The Indian telecom sector witnessed growth and technological advancements in 2023, while the market edged closer to becoming a duopoly. The launch of satellite broadband services last year helped connect remote regions across the country. Artificial intelligence (AI) became a buzzword with the launch of ChatGPT and its peers and competitors.
Networks are noticeably faster across much of India now. 5G networks, which Reliance Jio and Bharti Airtel started rolling out in October 2022, now cover most of India, with around 130 million users already on 5G. This number is expected to rise exponentially. Enterprise use cases for 5G are also being developed rapidly.
With the new 5G networks taking on the load, 4G speeds have also increased. Strengthened by 5G roll-outs, fixed wireless access is facilitating fixed broadband penetration. The gigantic BharatNet project, which aims to link 640,000 villages, is behind schedule, but making progress. Satellite broadband coverage is tiny at the moment, but satcom is expected to grow at a compound annual growth rate of 36 per cent.
The government has made appropriate policy changes, amending laws and processes as necessary. In August 2023, the cabinet cleared the Draft Indian Telecommunication Bill, 2022. The bill allows spectrum sharing, trading, leasing and surrender. It simplifies the framework for mergers, demergers and acquisitions, and allows for spectrum allocation through auctions or the administrative route. It allows the government to defer payments and convert dues into equity, write off outstandings, etc. It also gives the government the power to waive fees, grant exceptions to licensees and allow insolvent licensees to continue operating.
The National Frequency Allocation Plan, 2022 defines future spectrum usage by all ministries. The new reforms in satellite communication services are aimed at easing procedures and clearances to expedite the roll-out of satcom services. Nearly 17 GHz of new spectrum has been released as a part of these initiatives. The Department of Telecommunications (DoT) has delicensed the 865-868 MHz spectrum band for internet of things (IoT) and machine-to-machine services, and the 433-434.7 MHz and 9-30 MHz bands for wireless charging. Other reforms include the introduction of self-certification for antenna deployment, and a reduction in fees and timelines for setting up satellite networks.
DoT also announced amendments to the Indian Telegraph Right of Way [RoW] Rules, 2016 and introduced the Indian Telegraph RoW (Amendment) Rules, 2023. The amendment provides a clear definition of “street furniture”, which will facilitate fast roll-outs. The new rules also provide a single-window clearance for all telecom-related RoW applications on the Gati Shakti Sanchar portal. DoT has also notified the Indian Telegraph (Infrastructure Safety) Rules, 2022 to protect telecom infrastructure from damage. The Telecom Regulatory Authority of India (TRAI) has released the draft Quality of Service (Code of Practice for Metering and Billing Accuracy) Regulations, 2023.
Apart from this, the production-linked incentive (PLI) schemes that support manufacturing and research and development (R&D) have been extended in scope and timelines. A framework has been set up for AI development. India’s known software competencies and start-up ecosystem position it to become a big player in the next wave of R&D. India may soon start generating intellectual property in new areas such as AI and 6G, which will make it an innovation centre rather than merely a large market.
India continues to record the highest data consumption in the world, both in aggregate and per capita terms. The combination of green energy investments, skilled manpower and low-cost locations also makes it one of the most attractive destinations for new data centres and it may evolve into a global data centre hub, contributing to exponential growth in data consumption.
Given the fast pace of change, further policy modifications will be required, in real time. The market dynamics are also not ideal. India is effectively a duopoly with Bharti Airtel and Reliance Jio dominating the services landscape. Vodafone Idea (Vi) continues to struggle financially and needs resources to regain competitive vigour. Bharat Sanchar Nigam Limited (BSNL) is also in a precarious position and the government is considering a capital infusion of Rs 529.37 billion for the PSU during financial year 2024 alongside a merger with Bharat Broadband. Ideally, both Vi and BSNL should roll out 5G networks soon as a more competitive landscape is very desirable.
By 2026, India will consume $80 billion worth of semiconductors and manufacture electronic products worth $300 billion, assuming PLI schemes across the telecom and electronics space are successful. Apart from multinational corporations such as Foxconn, Samsung, Nokia, Micron, Cisco and Apple, which have signed up for PLIs, India and the US have signed an MoU for cooperation in the semiconductor space.
A pilot electronics repair services outsourcing (ERSO) study in Bengaluru could be another game changer. By 2029, India’s ERSO industry could be worth $20 billion and generate significant employment opportunities. The expansion of data centre capacity will also drive employment and require large investments in green energy and the development of millions of square feet of infrastructure.
The interim budget targets revenues of Rs 1.2 trillion from the telecom sector in financial year 2025. DoT plans to conduct another round of 5G spectrum auctions worth about Rs 2.5 trillion soon. Spectrum could be offered in 11 bands, ranging from 600 MHz to above 37 GHz. Unsold spectrum from the last auction will also be offered.
The Cellular Operators Association of India (COAI) is lobbying the states, making a case for the telecom industry to be charged industrial power tariffs and given priority electricity connections. The COAI is also advocating for load aggregation for telecom sites, to avail of green open access energy. It has also suggested a reduction in the licence fee to 1 per cent from 3 per cent in the post-election budget for 2024-25. COAI also proposes waiving contributions to the Universal Service Obligation [USO] Fund until the current USO funds are fully utilised.
There is some focus on turning India into a global AI hub. The working groups on AI have recommended setting up a three-tier compute infrastructure comprising 24,500 graphic processing units, marking a 15x increase in capacity. On the corporate side, Nvidia has collaborated with Jio and the Tata Group while IBM has signed MoUs with entities engaged with the Ministry of Electronics and Information Technology. Nasscom estimates that AI can potentially add $450 billion $500 billion to India’s GDP within a couple of years.
Telecom is at the cutting edge when it comes to AI deployment. Telecom service providers can tap into new revenue streams with the use of AI and big data, particularly with the roll-out of 5G networks that allow IoT to scale up. Jio is offering AI services powered by Microsoft Azure and cloud AI solutions. Airtel has started using speech recognition and speech analytics algorithms on its own network, and is working on enterprise-focused AI solutions.
Telecom has always been a sector with high positive externalities and these have grown with the advent of IT-enabled services and the promise of AI. Indeed, the entire premise of Digital India – that digital public infrastructure will enable the smooth provision of all sorts of online services including government services and banking/financial services, and thus drive development – depends on affordable, fast, secure and reliable internet access across the country. India seems to be moving in that direction, but more competition would be desirable and the completion of BharatNet would accelerate the process.
