Priority call

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Priority call

India’s telecom policy needs a radical overhaul

Source: https://www.thehindubusinessline.com/opinion/editorial/priority-call-for-telecom-sector/article27188959.ece

Why in news?

  • The Indian telecom industry, which has been grappling with declining revenues following a long and bitter tariff war triggered by fierce competition in the market, is likely to see signs of recovery in the current financial year (2019-20).

Telecom woes

  • Over the past two years, India’s telecom sector has been struggling to stay afloat with intense pressure on profits due to declining tariffs and increasing costs.
    • While data tariffs continue to fall and voice is all but free, operators have still witnessed huge growth in consumption on the back of investments of around Rs 3 lakh crore over the last three years.
    • Telcos have invested to expand broadband coverage despite debt of around Rs 5 lakh crore.
  • While this has led to a great deal for consumers, the industry is struggling under increasing debt, lower profits and declining cash flows.

National Digital Communications Policy-2018 (NDCP-2018)

  • As technology evolves, the policy environment must also keep pace with it so that all citizens get secure access in an ever-changing environment. This is key to a sustained, rapid socio-economic growth of the country.
  • Towards this goal, the government has been regularly announcing telecom policies. Thus far, we have seen four such policies—National Telecom Policy 1994 (NTP94), National Telecom Policy 1999 (NTP99), Broadband Policy 2004 and NTP 2012.
  • With a view to cater to the modern needs of the digital communications sector of India, the government launched the National Digital Communications Policy-2018 (NDCP-2018).
    • The new telecom policy has been formulated in place of the existing National Telecom Policy-2012 and aims to facilitate India’s effective participation in the global digital economy.
    • The policy aims to ensure digital sovereignty and the objectives are to be achieved by 2022.
    • Further, under the new telecom policy, the government aims to provide universal broadband connectivity at 50 Mbps to every citizen. It has kept a target of providing 1 Gbps connectivity to all Gram Panchayats by 2020 and 10 Gbps by 2022.

Tasks ahead

  • In this context, the task is cut out for the new government in the Centre to carry out some of the promises made in the National Digital Communications Policy 2018 without further delay.
    • Lower fees and levies on operators: On top priority should be the measures proposed to lower fees and levies on operators.
      • Mobile operators pay almost 30 per cent of their revenues in the form of spectrum charges and other annual fees.
      • These levies were introduced when spectrum was allocated on a subscriber-based criteria. Since 2010, the Centre has shifted to auction of spectrum wherein winning operators pay an upfront fee to acquire the airwaves.
      • Therefore, some of these levies can be easily waived off without any major revenue impact for the exchequer.
    • Spectrum pricing formula: The new government should also review the spectrum pricing formula to reduce the overall cost of offering services.
      • Given that new mobile services will be supporting massive data applications, operators will need large amounts of spectrum.
      • There is a need to move away from the existing mechanism of pricing spectrum on a per MHz basis.
      • New data services require at least 80-100 MHz of contiguous spectrum per operator.
      • If the Centre were to fix the floor price based on the per MHz price realised in the last auction then no operator would be able to afford additional spectrum.
    • Infrastructure creation: Infrastructure creation, especially the much delayed optical fibre network, should be taken up on a mission mode so that it can complement the huge investments being made in rolling out the wireless networks.
    • Quality of services: The other area of focus should be on ensuring quality of services.
      • Telecom consumers are no better today than they were two decades ago when it comes to getting access to uninterrupted voice calls and reliable Internet connectivity.
      • Call drops, unwanted telemarketing calls, patchy data networks and unfair practices to get users to pay more are rampant.
      • Consumers do not have access to a reliable and neutral complaint redress mechanism.
      • The new government should promptly notify the creation of an ombudsman to empower mobile consumers.
    • PSU telcos: Telecom PSUs continue to languish under high manpower cost and bureaucratic decision making.
      • That BSNL delayed February salaries, and the DoT had to give MTNL funds to pay salaries are symptoms.
      • Legacy issues, fierce competition and rock-bottom tariffs have led to the sharp decline in the fortunes of the two telcos, despite their early-mover advantage in 3G service.
      • The large payout for 3G spectrum, even as the companies made losses, was a fatal blow.
      • MTNL’s net worth is completely eroded, while BSNL’s accumulated operating losses have reportedly crossed Rs 90,000 crore.
      • The two together employ 1,98,000 people, whose salaries make up for 90% of the revenues in MTNL and around 60-70% in the case of BSNL.
      • The corresponding figure in their private sector rivals is 4-5%. The VRS scheme for the BSNL and MTNL is estimated to cost about Rs 8,500 crore. The government should foot the bill, neither company can.

Way forward

  • The Centre must take immediate steps to revive Bharat Sanchar Nigam Ltd if it wants to achieve the objective of reaching 100 per cent tele-density in rural areas.
  • Infrastructure creation, especially the much delayed optical fibre network, should be taken up on a mission mode.
  • Finally, there is also a big worry over the large quantity of telecom equipment and devices being imported.
  • The Make in India plan needs to be tweaked to make local manufacturing a viable proposition.

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