What ‘Business Standard’ Did Not Tell Us: The Other Side of the Telecom Story

The Business Standard editorial “The telecom mess”, published October 10, 2017, blames the Central government for not hand-holding the telecom industry at a reportedly difficult time. In the paper’s opinion, the telecom industry is entering its “worst phase so far” but the “signal” from the government is that “it is maintaining an arm’s length distance” from the industry.

The fact is that, as far as the current financial stress of telecom companies is concerned, the government is not in denial. In fact, the Minister of Communications and the telecom secretary have reportedly said that the government is open to intervention but only when necessary. But if some private enterprises in the sector have been undergoing a financial strain, whether because of their debt burden or otherwise, is it fair to put the blame squarely on the government for “inaction”?

The State As Enabler, Not Imposer

Before asking the government to take responsibility for private players’ financial stress and even for possible job losses, we must ask what the core duty of the state appears to be vis-à-vis telecom policy. In a free market economy, with a large private sector, the state can ideally act as the enabler for industry and ensure a level playing field. Stepping beyond that may often run the other risk of a return to state control of the economy and industry.

In policy formulation and enabling of the telecom industry per se, it appears that in the last three years several things have been done or begun which all seem to be steps in the right direction. Let us focus on some of facts:

  • The Centre is working on a new, application-driven telecom policy which will replace the existing Telecom Policy 2012, which is connectivity-driven. The government has said that it is committed to taking help from a large pool of experts from outside for more inputs from citizens and stakeholders in order to formulate the new policy.
  • As of April 2017, India has close to 1.2 billion telephone connections, including 1.17 billion wireless telephone connections and has similarly witnessed the rapid growth of broadband connections that now stands at 276.52 million.
  • While service providers are rapidly deploying 4G technology, the Centre is keeping an eye on 5G technology to ensure that India plays a key role in standards development and gets a healthy share in innovations & patents.
  • FDI equity inflow in the telecom sector from April 2016 to March 2017 was $5,564 million, which is more than four times the average inflow of about $1.3 billion every year since 2013-14.
  • The Centre has also said that it has a moral and strategic obligation to expand connectivity to all parts of India, including the Northeast and Left-Wing Extremism-affected areas, which is in progress. The BharatNet project plans to connect all 2.5 lakh gram panchayats with high-speed optical fibre cables by 2018. More than 1,00,000 gram panchayats have been connected in Phase I as of July 2017.

The Business of Telecom

As an enabler and policy facilitator, one cannot really pin blame on the government for inaction. The points above also make it quite clear as to what the Centre has been doing. The editorial itself agrees that there is no room for drastic intervention by the government citing the example of 2008, when the government of the day granted 122 2G licences to all and sundry. Still, the editorial suggests that competitiveness would be killed if the government maintained its “distance” from the crisis. The editorial presents a bleak scenario of possible job losses in the telecom sector, which it estimates at 35,000 direct jobs and 1 lakh indirect jobs being under threat.

It is another thing that the telecom secretary reportedly dismissed a similar estimation of “several thousand” job losses. But the basic question is this: How could the government be responsible for sales, mergers & acquisitions, downsizing, etc of their companies and work forces by private entities?

There is no evidence to claim that the current financial stress some companies are reportedly under is the outcome of bad government policy. In other words, the present crisis may have to do with questions of business models, management methods, business cycles, etc which could have been affecting the private telecom companies. Of course, as the editorial points out, there has been a demand from the telecom companies to lower spectrum charges and revenue charges, etc. This again, as per evidence, the government is not averse to considering.

The Data Explosion

Perhaps, India’s telecom scenario at present is not comparable to any other country. The real challenge is exponential data consumption. One cannot simply blame the government for glitches but private players have their task cut out to attend this situation of an expanding data explosion. Let us consider the facts:

  • Six-fold increase in data traffic in India from 561 million GB in the first quarter to 2,988 million GB in the third quarter of 2016-17, which is a 400% jump.
  • By the end of 2016, the number of Internet subscribers in India was 391.50 million, making India globally the 2nd biggest in terms of Internet users.
  • Mobile data traffic also grew by 76% in India in 2016.
  • Consumption of video content is also estimated to be 75% of India’s mobile data traffic by 2021, compared to 49% in 2016.
  • India’s telecom market is expected to cross the Rs 6.6 trillion revenue mark by 2020.

With such growth and expansion opportunities, in what is perhaps the fastest digitalising economy and society in the world, telecom companies and Internet service providers need to explore the various ways they can monetise the trend. It does not appear to be anybody’s business when a private company’s business model and/or practice fails or is in trouble. But if there is a cascading effect on the industry as a whole that genuinely needs intervention, the state may step in. That, apparently, is just what the Indian state’s modus operandi is at present.