A mind-blowing roller-coaster

As our dependence on telecom infrastructure grows exponentially, security and reliability of this infrastructure assumes ever greater importance.

By R Chandrashekhar

For the millennial and Gen Z of today, it may be hard to imagine that the first mobile call in India was made just 25 years ago on 31 July 1995. The mobile device is now an integral part of our social and economic fabric. One cannot imagine life without it. The advent of the COVID crisis has made us much more aware of this reality. COVID has been on the ascendant in India since March 2020 and shows no signs of retreating anytime soon.

The monitoring of exposure to COVID infection risk is now done via the Aarogya Setu app on the mobile. Healthcare regulations have been relaxed to allow and even encourage telehealth services. Wadhwani Institute for Artificial Intelligence in India is working on an AI-based mobile application for preliminary screening of patients for COVID, based on cough sounds. Visits to hospitals for treatment with or without COVID have become the last resort with remote health services being the preferred and less risky mode for both patients and medical personnel alike. Schools and colleges have all resorted to virtual classrooms to the extent feasible. Organizations, governments, and courts are conducting their business almost entirely in the virtual mode.

No roller coaster ride can match the dizzying pace, the highs, the lows, the twists and turns of mobile telecom services sector in India.

Nothing could have underlined the criticality and urgency of ensuring countrywide availability of mobile broadband services as effectively and emphatically as the present crisis has done. Mobile connectivity was already important before COVID-19 struck. It has now become critical, not only to the economy and society but to healthcare, education, and literally life itself. Mobile telephony is a critical national infrastructure more than ever before. Protecting, expanding, and modernizing it is unquestionably a major national priority.

But how prepared are we for this mobile-telephony dependent future irrespective of the trajectory of the COVID pandemic? Before coming to that question, on this occasion of the silver jubilee of the first mobile call in India, it is fascinating to reflect on how we reached here before visualizing the exciting future that lay ahead.

No roller coaster ride can match the dizzying pace, the highs, the lows, the twists and turns of the mobile telecom services sector in India. The advent of mobile telephony and the private sector into telecom in the country set off a chain of events, which made history and has already re-scripted the future of India.

The start of the journey, like any roller coaster ride, was beguilingly slow. Against the backdrop of economic liberalization initiated by the Narasimha Rao government, NTP 1994 introduced mobile telephony and opened the gates to the private sector with two operators in each circle. But NTP 1994 belied expectations and did not exactly set the Ganga on fire. Services were expensive and handsets were unaffordable except to the rich. Consequently, uptake was low, and penetration minimal and largely confined to urban areas. Worse, the operators who succeeded in obtaining licenses through a fiercely competitive bid process discovered that they had grossly misread the market, bid way too high, and were afflicted by the winners’ curse. They mounted pressure on the government to revise the contracts. These pleas were backed by International Financial Institutions like the WB and IFC. Soon, the Government too realized that the policy had become a constraint rather than an enabler and began looking for new solutions.

After protracted and tortuous reassessment, the Vajpayee Government came up with NTP 1999, which brought in revenue share instead of upfront payments and introduced 2 more mobile operators in each circle, including the state-owned BSNL. The momentum started picking up thereafter as the operators began to understand the market better and were able to tailor their offerings, accordingly, using flexibility that the revenue share regime gave them. Still, growth was not quite meteoric. The Unified Access Services License (UASL) was introduced in 2003-04, which enabled operators to offer landline, mobile, and a range of other services through a single license.

The spread of mobile telephony in the country gathered greater momentum thereafter and by 2008, the country had nearly 300 million mobile subscribers. Then we saw the dramatic and hugely controversial expansion of 2008 when 122 new licenses were issued across 22 circles. The number of operators in each circle ballooned to an unimaginable 12-16. Cut-throat competition ensued. Telecom rates, which were already amongst the lowest in the world dropped to one-third of the earlier prevailing levels and became affordable to even low-income earners, including rural areas.

During this phase, the coverage grew by leaps and bounds and in just 3-4 years, trebled to 900 million. Meanwhile, the political, economic and business ramifications of the unbridled expansion were playing out. Relentless legislative (including PAC and JPC), media, and judicial scrutiny culminated in two epochal events. The first was the CAG report of 2010 which identified losses to the exchequer caused by the issuance of 122 licenses with bundled spectrum at administered prices. The loss was estimated at a mind-boggling Rs 1.76 lakh crore. Then there was the Supreme Court judgment of 2012, which canceled the entire set of 122 licenses issued in 2008.

Steering the sector during those turbulent years was incredibly challenging. A new policy was needed so that changes could be driven by an elevating vision rather than as mere remedial therapy. A triad of policies covering telecom, IT, and electronics was unveiled in 2012 offering an integrated view of the emerging digital future and what was needed to enable it. The mobile device was positioned as an instrument of mass empowerment providing access to services, employment, entertainment, and much more. The integration of mobile telephony with financial services and the banking sector was another path-breaking leap that has its roots in that period.

The seemingly impossible task of steering the sector to calmer waters was facilitated by presenting an enticing future and a road map to get there. At this distance of time, it is hard to imagine the challenge then of navigating a path to a new and exciting future amidst the looming threats of international arbitration, media warfare, judicial involvement, and political churn. Aadhaar created a digital identity for every resident. Direct Benefit Transfer brought together governance, banking, telecom, and IT on a mega scale. UPI enabled the integration of digital financial services across the entire financial sector. These developments enabled India to become a creator rather than a follower of global best practices. More importantly, they lifted telecom from being merely a convenient mode of communication to become the bloodstream of modern India.

The en bloc cancellation of the 122 licenses by the Supreme Court in 2012 triggered an industry-wide consolidation across the sector. Many of the new companies, which were focused more on subscribers and valuations than sound business plans, folded and merged into larger companies. However, the competitive environment still did not permit tariffs to be raised or companies to achieve healthy balance sheets. More importantly, from a subscriber perspective, investment in infrastructure could not keep pace with the growth of subscribers and usage, and quality of service dropped. At the same time, a heightened awareness of the health hazards posed by proximity to telecom towers made it difficult for telcos to find sites for installation of base stations. All these developments led to a decline in service quality, notwithstanding the fact that the number of subscribers had plateaued, having reached near saturation levels. Policy consolidation accompanied industry consolidation during this period. Policies allowing spectrum sharing and trading cleared the decks for business consolidation and more efficient use of spectrum. Unified License (UL) replaced UASL and allowed operators to offer nearly all services through a single, integrated, and nominally priced license. Bundled spectrum was no longer a part of the license and so, much of the exclusivity and contentiousness relating to licensing was removed.

Despite industry consolidation and policy enablement, mobile operators were unable to find a path to financial health. The entry of Jio added a whole new dimension to the industry dynamic. Unburdened by legacy investments in 2G and 3G, a direct entry with 4G using newer, more cost-effective LTE technologies and equipment and bolstered by substantial investments in content, Jio disrupted the market, made the huge variation between voice and data pricing untenable and overall added to the business pressure that incumbents were already under. The consumer benefitted, even though the extension of coverage to rural areas and augmentation of infrastructure in urban areas still lagged. The coverage problem was compounded by the failure of USOF to bring the same speed into the expansion of coverage into uneconomic areas due to budgetary constraints, process bottlenecks, and inability to enforce contracts.

The Narendra Modi government’s visionary Digital India programme and the huge thrust on digital services, especially DBT and digital financial services riding on the JAM trinity of Jan Dhan Bank Accounts, Aadhaar and the Mobile, combined with rising rural demand for audio and video content have already made India the world’s highest per capita data consumer. India is also one of the highest-ranked in terms of the percentage of mobile Internet users with rapidly rising smartphone usage. The National Digital Communications Policy (NDCP) of 2018 lays the foundation and sets the direction for the next phase of industry growth. A key sentence in the Policy has not attracted as much attention as I thought it would. The Policy says: “Accordingly, this policy aims for Universal Coverage rather than revenue maximization.” Universal coverage logically subsumes affordability. Past policies had always prioritized universal coverage/affordability on the one hand and revenue maximization on the other, without indicating which was the overriding goal. This deliberate ambiguity lies at the heart of many of the ills of the past.

The final Supreme Court judgment on AGR pronounced recently has settled an issue pending for about 15 years. However, it has led to a new reality with one of the three surviving private operators teetering on the brink of collapse. This poses serious issues regarding the resultant competitive landscape in the sector that will need to be confronted head-on by the government. Political courage is needed to nurture the sector back to health with a well-thought-out intervention, as was done by the Vajpayee Government in 1999. Nothing less can achieve the dreams of NDCP and Digital India.

The future is an era of connected, intelligent devices. Businesses, financial services, governments and infrastructure sectors like power, railways, and airports will all be driven through and by such devices. Education, agriculture, healthcare will be heavily dependent on high-speed connectivity and connected devices. A vibrant telecom sector is a foundation on which the entire society, economy, and governance will increasingly rest. The current difficult phase through which the older surviving telecom service providers are passing through must be dealt with understanding and courage to ensure continued vigorous competition amongst financially viable TSPs. Massive investments needed to create ubiquitous broadband connectivity can only flow in if the sector remains a viable investment option. Competition is vital to ensure competitive pricing, universal coverage, and protection of consumer interest. Unfortunately, at the present time, especially after the recent Supreme Court ruling in the AGR case, all of these are not reasonably assured and will need focused attention of Government and bold remedial action.

Massive investments needed to create ubiquitous broadband connectivity can only flow in if the sector remains a viable investment option.

As our dependence on telecom infrastructure grows exponentially, security, and reliability of this infrastructure assumes ever greater importance. The recent border confrontation with China has brought this issue at the centre stage. Sourcing of trustworthy and reliable core and even peripheral network components becomes especially important from a national security point of view. Raising domestic capability in telecom R&D, design, manufacturing, testing, and software by building strategic partnerships initially and progressively increasing domestic capability through win-win partnerships are critical. A carefully thought-through strategy and road map are a sine qua non for success. Inadequate groundwork before increasing local sourcing via carefully calibrated steps runs the risk of encouraging non-conformity to global standards, higher pricing due to lack of global volumes (leading to higher cost of service) or lower security and reliability apart from avoidable debate and litigation on what constitutes indigenous technology/products. This is not merely a technology battle. It is a techno-commercial battle with strong geopolitical overtones. Only when we recognize, allow for and manage all these elements simultaneously, can we find the right path.

The advent of mobile telephony and the private sector into telecom set off a chain of events which made history and re-scripted the future of India.

These challenges can and must be overcome. Let us remind ourselves that the telecom sector has made us proud. It delivered the fastest growth ever in human history and has brought us to the doorstep of universal coverage. It has given us the lowest rates for usage anywhere in the world, despite there being no new underlying technological innovation – purely by business innovation. Let us take pride in all these achievements and savor those successes while dealing with some of the aberrations of the past and more importantly, laying the foundation for an even more exciting future that awaits us.

There is a tantalizingly attractive digital future beckoning us. We have all the ingredients to achieve the trillion-dollar digital economy by 2024: a vibrant IT sector with demonstrated world-dominating (not just world-class!) capability, a remarkably innovative startup eco-system that is growing at an explosive pace, the highest per capita digital consumption in the world, near-universal mobile coverage with a rapidly rising percentage of smartphones and a host of intractable economic and social problems that are amenable to breakthrough disruptive solutions using new technologies like AI, big data, and IoT. But to realize the dream, we need to ensure regulatory and policy interventions in telecom based on a single-minded pursuit of that lofty vision while keeping in mind the lessons of the past. That is the challenge of the coming decade.

The author R Chandrashekhar is Chairman, Centre for The Digital Future, former President of NASSCOM and Secretary of IT & DoT, Government of India

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