Telecom industry’s five-point agenda for new govt

Our Bureau New Delhi | Updated on May 16, 2014


Make more spectrum available for data usage

Rationalise the taxes and levies in the sector

Facilitate introduction of new and efficient technologies such as M2M and cloud computing

Implement the benefits of the status for the industry in parity with other infrastructure sectors in the country

Exploring a revenue sharing arrangement between the over the top Internet players and telecom companies

The telecom operators has put out a five-point action plan for the new Government primarily aimed at reducing levies and improving the financial health. While the fallout of the 2G spectrum scam under the UPA government pulled down the telecom sector, the Communication Ministry has tried to bring some stability through transparent spectrum auctions and favourable unified licence policy. But the new Government will have lot of challenges especially with the industry sharply divided over key issues.

One of the biggest issues for the new telecom minister will be to make available fresh spectrum that will meet the demands of the growing data usage. India is a predominantly wireless economy with fixed wireline penetration being very limited; hence rollout, adoption and benefits of broadband will be primarily driven through mobile broadband. New solutions such as M2M, m-governance, m-banking and m-entertainment will lead to voluminous traffic/data on the wireless networks. To address and cater to this, identification and allocation of new spectrum bands with clear future plans for availability of spectrum are crucial. The roadmap is also important to plan for the heavy future investments in telecom infrastructure that will be required.

“Essentially, the Government should make available to the industry, all spectrum in all the bands (e.g. 2100 MHz, 1800 MHz, 800 MHz and 700 MHz) presently lying unutilized by various government agencies in conformity with globally harmonized bands and should provide a clear road-map of spectrum availability in the future,” said Rajan mathews, Director General, Cellular Opertaors Association of India.

The telecom industry in India is floundering under heavy financial and operational pressure and operators are finding business sustainability a challenging task. In terms of telecom infrastructure investments too, India accounts for just 11 per cent of the total investments in the Asia-Pacific region while compared to China, which accounted for nearly 50% of the investments in the region in 2012-13.

‘There is an urgent need to rationalise the taxes and levies in the sector, which aggregate presently to 30 percent of the revenues earned by telecom companies as compared to about 5% in other Asia-Pacific (APAC) countries,” Mathews said. The industry will also need to work closely with Government, international standards bodies, Over-the-Top service providers (like Google, Facebook) and the Civil Society in promoting security while also ensuring the legitimate rights of consumers for privacy. There is a need to have balanced and rational security policies that protect the stakeholders and which also do not stifle innovation and progress.

Though the sector has been awarded “infrastructure status”, there is a need to implement the benefits of the status for the industry in parity with other infrastructure sectors in the country. This could take the form of tax holidays, reduced interest on debt, sourcing of funds from special funding agencies, priority availability of grid power, Hemant Joshi, Partner, Deloitte Haskins & Sells, said, “ The telecom policy needs to be very imaginative treating telecom sector as a growth enabler and serving the masses. The best practices from various countries in the areas of spectrum trading, sharing, refarming, M&A, innovation band, etc. should be incorporated in the telecom policy. The new Government is expected to give crystal clear policies to eliminate and close all litigations in the telecom sector.”

The mobile operators are also looking towards policy that would bring over-the-top services under some form of regulation. As per industry estimates, the total number of over the top users on smartphones are expected to rise from 276.8 million in 2012 to 1.32 billion in 2016. As of 2012, 20% of global Smartphone users were actively using such services, and this is predicted to reach 45% by 2016. Over-the-top users in 2012 accounted for 2% of the total global mobile subscription base and are expected to increase to 18% in 2016. The market is expected to be worth US$166.5 billion in 2016, but its impact is already being felt by mobile operators today.

“As profit margins for Indian telecom operators is wafer-thin, the key challenge faced by operators is that while revenue growth remains challenged, data consumption is expected to grow at a high rate due to over-the-top services, accelerating demand for network investments. Thus, the revenue earned by the operators need to grow in order to meet the enhanced network requirements,” Mathews said.

“ However, without a parallel revenue stream to support these investments, it becomes disruptive for the telcos and makes the business model unsustainable in the long run.Thus, there is a need to find alternatives to monetize these services, by exploring a revenue sharing arrangement between the over-the-top service providers and telecom service providers. COAI Members believe there is a crucial need to initiate dialogue and work with the Government of India on this issue,” he added.

Published on May 16, 2014

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