Guide to NTP 2018

Where are we headed with National Telecom Policy (NTP) 2018? What would be the key takeaways in the policy? With lots of talks and speculations going on about the new policy, Voice&Data digs into past NTPs to understand what went wrong there and while moving forward, what learnings can be taken forward

The decibels are high around National Telecom Policy (NTP) 2018, unlike NTP 94, NTP 99 and NTP 2012, NTP 2018 has to pave the way for newer technologies and the fourth industrial revolution.  

Over the past few years, the Indian telecommunications industry has shown stupendous growth from 600 mn wireless connections at the end of FY 2009-10 to 1.2 billion connections today.

Some of the remarkable features remain -- India has the world’s second-largest mobile phone user base, India has overtaken the US as the world’s second largest smartphone market, the Indian market has witnessed one of the lowest tariffs of the world.

One of the key features of the Indian telecom sector is that it has maintained some of the lowest tariffs in the world, which has helped in curtailing inflation to some extent.

This has also helped the industry to cross the billion connections mark and become the second largest telecom market in the world in such a short time, providing a platform for a vibrant e-commerce, technology and digital services ecosystem.

Indian Telecom-At a Glance

In addition, about INR 9,27,000 crores have been invested so far by telecom service providers (TSPs) in order to create a strong telecom infrastructure, which is the second largest private sector investment in infrastructure amongst all the sectors in the country. To support the orderly growth of the telecom sector, TSPs have invested around INR 3,27,000 crores in spectrum auctions alone since 2010.

According to industry body Cellular Association of India (COAI), the industry has made consistent and significant efforts to optimise networks, with more than 3.9 Lakh sites being installed in the last 12 months for 3G and 4G services across the country.

India currently has more than 6,70,000 4G Base Transceiver Stations (BTSs), whereas over 3,72,000 BTSs are for 3G.  

As of November 30th, 2017, there has been an addition of about 3.90 lakh 3G and 4G BTSs in the last 12 months to address the problem of call drops. Currently, the industry is heading towards a new phase with consolidation taking place in the sector.

In the year 2016, new entrant Reliance Jio (RJio) disrupted the industry by offering unmatchable freebies that included ultra-low data prices, free calls for consumers. Post RJio’s entry, the hyper-competition pushed the industry to a consolidation phase, which was never witnessed before.

The rising competition compelled the incumbents to come out of complacency and they expanded their 4G services and started offering services at extremely competitive prices - across the country.

The operators also expanded their services beyond voice and data, creating a huge bonanza for the consumers.

The significant investments into the sector has contributed to the economy, in addition, has also facilitated progress in bridging the digital divide in the country. The telecom services have become essential for existence as it is not only connecting people but simultaneously improving their lives by facilitating advances in medicine, transport, education and lifestyle.

The sector today is also witnessing an explosive growth of mobile payments, leading to many opting for mobile wallets and making digital financial transactions for the first time. The explosive growth even led to the Reserve Bank of India (RBI) looking into interoperability of mobile wallets and other ways to drive the uptake of digital services.

Also, the Indian Government is trying to make digital inclusion a possibility as soon as possible with programs such as Digital India, Aadhaar, Bharat Net and the JAM trinity.

The UMANG App, launched by Prime Minister Narendra Modi at the GCCS conference (Global Conference on CyberSpace), aims to bring over 162 government services on a single mobile app, with a larger goal to make the Government accessible on the mobile phone of citizens. In a nutshell, all these indicate that how mobile phones have become indispensable and creating a robust policy framework around them is the need of the hour.

The above success stories would not have been possible without liberalization in Indian telecom. The Indian telecom services have gone through innumerable transformations, with major policy decisions that had taken place with NTP-94 and NTP-99.

Past NTPs

The Indian telecom industry was opened for private participation in 1992 and a clearer picture was drawn when the government announced its motive of liberalizing the telecom sector with the National Telecom Policy resolution of May 13, which was followed by New Telecom Policy 99, which produced another set of guidelines clearly recognizing the need for strengthening the regulatory regime.

Providing a boost to the investment climate, NTP-99 also pushed the need of restructuring the departmental of telecom services to that of a public service corporation.

The telecommunication industry, which is one of the prime support services needed for rapid growth and modernization of various sectors of the economy, has undergone a process of change over the years through significant policy reforms; and now when there are counted days left for NTP 2018, we should look back and try to learn from our past mistakes in shaping up NTP 2018.

Looking back at NTP 2012, the best part was it tried to simplify licenses through unified licensing. However, the way technology and telecom have evolved, it is not a simple value chain anymore and therefore, it could have curated the policy in a better way. Telecom is an amalgamation of different segments, where someone brings the equipment, someone puts the network and someone delivers the service. Today, we have tower companies, within them, we have small cell companies. Earlier it was just voice and data. Now it is far more complex. And therefore, it should have worked better, for example, it should have allowed licenses as per the services being offered.

“One would have required unified licensing, if he wanted to be in so many categories of services. However if someone just want to be in one or two services space, he can just take another license and start his business,” says Amresh Nandan, Research Vice President, CSP Research, Gartner.

While framing NTP 2012, one of the key demands of the industry was it should not only focus on telecom but should focus on ICT so that both departments (IT & Communcations) from the same Ministry (Ministry of Communications & IT) can work in tandem as one without the other cannot help India to move in the fast track. And we need to think in a disruptive way if we plan to achieve the larger goals.

Besides, the industry has always taken a beating due to spectrum & licensing, be it moving from limited mobility to full mobility or providing new licenses for 2G services.

The industry also demanded that high priority should be given to consolidation, by easing mergers and acquisitions processes.  In case of merger, the merged entity should not have a market share of more than 30% in the merged circle. This would restrict two large existing operators from merger and would prohibit monopolistic trade practices. Prior approval of the DoT should be taken which should base on the market share, market power and AGR of the intending operators to merge.

While some demands were taken care of, some were given a miss while framing NTP 2012. NTP 2012 was released with the vision of transforming the country into an empowered and inclusive knowledge-based society, using telecommunication services as the platform. There were series of objective and strategies laid out in the NTP 2012 to leverage telecom infrastructure in rural and urban areas to participate in the internet and web economy for an inclusive development.

Much of the National Telecom Policy 2012, pivoted on the proposed one-time spectrum fee, delinking of spectrum from license, spectrum sharing, trading, re-farming and pooling and license renewal fee.

Simplifying licensing and regulations, incentivizing research and development, promoting skill development creating a robust framework for telecom network security and data privacy are were of the areas which the NTP2012 did not fully address.

Spectrum remains the key failure. The approach to setting the reserve price (RP) in spectrum auctions is clearly faulty it leads mostly to spectrum sale at only the RP or marginally above it. There is no discovery of the true market price. This is responsible for the inordinately high spectrum prices and the tremendous debt burden of the sector.

“Apart from correcting the setting of spectrum RP, the NTP should have set out the clear roadmap for meeting the set targets of 300 MHz and 700 MHz by 2017 and 2020 respectively. The failure to address the spectrum issues not only adversely affected the industry financials but also impacted the Quality of Service received by the customer,” says TV Ramachandran, President, Broadband India Forum.

NTP 2012 also erred in not addressing the other serious problems of the sector such as duties and levies as compared to other comparable economies/regimes, he adds.

“The third major shortcoming of the 2012 policy was that although by 2010 the dawn of the Data Age was amply visible, the policy continued to look at the sector through the deficient looking-glass of conventional telecom and not adopt the required progressive vision of a Digital Communications Policy,” Ramachandran adds.

Bharatnet- A Big Miss

Although NTP 2012 called for improving rural penetration and improving the telecom infrastructure, through Bharatnet, minuscule development was seen in these areas. It promised to improve rural teledensity from 39 to 70 by 2017 while 100 by 2020. The teledensity still hovers at 56 in 2018. The policy didn’t lay down a specific roadmap as to how this will be achieved in a time-bound and orderly manner, says Hemant Joshi, Partner, Deloitte India.

Two important objectives of NTP-2012 were to provide high speed and high quality broadband access to all village panchayats through a combination of technologies by the year 2014 and progressively to all villages and habitations by 2020, and to provide affordable and reliable broadband-on-demand by the year 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at a minimum of 2 Mbps download speed.  

However, the BharatNet project (connecting the GPs) has now started taking shape as late as 2016-17 in comparison to the target year of 2014. Further, the adequate broadband coverage with the desired speed is yet to be achieved especially in rural areas.

“As per the Right to Broadband policy, the NTP 2012 promised to provide high-speed broadband services to all village panchayats by 2014 which is yet to be fulfilled after several policy changes and budget over run,” according to Joshi.

“In my opinion, 2012 was the perfect time to think of telecom infrastructure as one of the most important element from growth across society and business. That should have been the thought process in 2012. One of the first things that should have been done at that point in time, was to put the policy framework for better infrastructure across the country – rationalizing investments across all parties, public and private,” adds Nandan.

“There are areas where there is surplus capacity through fiber networks, and there are areas where there is lack of ample infra. Industry leaders started thinking of digital transformation many years ago – around 2012. People got the sense that things are going to converge. Ideally, policymakers should have looked at telecom beyond the purpose of connectivity in 2012 itself,” he added.

According to industry experts, connectivity is a basic minimum need. Transformation is required for going beyond connectivity i.e. collaboration, transaction and intelligence. These things also require adequate policy framework to address privacy issues, security issues, protection of digital identity etc. These could have been dealt in a much better manner.

Also, even though the NTP 2012 stated that it looks to make India a ‘global manufacturing hub’ for telecommunications hardware, in order to ensure that the prices of devices come down in India, the policy failed to define how it is going to achieve that, and by when.

NTP 2012 promised to create a complete value chain for domestic production of telecommunication equipment to meet Indian telecom sector demand to the extent of 60% and 80% by 2017 and 2020 respectively. Still the domestic manufacturing is poor and 90% of the telecom equipment is being imported.

The NTP-2012’s stated vision was to provide secure, reliable, affordable and high quality converged telecommunication services anytime, anywhere for an accelerated inclusive socio-economic development. Yet it didn’t define a framework as to how that is to be achieved.

By enabling policies, automation of processes in the government interfaces and analytics, India can become an immensely business friendly country and improve its own rankings aligned with Prime Minister Narendra Modi’s vision.

Expectations from NTP 2018

It is more than just telecom (network) and IT. It is about the convergence of IT and OT – across the industry. OT is operational technology across telecom, manufacturing, healthcare etc.

“While we talk about digital transformation, digital governance, digital services, so on and so forth, all of these depend on telecom infrastructure and its quality. However, we seem to reduce the concepts like IoT and digital services to mobile apps and services. That is not enabling transformation. Yes, we need an app, but a lot more is needed in the background,” elaborates Nandan.

And therefore, the key focus of NTP 2018 should be enabling newer technologies. At the outset, the backend or the infrastructure needs to be robust for introducing new technologies.

The policy must focus on improving and enhancing telecom and broadband penetration in the country. NTP 2018 should focus on enhancing broadband penetration in the country to 70% by 2020 from the present level of 23%.

It should focus on improving the ranking of India in comparison to other countries in terms of Broadband Penetration, ICT Development, and Network Readiness etc.

“Increase in penetration and affordability can come from simplifying existing licensing and regulations on the lines of harmonized and equal policies for the competing technologies,” explains Rajan Mathews, Director General, COAI.

He also added that the new policy should encourage investments and ensure financial stability of the sector. Several current levies and taxes need to be rationalized and multiple audits must be done away with if we want India to leapfrog into the next level of socio-economic growth and improve our ease of doing business rankings.

The sector should not be treated as a ‘Cash Cow’ and the levies that add to the Government revenue should be rationalised. Almost 30% of revenues from the sector go to the Government exchequer. Reduction and rationalisation is the only way to relieve the sector from present financial burdens. However, for that to really happen, more tax cuts, lowering of license fees and favourable reforms are absolute necessities, according to Mahesh Uppal, Director, ComFirst India.

More so, as the sector is reeling under financial stress for a long time now, operators are complaining about the fact that around 30 paise of every rupee earned by telcos is paid as fees and taxes to the government, and this alone is one of the key reasons for the industry’s INR 4.6 lakh crore debt, against steeply declining revenues.

Besides, IT is getting into technologies of various industries and that convergence has to be enabled methodically. It is not just about technology. Policies also influence such things and that is critical for digital transformation.

In NTP 2012, there were certain loopholes about spectrum licensing, etc. and licensing seems to be the biggest problems in India. When it comes to NTP-2018, we all expect that it would be sans draconian rules, proving more leeway to the industry to grow with the rest of the world.