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Draft Digital Communications Policy attempts to reverse trends with incremental steps

Draft Digital Communications Policy attempts to reverse trends with incremental steps

Draft Digital Communications Policy attempts to reverse trends with incremental steps
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By Mahesh Uppal  Jun 6, 2018 7:33:15 AM IST (Updated)

On May 1, the Department of Telecommunications (DoT) of the Government of India issued its draft of the new National Digital Communications Policy. This note attempts a critique.

On May 1, the Department of Telecommunications (DoT) of the Government of India issued its draft of the new National Digital Communications Policy. This note attempts a critique.

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Focus And Objectives
The draft policy rightly focuses on universal broadband across India. It envisages speed of 50 Mbps. It expects the sector to create four million jobs and contribute an additional 2% to the country’s Gross domestic product (GDP).
It foresees India moving 84 places ahead in International Telecommunications Union’s (ITUs) index that ranks countries based on the status of Information and Communications Technologies (ICTs). It anticipates an over 200-fold increase in Wi-Fi hot spots in India.
It expects these objectives to be met by 2022. Clearly, policy draft seeks to reverse existing trends. It sees millions of new jobs in a sector that shed 90,000 jobs this year. Similarly, it projects investments of $100 billion (or Rs 6.7 trillion) by 2020 at a time the current debt of telecom operators is over Rs 7 trillion and their revenues down 17% this year.
The objectives are ambitious. No country has achieved so much in barely four years. However, lack of precedent alone would be insufficient to dismiss the objectives as un-achievable in sectors like telecom and information technology, where easy scaling and disruption are familiar. Recall, for instance, that India has 100 times more mobile connections than barely 20 years ago and that it now leads the world in mobile data traffic. Objectives are not the problem
Conducive Environment For New Technologies
A key feature of the draft is its focus on creating a conducive environment for new technologies. This is welcome, even urgent. Most Indians still struggle with inadequate broadband access and poor data speeds. India will need to pull all stops to address the challenge effectively. It is therefore counterproductive if players face barriers in testing and deploying new technologies or business models.
Or, if they could not test wireless technologies for lack of relevant spectrum. The policy proposal rightly recognises these concerns and recommends several measures including light touch regulation and ‘delicensing’ of E and V spectrum bands. The policy draft is right to explicitly mention the delicensing of V band in providing high speed (several Gbps) links speedily and cheaply. US and several other jurisdictions have already done so. V band offers other unique advantages including near freedom from interference and interception.
Role Of The Private Sector
Meeting targets for jobs and investments is impossible without substantive expansion of networks of sufficient capacity, access to affordable devices besides services and applications. The task is massive, since barely 30% of Indians use the internet. The expansion of broadband infrastructure and its subsequent usage will undoubtedly require financial as well as human resources. However, with publicly owned players, Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), accounting for less than 10%, of revenues or subscribers, it's inconceivable that policy goals can be met without private investments.
The Business Case For Players
It's not clear how far the policy proposals can improve the business case for players. The document does admittedly, propose lowering of regulatory barriers that hurt growth of telecom services. These barriers include high licence fees and spectrum usage charges. However, there is little in the document to suggest that government levies will have to come down drastically, from the current 30% to have significant impact (and come in line with most of India’s peers). Recall that an inter-ministerial committee investigating the state of the sector’s finances less than a year ago, suggested no significant concessions beyond extension of deadlines for payment of spectrum dues to the government.
Need For A Shift In Government Position On Levies
The policy document does not mention a change in government’s focus on levies and taxes, without which any revival of the sector would be difficult. There is no text to suggest that the government is ready to accept the inevitable short-term dent in its revenues from the sector. It would have helped if it said explicitly that it now prioritizes economic impact of digital technologies over its collections from the sector. In the absence of clearer statement, one can expect only token concessions.
The policy underplays the problems posed by the current licensing regime. The stipulation in the Indian Telegraph Act, 1885 that mandates licences to operate telecom services is a formidable barrier to innovation and growth. Obtaining licenses is neither straightforward, not cheap. Telecom operators and Internet Service Providers (ISPs) often pay significant sums – a nationwide Unified Licence costs ₹ 150 million and spectrum, several billion rupees. They provide bank and performance guarantees and must meet a long list of obligations including sharing revenue with government, rolling out networks in a specified time-period, contributions to USOF etc. They often justify comparable burdens on commercial users of delicensed spectrum or providers of Wi-Fi hotspots. The new proposals must explicitly remove these burdens to facilitate a move towards a more liberal and innovation friendly regime implied by the policy.
Strategies To Achieve Objectives
The various parts of the document admittedly, include sections on ‘strategies’ to achieve the objectives. However, these strategies need more detail. For instance, one of the “strategies” is to launch a National Broadband Mission or the ‘Rashtriya Broadband Abhiyan’. The Mission seeks to set up the following with resources mobilized from the Universal Service Obligation Fund (USOF) and Public Private Partnership (PPP):
BharatNet: Provides 1 Gbps to Gram Panchayats upgradeable to 10 Gbps.
GramNet: Connecting all key rural development institutions with 10 Mbps upgradeable to 100 Mbps.
NagarNet: Establishing 1 million public Wi-Fi hot spots in urban areas.
JanWiFi: Establishing 2 million Wi-Fi hot spots in rural areas.
Scoping The Resources And Institutional Capacity
The above proposal for Rashtriya Broadband Abhiyan raises several pertinent questions. What is the estimated investment? Have lessons of the much delayed BharatNet been factored in? How far can USOF resources support the rollout? How realistic is the reliance on PPP? Has PPP in India ever delivered projects of comparable size and complexity? Similarly, which specific proposals in the document can increase the number of public Wi-Fi hot spots -a mere 3,20,00 across India in 2016- to the millions now projected? Will the private sector have sufficient commercial incentives to expand Wi-Fi hotspots? Is there any analysis of the potential market size or business case? Or, of the recent plans/attempts to extend Wi-Fi coverage such as those of the Aam Admi Party in Delhi, where a presumably government-promoted and funded programme to provide citywide Wi-Fi coverage has failed to take off? Answers to these questions are critical to the success of the new policy.
Structure Of The Draft Document
A problem with the policy document is that it lacks a 'status report' or a 'problem statement'. It does not offer an estimate of the size and scale of the problem which would help to analyse whether the suggested policy approach is tenable. Compare this, with the two significant telecom policy statements of 1994 and 1999.
In the former, a rationale was provided for ending government monopoly in telecom services and in the latter case, to waive licence fees in favour of sharing revenue with government. Recall also that National Telecom Policy of 2012 had flaws like the current draft and is, unsurprisingly, largely forgotten and rarely invoked.
Need For A Clear Policy Statement
What is required is a policy to put India’s telecom sector back on a path of growth. India does not need a complex telecom policy. Competitive telecom markets have delivered massive consumer welfare in India and across the world. Regulators in north America, Europe, Australia allow largely unfettered deployment of technologies, services, apps, business models etc.
While they require players to buy scarce natural resources like radio frequency spectrum at market prices, they impose no significant levies or revenue-sharing. These 'international best practices' have gone a long way to encouraging investment and innovation in most successful markets. They could work the same for India. However, they are inconsistent with the current licensing regime with its many burdens mentioned above.
Dealing With Legacy Rights Of Existing Players
A change in the licensing regime will inevitably affect these rights and pose issues of level playing field between these players and new players who would incur no such costs. As mentioned above, incumbent players have paid large sums to acquire their rights. Perhaps a one-time ‘settlement’ will be necessary. The Telecom Regulatory Authority of India (TRAI) is the right body to devise such a settlement after an open process of consultation. An appropriate reference to the TRAI can start this process.
Clearly, it is difficult to reverse existing trends with incremental steps. As mentioned above, the policy seeks to reverse existing trends. Doubtless, reversing existing trends will need drastic — not incremental steps. The need of the hour then is a complete overhaul of the existing licensing regime along with the costs that imposes on the players. Anything less than that risks tying us in knots and India missing out on the great potential of digital technologies.
Mahesh Uppal is the Director of Com First (India) Private Ltd, a niche consulting company that specialises in policy and regulation aspects of telecommunications and internet.
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