Issues related to Telecom Sector in India *

1.0.Introduction

The telecommunications industry in India has witnessed many developments and undergone
tremendous changes. It is one of the fastest growing industries in the world and has proved to be
an international success story. India has developed as the second largest telecommunication
market with 898 million subscribers as on March, 2013. Indian telecom sector has undergone a
major process of transformation through several policy reforms and regulations. The sector is
becoming more competitive day-by-day, with the introduction of new players and has truly
revolutionized the way we communicate and share information. This article is an attempt to
capture the changing scenario of the telecommunication industry of India. The study also
tries to unravel the change strategies adopted by the key players in the industry.

The modern system of communications in India started with the establishment of telegraph
network. Like elsewhere, telecommunications in India started as a state monopoly. In the 1980s,
telephone services and postal services came under the Department of Posts and Telegraphs. In
order to ensure telegraph network’s exclusivity and establish government control over electronic
communications, various telegraph statutes were enacted by the Government of India which laid
the foundation of the present regulatory framework governing telecommunications (both wired
and wireless).

2.0. Brief History of Indian Telecom Sector

In the early 1990s the Indian telecom sector, which was owned and controlled by the Indian
government, was liberalized and private sector participation was permitted through a gradual
process.1 The Indian Telecom Sector has emerged as one of the critical components of economic
growth required for overall socio-economic development of the country as there is a positive
correlation between the penetration of mobile services and internet on the growth of GDP of a

1
The Indian Telecom Sector Legal and Regulatory Framework,2014 Nitin Desai Associates.

1
country.2 The Indian Telecom Industry is considered to be a vital tool for the development of the
country on the whole by contributing towards the immense growth, quick expansion and
upgradation of various sectors of the nation. This industry increases the GDP of India, earns
profit for the Indian Government and creates employment opportunities for a great number of
people. The Indian Telecom Industry is very huge consisting of companies that make hardware
and also produce software. Presently, it contributes to a revenue of USD 33, 500 million 3. Along
with the Government owned telecom units, the Indian Telecom market has also attracted many
private operators to enter here who started offering their telecom services as fixed
communication, mobile communication and data services to the customers at the most
reasonable prices, The Government of India has adopted several measures to provide a business
friendly environment for companies in the Indian Telecom market while competing with each
other. Due to the rapid advancement in technologies, the telecom operators of India are working
actively in order to adapt themselves to the changing technology to continue existing in the
market. The Indian Telecom Industry has grown tremendously during the past few years owing
to the unprecedented growth of wireless telephony in India and infrastructure which not only is
beneficial for the telecom industry but has positive effects on the entire economy of India4. The
industry has the world’s third highest number of internet users. The Indian Telecom Industry has
undergone a considerable transformation from being a Government owned enterprise to that of a
competitive environment after its liberalization in 19915. The rapid escalation in the telecom
sector of India has been made possible due to the active participation of private service
providers, revenue generated through Foreign Direct Investment (FDI), series of reforms
instigated by the Government and through the adoption of latest technologies6.

2
Dr. Papori Baruah and Rashmi Baruah, International Journal of Humanities & Social Science Studies (IJHSSS) 2015.
3
Annual Report 2014-15, Department of Telecommunications, New Delhi. Retrieved from:
http://www.dot.gov.in/reportsstatistics/annual-report-2014-15-0
4
Annual Report 2011-12, Telecom Regulatory Authority of India, New Delhi. Retrieved from:
http://www.trai.gov.in/..../201301150318386780062Annual%20Report%20En
5
Annual Report 2012-13, Telecom Regulatory Authority of India, New Delhi. Retrieved from:
http://www.trai.gov.in/.../AnnualReports/TRAI-English-Annual-Report-10032
6
Annual Report 2013-14, Telecom Regulatory Authority of India, New Delhi. Retrieved from:
http://www.trai.gov.in/.../AnnualReports/TRAI-Annual-Report-(English)=010420...

2
2.0.Recent developments in Indian Telecom Sector

In the first decade of the 21st century, the government further liberalised the entry of private and
foreign investors in the sector7, especially in the mobile telephony space. The impact was
affordable services for a large number of Indian residents, especially the Indian middle class.
During FY08, the mobile subscriber base recorded a 50 per cent jump year on year. Another
recent disruption has been witnessed in 2016 with the entry of Jio and it has announced the Free
voice calls, drop in data tariffs, sharp competition among Indian telecom companies. It has
brought the telecom industry to a new level in terms of tariffs, services and technology and has
also created substantial expectations among mobile customers. The launch announcement
offered the lowest rate (worldwide) for the Internet data at Rs 50 per gigabyte (GB). Also, all its
services were offered free, on promotional basis, till December 31, 2016 (which was further
extended till March 31, 2017). This kind of cut-throat disruption by a new player (with huge
financial muscle) is expected to bring consolidation in the industry. These developments in the
Indian telecom sector shook all major telecom operators. Jio has proved to be a game-changer
and the company's pricing strategy has disrupted the entire market and forced all the telecom
companies to devise ways and means to survive and face this stiff competition. Jio's strategy is to
focus on the data business aggressively instead of the voice as the data business offers high
growth rate potential. While the voice market has already matured in India, data relating to voice
and non-voice service revenues of the top three industry players (Bharti, Vodafone and Idea)
reflect this trend as well. Apart from its unique pricing proposition, Jio's network is
technologically more advanced and sophisticated for high-speed data business compared to other
existing players in the market. After deregulation and liberalization in the telecom sector in
India, it has seen a spectacular success. It was possible to achieve with consistent efforts from
Operators and regulators (TRAI) and Government sides. We could achieve unprecedented
growth and lowest prices. To further fuel the growth, it is further expected that smart phones will
be made available at lowest prices and Internet data plans will further be slashed to a new lower

7
Prashant Prakhar, Kishore Joshi and Pratibha Jain, FDI Reforms In India: Government Committed Towards Ease
Of Doing Business, 17 January 2018

3
level. These smartphones has got to be equipped with various Apps in various regional languages
covering local issues / utilities like information, health, financial and entertainment of their
importance. The smartphones with these applications are expected to interest and fuel the growth
of various data services. It is widely accepted that data is a new big source of revenue. All
operators must aspire to take their pie in the overall data market space.

3.0.Key challenges associated to the Telecom Sector in India

The telecom sector in India have to deal with various challenges like maintaining the sufficient
spectrum, Adoption of new technologies faster to be able to use new features and techniques to
serve the customers with better and feature rich service, Government and regulatory agencies,
various mobile handsets available from various companies brings lot of issues and content
partners etc. Also, it is evident from the current scenario that the Voice alone will not be
sufficient to generate revenue and hence the focus is required to be shifted towards various data
services.

 Challenges with respect to Technology or Technological Constraints

 Challenges with respect to Handsets or Handset Constraints
 Constraints with Contents
 Security issues in Telecom Industry
 Active Role of Government and Regulator

3.1.Technological Constraints

To be able to provide access, mobile operators need spectrum, which is a scarce resource. In
comparison to other countries the amount of spectrum available for commercial use is low. Since
the practice of the government is to auction it at an exorbitant cost. Therefore, it becomes
difficult for mobile operators to provide services at reasonable speeds and at low prices that
encourage adoption and usage. The probable solution is not to rely fully on licensed spectrum but
there is a need to depend on unlicensed spectrum i.e. Wi-Fi which operates in 2.4 GHz band. We
should also think of of floading their data onto fixed networks and SP-Wi-Fi network. It is
because of the fact that 80% of the time customers are either in office or their homes or some
static places. They should be using licensed band only when they need mobility and rest of the

4
time, they should be latched on to either fixed line work or Wi-Fi network available at various
strategic points.

3.2.Handsets Constraints

In order to experience a good Internet browsing, download and Video, it really becomes
important for us to provide consumers a phone having advanced features at an affordable cost.
Such phones are widely called as smartphones. These phones have many other features over and
above providing access to the Internet. The current price of smart phones is also a hurdle to
adoption. This telecom sector is a technologically dynamic industry as the new products and
technologies are being invented and deployed quite frequently. Smartphone prices are expected
to decline further and new technologies related to network &handsets are being used to make
more efficient use of the available spectrum.

3.3.Constraints with Contents

More and more contents are to be made available in all of regional languages. Also, these
contents should be focussed in addressing their local problems or providing knowledge to the
prevalent occupation of that region. Currently, most of the content that is available on the
Internet is in English. This languageis still spoken by a small fraction of the people in India.
Also, using the Internet or browsing is not a pleasant experience on the small screens of a mobile
phone. So most of the usage is restricted to chatting on applications such as WhatsApp and
playing games. With more and more utility based apps coming in, Internet data usage is on the
increasing trend. Apps has made the Internet accessing and navigation through various Internet
pages easier and is becoming more useful to the user. It becomes really easy to navigate within
that App for various other options. Now there are apps developed for mobile commerce and
banking usage. A large number of government services have started becoming available on
various apps. The use of apps makes the experience of using the Internet easier for all kinds of
uses as it optimizes the interface for the smaller screen of different mobile phones. However, it is
still difficult to read documents on mobile phones. Therefore, it is unlikely that mobile phones
will completely replace desktops, laptops and tablets. Apps developers are producing apps for
various applications. For example, an App providing cricket scores requires access to this

5
information that lies with news providers such as television channels and newspapers. Further to
provide access to the app the developer needs to have access to the mobile network. Over the
Top (OTT) applications such as Whats App, OLA, Viber and so on do not need permission or a
pact with a telecommunications company. It was necessary earlier for app providers to deal with
telecom operators to collect money from customers through billing but now OTTs run on a
different business model either funded by business or through revenue earned through
advertisements. Due to lack of credit card penetration, the app provider will have to go through a
telecom operator in the event it has to charge customers. So either a mobile operator has to buy
the app or make it available for purchase on its platform. Therefore, app developer finds himself
squeezed between these two - content provider and the network operator and does not get good
returns on his effort.

3.4.Active Role of Government and Regulator

There is a need to examine the role of the government and the various institutional actors in the
fray. The government's prime concern seems to be in the revenue it collects through various
auctions of Radio frequency spectrums. The Ministry of Communications and Information
Technology and its agency the Department of Telecommunications (DOT) have some social
concerns regarding access, which is reflected in schemes such as the National Optical Fiber
Network (NOFN) which is aimed to provide fibre access to all villages through universal service
fund. Various other ministries and government agencies are interested in e-governance or m-
governance but the extent of the involvement of the Ministry of Communications and
Information Technology and the Department of Telecommunications (DOT) is unknown. The
only agency that seems to be interested in the daily travails of the telecommunications industry is
the Telecom Regulatory Authority of India (TRAI). It is because TRAI shares a close
relationship with the industry. Whatever may be the reason, its workings are fairly transparent
and in fact, often provides an insight into the thought process of operators.

For a fairly long time mobile phone operators had a lucrative source of revenue from short
message service (SMS). A typical SMS costs very little to send but the charges were
correspondingly higher, but still relatively very low. Since the volume of SMS sent was very

6
high the operators made a huge amount of money from the SMS service given to Customers.
This source of revenue came under threat from applications such as Viber and Whats App. These
applications affected the SMS service revenue of the telecom operators. The service was free and
the look and feel of the interface was novel and exciting, particularly for the young people. The
applications relied on advertising for revenues and used the infrastructure of the Internet for its
operations. The mobile phone operators have raised their voice because they had invested
heavily in the towers and switches that made these services available, viable but these services
were using the same infrastructure to skim revenues away from them. An alternative was to
provide a slower or degraded connection to these services through technologies such as deep
packet inspection (DPI) which makes it possible to find, identify, classify, reroute or block
packets with specific data or code payloads that conventional packet filtering (which examines
only packet headers) cannot detect. But, that would have gone against net neutrality. In all of
this, none of the institutional actors except the TRAI played any meaningful role.

One area that the ministry of telecommunications has been fairly active in dealing with
electromagnetic field (EMF) radiations from both towers and all types of mobile handsets. The
alleged harmful effects of these radiations have always been a source of some contention to the
people at large. The radiation is a by-product of the strength of the signals that mobile towers and
handsets. The stronger the signal the better the connection and more the number of connections a
tower is able to handle. In a similar way, a stronger signal from a mobile handset means better
reach to the mobile tower. Therefore, a weaker signal means more towers would be required to
serve the same set of connections, which would ultimately increase the costs. Also, the linkage
between higher EMF radiation and health risks is mixed.

Apart from this, the Indian standards have been set at 10% of the existing International
Commission on Non-ionizing Radiation Protection (ICNIRP) standard, making it more stringent
than 90% of the countries, according to the Department of Telecommunication (DOT). The other
source of interest for both the government and the DOT is spectrum. A large part of this interest
seems to lie in the revenues generated from its auctions. This interest could lie at the bottom of
numerous restrictions on sharing and trading of spectrum. For 3G as none of the operators,
except the public operator BSNL/MTNL, could obtain spectrum for all the submarkets (there are

7
22 submarkets called circles in India) they entered into mutual agreements to share their 3G
spectrum with each other in order to have a pan India 3G coverage.

In order to face the challenges

, operators have to face the following challenges:

 Availability of sufficient spectrum

 Technology to enable faster connections and availability by new compression and other
techniques
 Making available more innovative and interesting applications for customer’s usage.
 The government and the regulators (TRAI) must provide the right mix of policy to help
in making all that happen.
 In the whole echo system all operators, phone manufacturers, software / application
developers, infrastructure providers should remain agile and healthy.

4.0.The Changing Face of The Indian Telecom Sector

The Indian telecom sector is one of the most critical segments in India’s growth story –
connecting billions of Indians and nurturing many entrepreneurial dreams. Over the past years,
the Indian telecom market has witnessed overwhelming growth. The increased network
coverage, healthy competition, and cost centric offerings from various providers have served as
the catalyst to the growing demand for telecom services in the country. Today, India stands
strong as one of the world’s fastest growing telecom markets with a user base crossing more than
1.2 billion subscribers with a CAGR of 17.44 percent. India is also the second largest
smartphone market and is expected to have almost 1 billion unique mobile subscribers by 20208.

This significant growth pace and the rapid transformation have largely been possible, thanks to
the innovation-led approach adopted by industry players, a growing demand in the domestic

8
Chatterjee Shivaji, The Changing Face Of The Indian Telecom Sector,

https://www.communicationstoday.co.in/services/the-changing-face-of-the-indian-telecom-sector/

8
sector, and strong support from policy initiatives. There is no doubt that the industry is touching
newer heights with the high network expansion and roll-out, especially in rural and semi-rural
areas. But, as the broadband internet subscriber base continues to surge, the telecom sector needs
to address the challenge of a growing demand for high-speed connectivity among users.

4.1.Rural markets: The next avenue of growth

The Indian telecom sector is poised to witness strong growth in the coming years especially with
a renewed focus on the rural market, a potential market that has largely remained untapped for
years. There are over 62,443 uncovered villages in India; the government plans to connect these
villages with subsidy support from the government’s Universal Service Obligation Fund (thereby
increasing rural teledensity)9. As of February 2018, the rural subscriber base accounted for 43.24
percent of the total subscriber base, thereby fueling growth across the sector. With 70 percent of
the population staying in rural areas, there is robust demand10.

The growing receptiveness to explore possibilities with newer technologies including satellite-
based connectivity is a positive sign but the industry is still far from leveraging its full potential.
There has been a long pending demand for the overhaul of the VSAT industry which is still
ailing from policy and infrastructure challenges.

Reliance Jio, one of the recent players, has sparked a wave of disruption with an aggressive
approach and increased focus on rural and remote regions. The 4G telco is connecting more than
400 LTE sites largely in remote and hilly locations which are beyond the reach of terrestrial
backhaul services through a satellite backhaul-based network11. Beyond expanding networks,
initiatives to connect the rural masses are already visible with service provider tie-ups with
content providers for services related to agriculture, weather, and livelihood. The government of
India has introduced the Digital India program under which all the sectors such as healthcare and
retail will be connected through the internet. The Department of Information Technology intends
to set up over 1 million internet-enabled common service centers across India as per the National

9
Id.
10
Main telecom trends to watch in India in 2018, https://www.telecomlead.com/in-depth/main-telecom-trends-
to-watch-in-2018-in-india-81413
11
Id.

9
e-Governance Plan. Major telecom service providers including Hughes are working with the
government toward fulfilling the connectivity needs and bridging the digital divide.

4.2.Emerging technologies and the future of Indian telecom

With growing demand for data and speed among new age consumers, the thrust has been seen
across the industry. Among the various BWA technologies, the recent developments such as
LTE and emergence of IoT technologies have seen tremendous interest from industry
counterparts. Reliance Jio, Bharti Airtel, and Vodafone have already launched VoLTE services
in select regions with BSNL looking to join the queue. The government’s vision for smart cities
has also provided the much-needed impetus to adoption and investment in newer industrial
technologies including the likes of the Internet of Things (IoT). The Indian government is
planning to develop 100 Smart City projects, where IoT would play a vital role in the
development of those cities.

Conclusion

The telecom sector over the years has seen significant growth and development. The opening up
of the Indian economy led to the deregulation of the sector which intensified the
competition amongst its various players. The effect of competition has been felt in the
declining tariffs, provision of different and innovative tariff plans customized for different
segments, loyalty programs and celebrity endorsements. Further, organizations have been
constantly trying to align their vision and organizational structures with the dynamic and ever
changing business environment. Airtel and Vodafone, which are the leading telecom
operators in the Indian market, serve as perfect examples of organizations managing change
successfully over the years. The industry in the coming years is predicted to be even more
competitive and aggressive with launch of new technology and it will be interesting to see how
the major players adapt themselves and move in sync with the fluctuations in environment.

10
The development of a telecom infrastructure is critical to the growth of the nation and there is no
doubt that India has made significant progress. There is still a lot to achieve and government
support including tax benefits and recognizing telecom infrastructure as an essential
infrastructure will go a long way in making India as one of the fastest, strongest, and most
affordable telecom market.

11