Telecom in India–propelling digital growth

It is time for the Indian telecom sector—second largest in the world in terms of subscriber base—to get policies that are aligned to global trends

Updated: Dec 3, 2021 05:53:50 PM UTC
India’s telecom journey has moved paces away from the first telegraph communication set up in Kolkata and is on a dizzying trajectory towards digitalisation. Image: Shutterstock

The telecom industry globally is a critical economic multiplier that cuts across all industries and is the base of all new-age communications and connectivity. The Indian telecom sector, by far, is the world’s second-largest telecommunications market with a subscriber base of 1.16 billion. In 2019, India also surpassed the US to become the second-largest market in terms of the number of app downloads.

During the Covid-19 lockdown, the telecom industry in India enabled about 35 percent of the GDP, while directly contributing about 6 percent. The importance of having a strong telecom network during this lockdown has also been acknowledged by the government in its guidelines issued during the pandemic. The government is now knee-deep in releasing fresh reforms related to the sector, such that robust operators are enabled that will chart the international market while also connecting the remotest parts of our country.

But some of our clients and overseas colleagues often have a question – “Why are there DoT restrictions on Indian telecom players for voice and data connectivity, whereas we don’t hear of other developed nations in the world having any of these controls?’. The Indian government has worked on liberalising certain policies in the past few years but has been protective of the telecom sector for reasons of national security.

However, the telecom industry has also borne the consequences of disruptive policy challenges within the country, retrospective taxation, restrictions on types of equipment, besides suffering from huge debts and expenses on telecom licensing and spectrum buying. Given the rapid pace of technological developments and their effect on the economy, the telecom sector, more than any other sector, needs to have policies that facilitate growth and are in coherence with global trends.

The Covid-19 outbreak and the resultant lockdown came at a time when the sector was already grappling with the issue of payment of Adjusted Gross Revenue (AGR). The Supreme Court had recently rejected the self-assessments of AGR dues undertaken by a few telcos, and had refused to take up the Centre’s submission to allow telecom companies an extended period of 20 years to pay the AGR dues.

Re-calibrating Indian telecom

But changes are starting to happen. Under the Digital India campaign, the government is focusing on making various platforms digitally available. This would accelerate the adoption of new technologies and the telecom sector infrastructure, on which all disruptive technologies sit. For example, the DoT categorically took up the task to define the term OSP (Other Service Providers) in the policies, to clarify on necessary guidelines to be followed by telcos to be compliant. Key sectors, such as BPM, KPO, Domestic & International Call Centers, and more, are now covered under the 'Other Service Provider' (OSP) category, easing the burden of compliance.

Industry body, the National Association of Software and Service Companies (NASSCOM), has been instrumental in bringing this change in the government’s perspective towards the telecom industry. During the pandemic, it played a vital role in supporting the industry, while front-ending discussions with the government on impacting reforms. As a result, in November, last year, the DoT revisited the policy guidelines to eliminate impediments and support the industry in doing business. These sweeping changes include:

(a) Removing bank guarantee requirement of Rs 1 crore.

(b) Logical sharing of the enterprise telephone system, or PBX, for domestic and  international business.

(c) Permitted consolidation of Internet links.

These changes helped in cost optimisation and better usage across the IT infrastructure. Other sets of relaxations include elimination of paperwork for financials and signatories, no registration required for OSP centers, sharing of the PBX within group companies and unrelated OSP companies, allowing hosting PBX in third party data centers and foreign locations, and enabling work from anywhere. These changes helped in optimising the process, saved time and effort, and improved the ease of doing business.

Telecom Milestones

  • The evolution of telecom in India dates to 1850s, when the first “telegraph” was setup in Calcutta (today known as Kolkata).
  • In 1882, telephone exchanges in Mumbai and Chennai were commenced. The exchange in Kolkata was named the "Central Exchange", with 93 subscribers to start with.
  • Liberalisation of Indian telecommunication industry started in 1981. Centre for Development of Telematics (C-DOT) was setup which manufactured electronic telephone exchanges in India.
  • During the 90s, with the growing demand for telephones, landline telecom devices were allocated to households. During the same period, the Indian government also opened up the telecom sector for private investment as a part of LPG (Liberalisation, Privatisation, Globalisation) policies.
  • In 1994, the government introduced the National Telecommunications policy (NTP) that brought changes in the areas of ownership, service and regulation of infrastructure, with the vision to expand telecom facilities to all the villages in India.
  • Post March 2000, the government became liberal in making policies and issuing licenses to private operators. The government further reduced license fees for cellular service providers and increased the allowable stake to 74 percent for foreign companies, paving the way for millions of Indians to access telecom services at low costs.
  • Around the same time, NiXi (National Internet exchange of India) was registered. Its primary purpose is to facilitate exchange of domestic Internet traffic between the ISP, content players, and other organisations.
  • 2005 onwards, internet usage and adoption accelerated, but last mile reachability remained a challenge. To overcome this challenge, the government encouraged the adoption of 3G and 4G spectrum, setting a competitive scene for private player to offer value added services.
  • The Indian telecom sector is now well positioned to garner Internet users exceeding 900 million users by 2025.

Forward looking

As a next step, like other countries, DoT would need to strongly consider allowing Cloud, Voice Services and Software-Defined Wide Area Network (SD-WAN) over the internet, by avoiding data forwarding technologies such as MPLS, exempting CDR storage in India, and allowing Voice over Internet Protocol (VoIP). This will help organisations be cost-effective, agile, and focus on providing better products and services with superior customer experience.

Going forward, the latest technologies like ‘Internet via satellite’ will drastically increase internet penetration to the remotest locations in the country. This is expected to further propel digitisation efforts, with many rural and remote users gaining access to the World Wide Web.

Commercial Internet satellite, though at a nascent deployment stage, will co-exist along with the future of telecom technology—5G and 6G. While satellite internet could address the coverage challenges, 5G and 6G technologies would address the need for higher speed, performance without latency, and immersive experience. Although the telecom sector in India has struggled with restrictions and policy disruptions for long, the reforms taken up by the government now point towards a new era of healthy growth. These reforms will bring alive the digital aspirations of 1.3 billion people and accelerate India's journey to be a digitally powered economy, snatching it away from the restrictive policy regime that several of my clients and colleagues have rued about.

India’s telecom journey has moved paces away from the first telegraph communication set up in Kolkata and is on a dizzying trajectory towards digitalisation. Further reforms in telecom regulations will propel the future of Digital India to greater heights.

About authors: Lakshminarasimha K is Practice Manager - IT Service, Support and Operations
& Koshy Jacob Abraham is Lead Technology Specialist - IT Services at Infosys BPM.

The thoughts and opinions shared here are of the author.

Check out our end of season subscription discounts with a Moneycontrol pro subscription absolutely free. Use code EOSO2021. Click here for details.

Post Your Comment
Required, will not be published
All comments are moderated