Quick Take

Telecom tariff hike will undermine Digital India plan

| Updated on November 19, 2019

It will widen the gap between the digital haves and have-nots. The number of mobile users has already fallen in rural India

The decision by Airtel and Vodafone Idea to hike tariffs is bad news for the future of India’s digital roadmap. Together, the two operators control nearly 60 per cent of the country’s mobile subscriber base. Any increase in tariffs will not only impact millions of existing users but also slow down new user addition.

About 55 per cent of the country’s population is yet to experience data services. Most of these consumers are in rural or economically backward areas, who may not be able to afford expensive data services.

The effect of increasing tariffs can already be seen in the 2G voice segment. There has been a steady decrease in the number of mobile users in rural areas over the last six months. According to data available with the Telecom Regulatory Authority of India (TRAI), 20 million mobile phone users have discontinued their subscription between December 2018 and June 2019.

Faced with mounting losses and a huge debt burden, mobile operators are under pressure to improve their earnings or close down. Operators are letting go of low-paying subscribers in a bid to push the average revenue per user. Many of the existing operators have withdrawn the low-value recharge coupons. In some cases, the minimum recharge required has gone up three times.

The recent ruling by the Supreme Court on payment of licence fee dues of nearly ₹1.3 lakh crore is now forcing the operators to increase data tariffs too. This will put broadband services beyond the reach of the majority of Indians, which in turn will be detrimental to the Digital India vision.

The Centre must step in quickly to provide some financial relief to the operators. Operators pay nearly 30 per cent of their annual revenues in the form of levies and taxes to the Centre. Some of these levies are unnecessary, as they are a continuation of a policy followed when spectrum was given on subscriber-linked criteria. For example, mobile operators are required to pay spectrum usage charge in addition to a licence fee. This method of levying spectrum usage fee is not relevant anymore, with the Centre now selling airwaves through an auction mechanism.

Indian consumers have always enjoyed the cheapest tariffs in the world, primarily due to regulatory interventions that enabled operators to keep services affordable. The migration package under the New Telecom Policy 1999 and the Calling Party Pays regime, that made incoming calls free, are two examples of forward-looking policymaking. It is time for the Centre to put together a relief package to alleviate the financial stress on the telecom sector. Otherwise, consumers will be the biggest losers.

Published on November 19, 2019

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