Aruna Sundararajan, Secretary, Department of Telecommunications (DoT),
In the past two decades, the Indian telecom sector has undergone a paradigm shift in terms of growth drivers, business dynamics, market structure, challenges as well as opportunities. Broadband has emerged as the single biggest driver of growth. The sector, which touches almost every life in the country today, is also the backbone of the government’s Digital India initiative. In an interview with Indian Infrastructure, Aruna Sundararajan, Secretary, Department of Telecommunications (DoT), talks about focus areas, concerns and outlook for the sector…
How would you assess the progress made in the Indian telecom sector over the past two decades?
Telecom in India has been a remarkable success story. In the past 15 years, the number of telecom subscriptions has increased significantly from about 38 million in 2003 to 1.21 billion now. Today, telecom is perhaps one sector that touches the largest number of citizens. Telecom services are consumed by the maximum number of people, far more than even electricity. I believe that this growth has been largely driven by the fact that the government decided to bring in private players by completely liberalising the telecom sector. Consequently, there have been several successful entrepreneurial ventures in the sector. Almost every one of India’s big corporates has contributed to the telecom growth story.
What were the key drivers of change during this period?
The government, in 1998, had experimentally opened up the sector but had fairly rigid conditions in place. At that time the government had taken a very bold step and had decided to move to a revenue share arrangement, which has been one of the biggest factors that has driven the growth in the industry. In the years that followed, the government undertook a series of enabling policy steps – foreign direct investment (FDI) liberalisation from 49 per cent initially to 100 per cent now, gradual liberalisation of the spectrum regime by allowing trading, sharing, etc., as well as improvement in the ease of doing business.
Are you concerned about the financial health of some of the companies and their shrinking margins?
It is an absolute fact that currently there is compression in revenues. However, what I have been consistently saying is that we need to look at the fundamentals of the market. Investment and returns ultimately depend on market fundamentals. We could have very high tariffs in the industry, but if the growth prospects of the market are not inherently strong, this profit would be wiped out. There is a big disruption, a huge technology change that has taken place, which has opened up the data market. So we will see data monetisation in various forms. This tariff competition will soon settle down and players will compete on the basis of niche content and differentiated packages. I am extremely bullish on market growth.
What are the concerns and challenges that make you worry about the sector?
Today, we have to run to remain in the same place because the technology is running ahead of us. One thing that we really need to do is to prepare ourselves to embrace the next wave of technology which is 5G. So, the things that would worry me are keeping pace with new technologies and getting broadband to everyone, particularly in the rural areas.
What measures are you taking to address each of these areas?
The big-ticket idea is Broadband for All. I believe that broadband is not just a growth driver for telecom, but is a growth enabler for the rest of the country. In fact, it will even supplant a lot of physical infrastructure. So, we have developed a policy with the basic objective of getting broadband for all. The National Broadband Mission is the heart of the policy. Second, there is a big focus on 5G. We are working on a separate roadmap for 5G. Third is the quality of service, which still requires much more to be done. We are witnessing 500-800 per cent growth in traffic but we do not have similar growth in infrastructure development. So we need to fiberise towers, and ensure that the networks are optimised, so that quality is improved.
How has the government’s Broadband for All vision progressed over the years?
We have outlined in the recent policy document that we want to provide a speed of 50 Mbps to everyone. We are also about to come up with the broadband-readiness index, wherein we will be putting in place parameters to measure progress on broadband adoption.
“The government has taken a series of enabling policy steps – FDI liberalisation from 49 per cent initially to 100 per cent now, gradual liberalisation of the spectrum regime by allowing trading, sharing, etc., as well as improvement in ease of doing business.”
How do you see the role of DoT evolving over the next few years?
We have already flagged that this is going to be the era of converged infrastructure – the digital era. In fact, we are even saying that the Telecom Commission needs to be renamed the Digital Communications Commission. The role of DoT is going to become even more critical in the future, particularly in terms of ensuring that broadband highways are in place, requisite security of networks is there and that all the uncovered areas are covered.
What future do you see for Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL)?
BSNL and MTNL cannot be looked at using the same yardstick as for other companies because communications is a strategic subject. Today, even the US is saying that it will build its own government network. BSNL has a very big role to play in ensuring rural connectivity. So, I believe that the strategic relevance of BSNL and MTNL has not gone away, it has actually increased. We have to balance this with the fact that they have not been able to invest as much as they should have in technology.
What is your outlook for the sector?
The outlook for the telecom sector is extremely bullish. So far, we have only tapped 35 per cent of the market in terms of internet penetration, smartphone penetration or broadband penetration. We still have to tap 65 per cent of the market. India is an aspirational market. One may question whether broadband will have uptake in rural areas, but data shows that aspirational levels in these areas are in fact higher. For instance, eastern Uttar Pradesh is leading in the country in terms of data consumption. I believe that growth prospects are extremely bright for the telecom sector. Several technologies will be riding on the back of digital communications infrastructure.
What are your views regarding the current policy and regulatory environment?
Personally, I believe that we still have a fairly heavy compliance regime. We need a lighter touch to see how to facilitate ease of doing business. Second, we must do something on the domestic manufacturing front, where slow progress is a big area of concern. In every other sector, the government is spending and building infrastructure. However, in telecom the private sector is doing the spending. Now, we are not even enabling them to spend. For instance, in the case of right of way, urban local bodies (ULBs) are a little opportunistic, and are looking at this sector as a source of additional revenue. ULBs have still not made the big shift from physical infrastructure to digital infrastructure. Once that happens, we will see a much more facilitating environment.
We are heavily reliant on foreign technology and networks. Is that a concern?
It certainly is a big concern fundamentally, not only from the point of view of security but also from the point of view that no country in today’s age can afford to be digitally dependent on any other. We say that we are a big digital power, but in this area we need to quickly ramp up our capabilities.
“Today, we have to run to remain in the same place because the technology is running ahead of us.”
