1. Telecommunications need priority as the primary enabler for growth, climate mitigation, and living conditions. This holds for primary infrastructure as well in energy, transportation, water and sanitation, and for secondary infrastructure such as healthcare, education, and financial services.
2. In the last decade, governments in India have taken out more than they have put into telecommunications by way of funding and/or enabling policy formulation.
3. Given the high costs and impracticality of installing ubiquitous fibre, policies for wireless middle- and last-mile telecom connectivity are urgently required.
Shyam Ponappa | February 14, 2023
Setting aside the uproar in financial markets and politics for a moment, consider just some mundane facts on a deficient aspect of infrastructure. The urgent present and future need is to address the missing links in our connectivity chain with appropriate, enabling regulations.
One would think that in this era, governance in India would focus on digitisation and digital connectivity. It is one of our critical infrastructure needs in a set that includes transport and energy. One might even assume from the schemes and announcements about digitisation that the government accords priority to these areas. So what is it that gives one pause?
India touts its resolve in this sector. Yet, in the ground realities of its expenditure on the sector, policies and actual reforms, this resolve is lacking. Moreover, many urgent requirements are actually for appropriate, timely policy responses, not for government funding, as discussed below.
The table (Spending Plan) shows budgeted expenditure (revised figures for 2022) for roads, railways, and communications in the last three years.
The expenditure on roads and railways is twice the amount on communications, for which there is also a lower increment for next year. Of the Rs 1.23 trillion, BSNL gets Rs 52,937 crore, the rest of telecommunications gets Rs 44,642 crore, and postal projects get Rs 25,814 crore.
If emphasis on digitisation and connectivity is really critical, is the budgeted amount disproportionately low? Considering that efficiency and productivity drive growth, climate mitigation, and living conditions, and gain from these enablers regardless of the mix of technology, capital, land, and human resources, digital effectiveness and efficiency need prioritisation as multipliers. It is as though we simply do not recognise that communications is the leading enabler.
What Can Be Done About This?
The way the following instances were dealt with over the last several years show how policy deficiencies may be more purposefully addressed.
The Vodafone Saga
The handling of the Vodafone saga by both the United Progressive Alliance and the National Democratic Alliance exemplifies one type of problem. Briefly, Vodafone was saddled with arbitrarily imposed retrospective taxes in 2007, which the Supreme Court set aside in 2012. Then Finance Minister Pranab Mukherjee piloted legislation whereby retrospective policy changes justified tax claims on offshore stake acquisitions of Indian companies. Vodafone and other operators were also battling licence fees claimed on non-telecom revenues included in “aggregate gross revenues” (AGR) since 2003, with mounting interest dues. In August 2021, the government finally gave in on retrospective taxes on Vodafone (and Cairn Energy) after arbitration awards against it. In September 2021, a telecom relief package offered a four-year moratorium for the beleaguered operators’ debt repayments, while finally excluding non-telecom revenues for licence fee calculations.
The relief was temporary, with interest accruing on all outstanding dues. There was much more that needed to be done to prevent prolonged attrition with high opportunity costs, because of the non-availability of services severely constraining India’s capacity and productivity. Examples include revenue sharing for spectrum as for licence fees, and active network sharing through open access to operators on payment (see https://organizing-india.blogspot.com/2021/10/telecom-reforms-relief-with-hope.html).
Vodafone Idea and India’s users suffered the cost and deprivation of services until the government decided on February 3 to convert Vodafone’s dues of Rs 16,133 crore into government-held equity. Meanwhile, Vodafone Idea was down to under 244 million subscribers by the end of November 2022, having lost 21 million users. Its debt rose because the government dithered with the afterthought that Vodafone Idea should invest more before the government fulfilled its conversion of dues to government-owned equity. Clearly, future policies need to be stable and well-thought-out in the public interest, without whimsical changes or arbitrary conditions.
The irony is that in the UK and Europe, Vodafone competes with Orange, BT, Telefonica, and Deutsche Telekom with state-of-the-art services, and runs Europe’s largest 5G network in 12 countries. In partnership with the Kumar Mangalam Birla group, it is the sole surviving international telecom operator in India.
What if governments had acted quickly to correct anomalies such as retrospective taxes and defined AGR rationally? Imagine what the opportunity gains might have been with three strong operators in a well-regulated market of over a billion.
The Elusive Goal Of Optical Fibre For All
A second instance of inappropriate policies is that of wireless policies and the use of optical fibre. Ratings firm ICRA recently stated that full-scale 5G deployments across India would require expenditure of about Rs 3 trillion for densification, because nearly two-thirds of the towers lack fibre connectivity. Heavy investment appears unlikely given the telcos’ expected debt of Rs 6.3 trillion by March 2023 (see https://www.business-standard.com/article/economy-policy/5g-infra-to-cost-rs-3-trn-in-next-4-5-yrs-amid-elevated-debt-levels-icra-123013001026_1.html).
With the high costs for fibre rights-of-way and the installation difficulties on the ground, it is baffling that our policymakers in the government including the Department of Telecommunications (DoT) have not engaged with the urgent need for enabling wireless policies even for towers, based on successful models in other countries.
The DoT did, in fact, model the enabling wireless regulations for 5 GHz in October 2018 on the FCC template for Wi-Fi (for access and for point-to-point with limited capacity: https://organizing-india.blogspot.com/2018/11/a-great-start-on-wi-fi-reforms.html). However, this was not followed up with regulations for middle-mile, high-capacity wireless for towers and small cells, as is only logical, that is, for 60 GHz V-band and 70-80 GHz E-band for longer distances. Without these, and with pricing for microwave being restrictive here, there are gaps between the user-access-end and the core-network-with-fibre-termination-points. These gaps would be too expensive to fill out entirely with fibre optic cables, as is evident from ICRA’s estimate above. Yet, many officials repeatedly talked about fibre connectivity to all, which after consideration should strike anyone as patently infeasible because of our size, population distribution, and cost-and-revenue structure.
Other critical wireless regulation required now is enabling 6GHz for Wi-Fi, allowing speeds of up to 10 Gbps, and support for local product development and production instead of relying on imports.
Considering how resources are channelled and regulations attended to, the communications sector needs far greater emphasis and action on well-thought-out, timely policy intervention as indicated above to better support our economy and society.
