Companies

‘High reserve price for spectrum can pose a challenge for telcos’

S. Ronendra Singh New Delhi | Updated on January 10, 2021

S P Kochhar, Director General, COAI

It has been 25 years for the telecom industry here, but the financial challenges still remain. The immediate challenge before the industry is the high reserve price (of spectrum) that the government has fixed, said SP Kochhar, Director General, Cellular Operators Association of India (COAI).

“When telcos rolled out networks, they had to infuse huge capital, and sometimes when you are infusing capital, you are not quite sure whether there will be return on investment, so the challenge of finance always remains,” said Kochhar. In an interview with BusinessLine, he shared his thoughts on various issues, including OTT players.

“If they are providing voice services through the OTT platform, then they should be regulated and charged the way telcos are being charged,” he said. Excerpts:

The telecom sector played a key role in 2020. Going forward, what kind of challenges do you think telcos face?

Finance is the biggest challenge for the sector, as you are not sure about return on investments. In 5G also it will be the same. One has to invest huge amounts, but there will not be immediate return on investments. Also, there are challenges such as facilitating arrangement for roll out of fiberisation of networks. There are a lot of uncertainties also.

For example, the charges are not uniform. Besides, the Central government says something and the State governments something else. There are also challenges of the levies that the government imposes on telecom.

They continue to be high. The government continues to look at telecom as a revenue generator rather than a facilitator of the country’s growth. The immediate challenges are high reserve price (of spectrum) that the government has fixed.

We are of the opinion that for a market-driven correction, there should be a right way of discovering the market price rather than putting an artificially-indeminated reserve price, which is very high.

That may actually be counterproductive because people may not really be able to buy as much as they want to due to constraints of finance. But the industry has been positive all these years, and I’m sure this year is going to be no different. There are challenges, but there is positivity all around, and with auctions coming around, we are hoping that the networks will also expand, and we’ll be able to reach more consumers with quality services.

Taxes and levies are one of the main hindrances to the telecom industry’s growth. How are you taking this up with the government?

We are in regular touch, and in many places we have been able to make headway. The government is supporting us in many ways. For example, Right of Way (RoW) charges – the Centre has come up with guidelines and fixed the limits of RoW.

But unfortunately, telecom being a Central subject, and peripheral being in the concurrent list or in the State jurisdiction, people don’t always obey the Central guidelines. Had it been a directive, having a legal enforcement, we find a lot of deviations from this guidelines.

For instance, the Centre says the RoW charges should be restricted to ₹10,000 per kilometre, but there are cities that are charging up to ₹1 crore per kilometre. So, you see the difference. This is not in a planned manner. The telcos just don’t know that if they go to particular city or Tehsil, how much will they be charged and, therefore, there is no budgeting.

Budgets go for a toss and finally the consumer suffers. There are high charges in places such as Delhi, Mumbai, Kolkata and Pune, where the roll out of networks suffer and, hence, the consumer suffers. So, this is something that the Central government is supporting us with the National Broadband Mission. They are also trying to get States to fall in line and many States are. On spectrum price, we have not been really able to convince the government.

So, in immediate terms, do you think the government should fix on a floor price and, if yes, what it should it be like? (there are reports of DoT not agreeing to a fixed floor price).

It hasn’t yet come to DoT and is still lying with TRAI... We have brought it up to the notice of the new TRAI Chairman. We have explained the logic as to why it is required. So, it’s not that DoT has rejected it. It has not gone as recommendations of TRAI to DoT, so question of rejection doesn’t arise.

It is difficult to give an absolute figure. If you have to give good quality communications at affordable prices and be still lowest in the world, there should be some comfort number. Somewhere you have to draw the line and that is where the floor price comes in. The floor price cannot be decided by just one factor – consumer’s affordability.

That is why we have been asking government to reduce the taxes, reduce the charges that they are levying, do away with USO fund. If that happens, the floor price will be lower, but if that doesn’t happen, the floor price obviously will be higher. So, what is pinching the pocket of the telecom service provider (TSP), is not clear yet.

What is your opinion on the OTT regulations?

Our only demand is that please treat every player who’s providing similar services on par with each other. We are saying that if the OTT players are providing voice services through OTT platforms, then they should be regulated and charged the way telcos are being charged, or you forego the charges for telcos also. We have requested the government to please treat everybody on par for communication services, both for the policy as well as for regulations – they should pay for the spectrum the way we do, they should be the subject to the same rules and regulations that we are subject to.

On 5G trials, what is your opinion of Chinese firms like Huawei not being allowed, or for that matter in other partnerships?

In India, the entire rollout of telecom is based on standards and international standards. Therefore, the equipment that is being rolled out by the Indian telcos are based on standards, which are interoperable. Exit or entry of a player cannot be decided overnight.

The question which comes up is how fast will they be able to fill in and at what cost? If a country, which is making equipment at a cheaper cost exists, obviouslythat country would have captured most of the market, and there will be a sudden vacuum that has to be filled up by the indigenous production or by competitors from the rest of the world. The production line ramp up will take a little time. So, there will be a little slump there. But the flip side is now with AtmaNirbhar opening up, many countries will also find an opportunity to set up shops in India and make in India. And, therefore, that will be actually a blessing in the long term.

 

Published on January 10, 2021

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