From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 2- Threat of duopoly in telecom sector
The Indian telecom sector faces the prospect of duopoly due to the impending exit of Vodafone-Idea. This has several implications.
India’s telecom sector: From monopoly to hyper-competition
- India’s telecom market has seen monopoly as well as hyper-competition.
- Twenty-five years ago, the government alone could provide services.
- Ten years later, there were nearly a dozen competing operators. Most service areas now have four players.
- However, the possible exit of the financially-stressed Vodafone Idea would leave only two dominant players-Airtel and Jio in the telecom sector.
- A looming duopoly, or the exit of a global telecommunications major, are both worrying.
- They deserve a careful and creative response.
Why it matters
- Competition has delivered relatively low prices, advanced technologies, and an acceptable quality of services.
- There is a long way to go in expanding access as well as network capacity.
- For example, India is ranked second globally—after China—in the number of people connected to the internet.
- However, it is also first in the number of people unconnected.
- Over 50% of Indians are not connected to the internet, despite giant strides in network reach and capacity. India tops aggregate mobile data usage.
- However, its per capita or device data usage is low.
- It has an impressive 4G mobile network, however, its fixed network—wireline or optical fibre—is sparse and often poor.
- 5G deployment has yet to start and will be expensive.
- Filling the gaps in infrastructure and access will require large investments and competition.
- The exit of the Vodafone-Idea will hurt both objectives.
- The closure of Vodafone Idea is an arguably greater concern than the fading role of BSNL and MTNL.
- The government companies are yet to deploy 4G and have become progressively less competitive.
- Vodafone Idea, on the other hand, still accounts for about a quarter of subscriptions and revenues and can boast of a quality network.
1) Strategic partnership with BSNL-MTNL
- A possible way out could be to combine the resources of the MTNL and BSNL and Vodafone Idea through a strategic partnership.
- Creative government action can save Vodafone Idea as well as improve the competitiveness of BSNL and MTNL.
- It could help secure government dues, investments, and jobs.
2) Develop resale market
- Global experience suggests that well-entrenched incumbents have massive advantages.
- New players are daunted by the large investments.
- However, regulators and policymakers have other options to expand choice for telecom consumers.
- Their counterparts in mature regulatory regimes—e.g., in the European Union—have helped develop extensive markets for resale.
- Recognising the limited influence of smaller players, regulators mandate that the incumbent offer wholesale prices to resellers who then expand choice for end-users.
- A key barrier to resale is India’s licence fee regime which requires licence-holders to share a proportion of their revenues with the government.
It would be tragic if India’s telecom-access market was to be reduced to only two competing operators, as we have a long way to go. The government needs to consider the implications of the situation arising due to the exit of one of the major players in the sector.