The country is witnessing the rapid deployment of 5G networks, with around 300,000 5G sites installed across 714 districts within 11 months of commercial launch. As such, the sector has come a long way since the launch of 2G services. This transformative journey from 2G to 5G has been enabled by supportive policy measures by the government coupled by network expansion and innovation-driven initiatives by telcos and other stakeholders. Industry experts discuss the evolution of the sector from 2G to 5G, the key challenges as well as the future growth drivers…
How has the telecom sector evolved over the past few years? What have been the key growth drivers?
India’s telecom journey has moved far from the first telegraph communication set up in Kolkata, and is on a dizzying trajectory towards digitisation.
Today, the Indian telecom sector hosts 1.17 billion mobile users, amounting to a teledensity of 84.38 per cent, with 0.77 million mobile towers and 2.76 million base transceiver stations (BTSs). The optical fibre cable (OFC) roll-out has crossed about 3.7 million km as of July 2023, enabling connectivity for 832.2 million broadband users, along with mobile subscribers.
From the very outset, the government’s focus was on communication technology, which marked the first wave of the information era. The second phase was the internet phase, which started around the year 2000. The industry realigned itself around horizontal solutions during this phase. After 2006, the cloud began taking shape, and this marked the third phase of transformation in the telecommunications industry. Come 2023, and we are in the midst of the era of cloud, wherein a new world of opportunities has opened up for carriers.
The telecom sector, by its very nature, evolves rapidly. However, what has happened in the Indian telecom sector over the last six to seven years can only be described as a roller-coaster ride. Some of the big developments in the sector in this period are summarised below:
- Expensive 4G spectrum auctions with cumulative bids worth over Rs 1,435 billion, which put a big financial burden on the sector.
- Large-scale and deep 4G roll-out across the country by three private sector players – Airtel, Jio and Vodafone Idea.
- Jio became the only operator globally to launch a 4G-only network.
- The merger of Vodafone and Idea in 2018 reduced the number of private operators from four to three.
- The infamous adjusted gross revenue (AGR) judgment by the Supreme Court in 2020 raised demands of over Rs 1,210 billion from Airtel and Vodafone Idea (Vi), delivering a crippling blow to the already beleaguered sector.
- A drop in ARPU from about Rs 200 in 2016 to about Rs 75 by 2018-19 resulted in big losses for all operators.
- The auction for 5G spectrum, garnering close to Rs 1,500 billion from Airtel, Jio and Vi, put an additional debt burden on telcos.
- The country saw the fastest roll-out of 5G anywhere in the world post October 2022, with over 280,000 base stations put up between Airtel and Jio, as on date.
- Vi continuously lost market share due to financial issues, as a result of which it has not been able to roll out 5G till date. Its revenue market share, which, post merger, peaked at above 35 per cent, has fallen to just 19 per cent today, as per the Telecom Regulatory Authority of India’s report for the quarter ended June 30, 2023.
- The government converted the amount due under Vi’s spectrum debt to equity of approximately 34 per cent in Vi. Despite this, Vi continues to default to vendors and seems to be in need of urgent new capital for survival, which, despite several attempts, has not yet materialised.
- In the meantime, plans are afoot for Bharat Sanchar Nigam Limited (BSNL) to launch 4G with a massive capital outlay by the government.
- During Covid, when the world, including India, was forced to work from home and 4G coverage and capacities kept India connected, it was clear to everyone that telecom networks are the bedrock for the digitalisation of India and for technological evolution, since all such technological developments/breakthroughs have to necessarily ride on telecom networks.
The above events clearly depict the dichotomy in the Indian telecom sector. On the one hand, there is the satisfaction of having one of the deepest 4G coverages globally, of being among the first to have a large-scale 5G roll-out leaving several developed countries and continents behind, of having the cheapest data rates (voice is free) of well under 20 cents per GB against the global average of over $3 per GB, and of having one of the highest per capita data consumption rates at approximately 20 GB per month. On the other, the sector finds itself in extremely poor financial health, with Vi and BSNL suffering large losses and trying hard to secure fresh funding for their survival/revival. The other two operators, Airtel and Jio, have very poor returns on capital employed. The fear of the sector turning into a duopoly as a consequence has been expressed by various experts lately, which clearly will not be good for the country and the industry. In a nutshell, such poor financial health for a sector that is vital for Digital India, requires capital investments of $10 billion-$15 billion each year and provides employment to millions, does not augur well.
The Indian telecom journey has been fascinating and presents a rather interesting story of development. We started in 1995 from ground zero, lagging behind our neighbouring countries like Nepal, Bangladesh and Sri Lanka that already had analog mobile telephony in place. Between 1995 and 2000, the growth rate was extremely low due to various inherent difficulties in the licences. The remarkable NTP 1999 set the sector free from these shackles, leading to an explosive growth in mobile connections from 2000. This marked the growth of mobile voice telephony, which continued till September 2016. This growth was driven by forward-looking policy actions, enabling regulations and operators consistently reducing consumer tariffs through improved efficiencies and growing volumes.
After September 2016, a historic commencement of the data age was witnessed, marked by the roll-out of 4G mobile broadband in India, on a promotional basis, with free data tariffs. Since then, there has been a meteoric rise in per subscriber data consumption per month from 0.3 GB to the current level of over 18 GB, the highest in the world. Our mobile broadband connections (850 million) are the second highest in the world. This data phase is progressing at a rapid pace and is expected to take us past the milestone of 1 billion broadband connections within the next two to three years. The predominant drivers for this growth are extremely low data tariffs and the insatiable hunger of citizens for using data-rich applications in every aspect of modern living.
The Indian telecom sector has shown significant growth in the recent past, driven largely by the government’s digitalisation initiatives and its focus on rural connectivity through BharatNet. The industry has stabilised after multiple operator exits and bankruptcies and is benefiting from the aggressive 5G roll-out.
The significant achievements and growth drivers have been:
- Telecom sector growth: The Indian telecom sector has seen remarkable expansion despite headwinds. The subscriber base of over 1.2 billion is expected to grow to over 1.5 billion by 2025. Indian telecom hosts 1.17 billion mobile subscribers and has a teledensity of 84.51 per cent. The network is supported by 760,000 mobile towers, around 2.64 million base stations and 3.7 million km of optic fibre. It contributes about 5 per cent to India’s GDP, and its ecosystem employs about 5 million people.
- Government’s focus on digitalisation: The Digital India initiative has catalysed the implementation of Aadhaar, the unified payment interface, and e-commerce stacks and financial inclusion strategies (through the JAM Trinity), spurring mobile internet and fixed line broadband demand.
- Rural connectivity through BharatNet: BharatNet has delivered robust broadband connectivity of at least 100 Mbps to 80 per cent of its target of 250,000 gram panchayats, bridging the rural-urban digital divide and creating demand for online government, education and health services.
- Stabilisation and investor confidence: The sector has stabilised post exits driven by Reliance Jio’s entry, subsequent price wars and financial burdens imposed on the incumbents by the Supreme Court’s AGR judgment. The potential of 5G technology has attracted a record $80 billion FDI inflow into the telecom sector over the past couple of years.
What are the biggest challenges that the sector faces today?
As per the National Broadband Mission targets, by the end of 2024, 70 per cent of towers will be fiberised. Achieving this is a big challenge, and DIPA seeks the support of the government for the following:
- Getting the discoms of states/UTs to implement composite billing, that is, one single bill for multiple connections.
- Getting detailed guidelines regarding green energy open access in terms of various charges, landing rates, eligibility criteria, list of registered companies, the role of discoms, etc., followed by help with implementational/operational issues.
- Interaction with state electricity regulatory commissions/discoms of states/UTs in adopting industrial tariffs in place of commercial tariffs for telecom sites, as has already been done by the Himachal Pradesh Electricity Regulatory Commission and Maharashtra Electricity Regulatory Commission.
- Getting long-pending applications approved by the discoms of states/UTs.
- Getting states/UTs to implement the addendum to the Model Building Bye-Laws, 2016 released by MoHUA in March 2022.
- Implementation of “Call Before u Dig” for remaining states/UTs.
- Getting telecom towers permanently included in the list of essential services that are exempted from the Commission for Air Quality Management’s notice on DG set running restrictions in Delhi-NCR.
“5G will become a catalyst in realising the digital val ue of India across all primary, secondary and tertiary facets of the economy.” T.R. Dua
As stated above, the biggest challenge for the telecom sector in India today is restoring its financial health so that it can access the new capital investments needed to keep pace with the evolution in this industry. For this, there is an urgent need for ARPUs to go up from less than Rs 200 to at least Rs 300 over the next few years. Another urgent requirement is for the government to significantly reduce taxes on this sector, commensurate with its status as a vital infrastructure industry rather than as a “sin” industry, which the current levels of goods and services tax, licence fees and universal service obligation contributions reflect.
“What has happened in the Indian telecom sector over the last six to seven years can only be described as a roller coaster ride.” Akhil Gupta
While significant progress has been made in the broadband sector, much more remains to be done to achieve our Digital India and Broadband for All missions. The growth has been somewhat lopsided, primarily favouring the mobile front. Over 98 per cent of broadband is on mobile devices and this is somewhat risky in terms of consistent quality since mobile networks are subject to many uncontrollable variables. A supporting base of adequate fixed broadband connections is essential to support heavy-duty and mission-critical applications. For example, for an equivalent size population, China has 590 million fixed broadband connections whereas India has only about 28 million. The US, which has only about one-fifth of our population, has 112.05 million fixed connections (Statista, Q1 2023) – nearly four times our count. This needs urgent improvement.
Another challenge is improving rural inclusivity while enhancing broadband coverage. The recent cabinet approval of Rs 1.39 trillion for BharatNet Phase III to connect all villages with optical fibre will be a significant step towards achieving inclusivity and socio-economic development of our rural population.
A third challenge is our abysmally low availability of public Wi-Fi hotspots, which are less than 0.5 million and not even 1 per cent of the global norm. Improvement in this regard is most essential for achieving Broadband for All since mobile networks need these hotspots to provide consistent download/upload capacity.
Last but not least, we need to enhance the availability of satellite broadband connections to serve remote and difficult-to-access locations. We are considerably below the global norm. Achieving full inclusivity requires increased availability of both satellite broadband and Wi-Fi hotspots based on India-developed PM-WANI (Wi-Fi Access Network Interface). In sum, India needs a more holistic approach to broadband involving all technologies.
“India’s 5G deployment has been a remarkable success and is undoubtedly the best in the world.” T.V. Ramachandran
The Indian telecom sector faces many challenges:
- The burden of government fees: Telecom operators have long been regarded as a golden goose by governments and municipalities, which are levying taxes/fees of 30 per cent of revenues, the highest in the world. This hinders investment in network expansion and innovation.
- Digital infrastructure challenges: The current network, supported by 700,000 telecom towers, barely meets today’s data/voice demand, let alone the future growth needs. Even in the country’s capital it is not easy to maintain a voice call while moving through Delhi’s roads. The 5G network needs a massive expansion of telecom towers, small cells and indoor digital antenna systems linked by fibre. The telecom ministry has eased the permission process through regulations such as the Right of Way Rules. However, many state governments and municipalities ignore these, causing delays in approvals and imposing exorbitant fees that jeopardise the roll-out of a future-proof 5G network.
- Consolidation: The aggressive price war following Reliance Jio’s 4G launch forced several mobile operators to exit, reducing the players from 10 in 2017 to 4 in 2023, of which two hold an 80 per cent share. The government must create a viable third player by facilitating a virtual merger between Bharat Sanchar Nigam Limited (BSNL) and Vi, in which it is already a significant shareholder. The government can drive a network sharing agreement between BSNL and Vi, allowing BSNL’s 120 million 2G subscribers to migrate to 4G while allowing Vi customers to migrate to BSNL’s 5G network by 2024. This network-sharing arrangement will reduce the capex for both companies, benefit their subscribers, particularly rural subscribers, and create a three-operator market structure that India needs.
“The 5G network has kick-started the next wave of telecom growth in India, but there are as many challenges as opportunities.” Amit Sharma
How do you assess the current status of 5G deployment and adoption in India? What is the future outlook?
On October 1, 2022, the honourable Prime Minister of India flagged off the official arrival of 5G services in India, thereby putting India on the map of 5G-enabled countries. While the roll-out is still in progress and is expected to spread to every nook and cranny of the nation by 2025, the arrival of this next generation network is very welcome, and we anticipate that it will become a catalyst in realising the digital value of India across all primary, secondary and tertiary facets of the economy.
India is one of the leading countries in the world in terms of 5G deployment. India is also setting up 100 labs across the country for developing 5G-driven applications. 5G subscriptions in India are likely to hit 350 million by 2026. India has covered over 700 districts with 5G in less than 300 days. Telcos have deployed nearly 300,000 BTSs since the launch of 5G services, as of July 24, 2023.
As 5G focuses on enhanced speed and capacity, and ultra-low latency, low-power BTSs or small cells will help in efficiently enabling these in hyper-dense areas as per the application requirements, providing scalability at low cost.
The deployment of small cells will address offloading, shared capacity, low coverage and indoor coverage (vide in-building solution). The use of street furniture is extremely crucial to ensure a successful 5G roll-out. Street poles, electricity poles, gazebos, vestibules, bus stands, hoarding poles, etc., can all be utilised for deploying small cells.
5G, without a doubt, is off to a very good start in terms of roll-out and number of customers. However, the real adoption of 5G has so far been lacklustre at best due to a lack of use cases. However, I am quite certain that adequate use cases will be found over time – mobile telephony itself and fixed wireless access are two clear uses for 5G owing to its higher speed and lower cost per GB. Telecom is inherently a “supply-led demand” industry, and with greater availability of 5G networks, use cases will surely emerge.
India’s 5G deployment has been a remarkable success and is undoubtedly the best in the world. Both the operators and the government have to be warmly complimented on this achievement, with over 300,000 base stations in 3,000 towns rolled out in just about 10 months. While the roll-out is most praiseworthy, equal, or greater significance lies in the utilisation and monetisation of 5G to provide a decent return to operators for their high investments. Without broader adoption of 5G, this new technology will not be sustainable for operators. Currently, the installed 5G subscriber base is still small at about 10-15 per cent and 5G shipments are only 48 per cent of the total despite significant capex being directed towards 5G deployment. It is seen that customers are not really appreciating the delivered 5G speeds of 200-300 Mbps since the normal video and other applications need only 5-15 Mbps, which is comfortably provided by 4G. Hence, there is a need to drive the adoption of the more complex use cases that demand speed levels characteristic of 5G.
The 5G network has kick-started the next wave of telecom growth in India, but there are as many challenges as opportunities. The government’s focus on 5G has led to rapid deployment by Reliance Jio and Airtel, which will cover all cities by the year end. However, many challenges must be addressed for 5G to take off. These include:
- Lack of a business case: Without a killer app that justifies the quantum increase in data demand and the opportunity to price 5G services at a premium to 4G, there is not a strong case for investing the $10 billion annual capex required for the realisation of 5G’s full potential. India’s ARPU needs to be doubled through gradual increases to improve the sector’s sustainability.
- Infrastructure challenges: Despite some positive regulatory moves by the telecom ministry, challenges in digital infrastructure deployment persist at both the state and the municipality level. This impacts network quality, fabrication of towers, small cells, street furniture and network growth.
- Indian 4G/5G IPR mandate: The mandate for BSNL to use Indian 4G/5G intellectual property rights (IPR) has the long-term benefit of positioning India as a global telecom tech development leader. However, deploying untested technology nationwide is risky. A network-sharing strategy between BSNL and Vi for 4G/5G can reduce the initial risk, allowing BSNL to thoroughly test the stability and capacity of the network and allow it to be rapidly upgraded to 5G in 2024.
What are your views on India’s data security and privacy scenario, especially in light of the growing digitalisation?
With telecom companies having large customer bases, there are abundant opportunities for malicious attackers to gain unauthorised access to data. When the infrastructure of a major telecom service provider comes under attack, the consequences could potentially affect the whole country, businesses, consumers and government agencies. It could also have major ramifications on the telecom brand’s reputation and trustworthiness.
There is unanimity on the need for strong data security and privacy in light of the massive growth in digitalisation in every walk of life. In fact, as we all know, the privacy and security of individuals and corporates are under severe threat today. To ensure privacy and security for everyone, we need both education and strong legislation. The Digital Personal Data Protection Act will be the first attempt towards a comprehensive framework in this regard. It is the responsibility of all of us, as individuals, corporates and the government, to work in tandem towards this crucial security measure. Failure to do so will create mayhem across all levels.
India’s data privacy landscape in the digital era presents both progress and challenges. India should enhance its cybersecurity measures, streamline processes for addressing cybercrimes, and invest in robust infrastructure to ensure data privacy. With a well-rounded strategy and concerted efforts, India can pave the way for a safer digital ecosystem that safeguards the privacy and security of its citizens.
In the rapidly advancing digital era, safeguarding the privacy of citizens has become a pressing concern for countries worldwide. India has made significant strides in data protection, evident in its initiatives to ban Chinese technologies and promote indigenous digital solutions through the Make in India campaign. With Parliament passing the Digital Personal Data Protection Bill recently, the country will shortly have a data protection law in place with all necessary safeguards to protect citizens’ privacy and ensure national security with respect to cybercrimes. India has also taken steps to address cybercrime and strengthen digital privacy through the enactment of laws and policies. The Information Technology Act, 2000 (IT Act) serves as the primary legislation governing cybercrimes and digital transactions in India. It was amended in 2008 to provide a comprehensive legal framework for addressing cyberthreats and protecting sensitive information. The IT Act includes provisions related to unauthorised access, data theft, identity theft, and hacking, among other offences.
- Data privacy concerns and solutions: Centralised data systems raise misuse and hacking concerns. The Data Privacy Bill aims to guide data collection, but effective implementation and an ombudsman for oversight are critical for trust and accountability.
- Cybersecurity challenges and solutions: Reliance on foreign technology in critical sectors poses security risks. Balancing security with innovation is crucial. Open-source software and local app development can mitigate cybersecurity risks while maintaining control.
What are the key trends and technologies that will shape the sector going forward?
The journey of wireless technology began with 2G in the early 1990s, followed by 3G, 4G and now 5G. 5G boasts peak speeds of 1 Gbps (1,000 Mbps), compared to 20-100 Mbps on 4G. The future holds even greater promise with 6G, which is expected to reach speeds of 1 Tbps (1,000 Gbps). In addition to this, tremendous growth in advanced technologies such as artificial intelligence, robotics, internet of things, big data, cloud computing, blockchain, 6G and automation will bring about unprecedented shifts in wireless communications.
Key advantages of embracing these emerging technologies include operational agility, improved data security and enhanced customer experience. These technologies are even giving birth to new business models. The global digital transformation market size is expected to reach more than $1 trillion by 2025. This is a clear indication that digital transformation is the need of the hour for organisations, big or small. Although the telecom sector in India has struggled with restrictions and policy disruptions for a while, the recent reforms taken up by the government point toward a new era of healthy growth.
The fundamental technology that, to my mind, will shape the sector going forward will be 5G because of the high speeds that it offers at a low cost per GB. Technological developments relating to the internet of things, artificial intelligence-based applications, and virtual reality/augmented reality-based games and apps in sectors such as health, education, fintech and transportation, will all ride on telecom networks powered by 5G.
There is already talk of 6G and an attempt is being made for India to play a leading role in the formation and design of 6G standards, which is a welcome step. However, we will need to be careful to not rush into introducing 6G in India under the current circumstances and financial health of the sector. All our efforts must first be focused on taking 5G to every citizen of India – both in terms of network and availability of 5G phones. This will take a few years at the least.
Indians are adept in adopting and using new technologies. While most new technologies will be welcomed in India, the top technologies that are likely to gain traction are:
- Edge computing
- 5G and beyond/6G
- Massive IoT
- Non-geostationary satellites such as low earth orbit/middle earth orbit
- Software-defined networks and network function virtualisation
- Free space optics/Li-Fi
The Indian telecom sector’s future will be shaped by additional demand for IoT, edge computing, artificial intelligence, augmented reality/virtual reality, digital payments, rural connectivity, e-healthcare, and smart cities. These trends will drive the demand for high speed, low latency data and create opportunities for premium pricing. The successful launch of a home-grown 4G/5G network will position India as a global technology provider for 6G networks.
To sum up, the telecom sector has emerged from a slump and is poised for rapid growth, subject to the provision of a supportive regulatory environment, the presence of a viable third operator and the implementation of measures to double operator ARPUs.