The past two decades have been remarkable for the Indian telecom sector. By being a flagbearer of the Digital India initiative, the telecom sector has positioned itself as a core infrastructure service provider that can touch and transform over a billion lives. However, poor financial health continues to impact the sector’s growth prospects and its transition towards a 5G economy. Industry stakeholders share their views on the key achievements of the sector, challenges being faced and policy interventions needed to overcome these.
How would you assess the progress made in the Indian telecom sector over the past two decades? What were the key drivers of change during this period?
Over the past 20 years, the sector has provided connectivity to 500,000 villages, facilitating broadband connectivity to around 650 million subscribers and overall serving 1.2 billion telephone subscribers.
While revenues of the telecom sector are under tremendous stress, telecom service providers (TSPs) have not shied away from investing a whopping Rs 10.44 trillion over the past two decades in setting up world-class infrastructure. Further, telecom companies have already invested Rs 3.68 trillion in various spectrum auctions since 2010. Technological advancements and innovations over the years have played an instrumental role in making the sector more competitive. Telcos on their part continue to focus on capitalising the increased data usage and associated services to generate more revenue, with a focus on shifting 2G users to 3G and 4G, and preparing their networks for seamless delivery of 5G over the next couple of years.
How different are the challenges for the sector at present as compared to two decades ago? What are some of the areas that urgently need policy and regulatory attention?
Twenty years ago, the telecom sector was still at a comparatively nascent stage. Challenges were also very different compared to what they are now.
At that time, many new telecom service providers were entering the market. In order to increase teledensity in the country, access technologies such as wireless local loop were explored. Several issues, with respect to radio propagation, network design and licensing policy, were resolved.
Despite several advancements and achievements over the years, the telecom sector is battling its own set of challenges. The severely cash-strapped sector is struggling with rising debt, falling revenues and dwindling profit margins. Further, consolidation amongst telecom players, cascading taxations, hyper-competition and the resultant low tariffs shook the sector to the core.
The most recent issue that requires attention is the Supreme Court’s ruling on the definition of AGR, which has led to telcos and the government being at loggerheads. Given the broad implication of the Supreme Court ruling in the 15-year-old case, we hope that the government will devise a suitable plan to find a lasting solution to this conundrum.
There are myriad types of taxes and levies that need to be rationalised on priority to assist the sector. The industry recommends doing away with multiple audits of the book of accounts of operators, and relying on only one audit mechanism wherein all parameters and requirements are predefined. This will facilitate ease of doing business in the sector.
Do you have a regulatory/policy wish list?
There is an urgent need to bring down the licence fee and spectrum usage charges. Further, a refund of the accumulated input tax credit, which is currently at Rs 360 billion, is also an important requirement.
The pricing of 5G spectrum should be much lower. We expect the government to revisit various licensing and regulatory provisions, and take necessary measures to ensure ease of doing business.
What are your views on the evolving 5G ecosystem in the country? What are the key opportunities and challenges?
The industry has been actively engaging with the government to ensure the development of a favourable 5G ecosystem in India. The result has been a forward-looking approach, as recommended by the 5G High Level Forum.
5G’s collective impact on India’s economy is estimated to touch a whopping $1 trillion by 2035. Industry experts have stated that by 2026, there will be an estimated $619 billion revenue potential with telecom operators targeting 10 specific industries for offering 5G services – manufacturing, energy and utilities, public safety, healthcare, public transport, automotive, media and entertainment, financial services, retail and agriculture.
However, it should be noted that the implementation of 5G will compel major ecosystem alterations with respect to spectrum usage, network infrastructure and devices. Also, while newer bands will be introduced for 5G, the reserve prices recommended by TRAI are quite high. Therefore, it is imperative for telecom companies to prepare their ecosystems before investing money to purchase spectrum.
Given the prevailing financial distress, telecom service providers will find it very difficult to raise funds to bid in the 5G auctions that are likely to take place soon. Further, the quantum of spectrum in the 5G band being put up for auction will be only 175 MHz. This is extremely inadequate for operators to build robust 5G networks and services.
India would require a total investment of about $100 billion to build 5G infrastructure over the next five to seven years. Further, as different use cases of 5G will require different frequency bands, the early use cases that seem viable for India to adopt are enhanced mobile broadband and fixed wireless access. Similarly, technologies such as beamforming and massive multiple input, multiple output are going to increase the number of IoT-based devices exponentially. Such technologies will create demand for higher frequency bands of shorter wavelengths. On the contrary, certain services will need high bandwidth to augment data delivery efficiency.
What is your outlook for the telecom sector in the coming years? What key trends will shape the future of telecom in India?
Here’s a quick lowdown of what’s going to shape the future of telecom:
- 5G: As 5G-enabled technologies emerge, it will further bring other new-age technologies such as AI, AR and VR closer to our world. 5G will also find widespread use cases in rural India such as smarter crop management, disaster management and education for all.
- IoT: It is set to grow by leaps and bounds in the times to come. By 2020, IoT units in India are expected to touch 1.9 billion units, which is a 32 times growth in the segment.
- Network functions virtualisation: Once 5G has been rolled out, it would become imperative for operators to adopt new network architecture (centralised control with dynamic flexibility and programmability) and virtualisation (hardware-free cost-effective).
- Artificial intelligence: AI offers many opportunities to telecom operators in the areas of applications, services and underlying infrastructure. AI is already being utilised by telcos to streamline operations, improve customer service and reduce turnaround time.
- Wearable technologies: Given their popularity, wearable technologies will become the order of the day in the coming years. One can expect newer innovations in the domain.
- Blockchain: Riding on the technological prowess of blockchain, the telecom industry would be seen exploring new revenue channels, reducing operational costs and monetising content and data.