Ringing in change

The Telecom Commission swings from revenue maximisation to universal coverage in poll season

The Telecom Commission’s decision on net neutrality had made headlines recently. At the same meeting, another decision was taken but not talked about. Once implemented, this proposal could have a significant impact on the telecom sector reeling under debt. Perhaps much more than the internationally-hyped net neutrality — that has almost split the world into good and evil — would have. 

The Commission wants the Draft National Digital Communications Policy 2018 to be modified before it goes to the Union Cabinet. The modifications directed by the Commission should please the industry, which has been lobbying for a reduction in taxes and levies on telcos. 

The first modification, once executed, would see inclusion of a provision in the policy document for specific reduction in levies for the telecom sector. The second modification suggested is even more interesting — universal coverage, rather than maximisation of revenue, should be part of the policy. For that, the policy document must include specific cuts in spectrum usage charges. 

With this, the Commission seems to have made an about turn over its stand. It had earlier argued that deep discounts offered by telcos such as Reliance Jio had hit the government revenues. For those who joined in late, telcos share a percentage of their revenues with the government in the form of various charges and levies. 

So far, while the Commission seemed to be in favour of revenue maximisation from the telecom sector, the Telecom Regulatory Authority of India (Trai) batted for another goal altogether — universal coverage. It was in 2017 that the battle played out in the open with the Department of Telecom and Trai clashing on the basic principle of how the government should view telcos’ revenues and its own subsequent earnings from the sector. “Affordable services and consumer interest are some of the key elements of the National Telecom Policy (NTP) 2012, which surprisingly appear to have been overlooked and maximisation of government revenue, which is not one of the objectives of NTP, has been given the centre stage by the Commission in its letter dated February 23, 2017,” Trai had said in its letter to the Commission in March 2017. It was responding to the Commission’s reference to the regulator that it should look into Jio’s tariff structure and the resulting price war in the industry hitting government revenue. 

More than a year later and after telcos’ representations to various ministries including the Prime Minister’s Office, the Commission has come around to backing Trai on the narrative of universal coverage versus revenue maximisation.

The timing is interesting too. The Commission’s diktat is coming at a time when the government has entered the poll season. While it was a non-priority item for the government till a few months ago, leaving things to the industry to handle and spring back, things have changed now. And, the sop, which was sought by the industry but not quite granted, may be in the works finally.

All this is happening when the country’s telecom sector is headed to a three-player scenario, from more than 10 not too long ago. Many telcos have merged, others have shut shop and further consolidation is not unlikely. The Commission’s push for universal coverage rather than revenue maximisation implies that there could be another round of no-holds-barred tariff cut by Jio and others. If the government does reduce the taxes and levies for the industry, some telcos would certainly take the lead in cutting consumer tariffs. Others would be forced to follow. All this will translate into goodies for consumers ahead of some crucial state elections and then the 2019 Lok Sabha polls. As for universal coverage, the country is still staring at a stark rural-urban divide. The earlier National Telecom Policy (2012) had aimed to take rural teledensity to 70 per cent by 2017 and to 100 per cent by 2020. Although wireless broadband has grown significantly, the targets have not been met. At the end of 2017, rural teledensity was just 56.7 per cent, according to Trai figures.

The story is not very different for broadband connections. Most of rural India remains a desert in data connectivity. No wonder then that the Commission in its July 11 meeting also decided to modify the Draft National Digital Communication Policy 2018 in a way that “universal broadband coverage” is replaced with “universal broadband connectivity”. The government is looking for real numbers to showcase.

Meanwhile, the industry, has been pitching for a substantial reduction in the total levy it pays to the government, currently in the range of 29 to 32 per cent, compared to China’s 11 per cent and Malaysia’s 12.5 per cent, saying that a cut in licence fee and spectrum charges would push up mobile phone and broadband penetration by several notches.