spectrum trading should be allowed after a lock-in period of five years as opposed to two years to avoid misuse.
Interconnection regulations
In January 2018, TRAI released the telecom interconnection regulations, outlining a framework for providing and augmenting interconnectivity ports, associated charges, and financial penalty for violating the rules. The regulator mandated service providers to enter into interconnection agreements on a non-discriminatory basis within 30 days of receiving the network connectivity request from another operator.
Recommendations on data privacy, security and ownership
TRAI in July 2018 suggested that the existing framework for the protection of personal data of telecom users is not sufficient. Hence, the regulator recommended that all entities in the digital ecosystem that control or process personal data should be brought under a data protection framework. The government should also put in place a mechanism for the redressal of consumer grievances relating to data ownership, protection and privacy.
Regulations for unsolicited commercial communication
TRAI released a new set of regulations, the Telecom Commercial Communication Customer Preference Regulations, 2018, to curb unsolicited calls and messages. Under these regulations, TRAI asked telecom operators to use blockchain technology to ensure that telemarketing messages are sent only from authorised entities and to those who have subscribed to them. Further, TRAI imposed strict penalties ranging from Rs 1,000 to as high as Rs 5 million per violation in a month for operators failing to comply with the guidelines.
Recommendations for promoting local telecom equipment manufacturing
With the objective to achieve net zero imports of telecommunication equipment by 2022, the regulator recommended several measures to promote domestic telecom equipment manufacturing. These included the creation of a telecom research and development fund with an initial corpus of Rs 10 billion to give a fillip to indigenous research, innovation, design, testing, certification and manufacturing. It also proposed the setting up of the Telecommunication Equipment Development Board under DoT to enable faster decision-making on funding and incentives, and streamline the permission process for trials of new technologies and products.
Further, TRAI initiated a consultation process on the regulatory framework for over-the-top communication
services, released regulations to make the mobile number porting process faster, cheaper and convenient, and issued recommendations on next-generation public protection and disaster relief communication networks. Besides, TRAI recommended DoT to not follow a bidding route for the allotment of radiowaves for the public mobile radio trunking service and instead levy spectrum usage charges equivalent to 1 per cent of the adjusted gross revenue.
Policy and regulatory outlook for 2019
While correction in the industry structure is a positive step, a financial turnaround is still awaited. The industry feels that the government’s vision of a digitally empowered India can be realised only if the players in the sector are financially strong and there is a stable and sustainable policy and regulatory environment that is sensitive to the needs of the industry.
Hence, the revival of India’s beleaguered telecom industry should be on the immediate agenda of policymakers. Steps to improve its financial health through rationalisation of telecom levies and affordable spectrum pricing need to be taken. The industry has pinned high hopes on the NDCP, which is expected to ease the business environment and enable the sector to regain its financial glory. The policy is also expected to support new trends and technologies such as fibre-to-the-home, 5G and IoT. Thus, the timely implementation of the policy will expedite all these developments in the sector.
