Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc

[op-ed snap] Govt has to ensure digital India does not miss the bus

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Telecom sector - impact of policies

Context

The telecommunications sector is one of the most progressive in the world, in terms of both development and outcomes. 

The success of the telecom sector

    • It rides on increasing mobile penetration, declining tariffs, increasing competition, and the evolution of wireless technologies. 
    • Telecom has surged ahead of other infrastructure-heavy sectors. 
    • This success can be attributed to a large addressable market along with substantial private sector participation, technological innovations and an enabling institutional and regulatory environment.

Challenges

    • In a judicial pronouncement in 2012, the Supreme Court ordered the cancellation of 122 telecom licences in the 2G scam case.
    • Then there’s the phase of hyper-competition unleashed by a new entrant. This led to the rapid consolidation – a virtually 3+1-player market, bankrupt telcos, lakhs of lost jobs, red balance sheets and worried lenders/investors. 
    • Now the Supreme Court judgement on licence fee and spectrum charges has taken away all those hopes.

Latest judgement

    • Court held that the definition of gross revenue mentioned in the licence agreement is sacrosanct and cannot be reviewed or decided by TDSAT or TRAI. 
    • It held that the “gross revenue of the licence” is equal to the “total revenue of the licensee company”. 
    • It said all revenue arising out of non-telecom activities has to be classified as “miscellaneous revenue” and included in the total revenue of the company.
    • It affects several companies that hold ISP, national long-distance or international long distance licences, or are MSO/cable operators.

Impact of the judgement

    • The definition of revenue is the same for all telecom licences. 
    • All companies such as GAIL, Power Grid, RailTel, Delhi Metro, Oil India Ltd—that have taken the telecom licence for their own captive use(not for a commercial purpose) would be liable to pay huge sums as licence fee on the revenue earned from its non-telecom operations.
    • Calculations suggest that the impact could be upwards of ₹2 trillion on these non-telecom entities alone. 
    • Also, there would be an impact close to ₹93,000 crores for mobile operators.

Alternatives

    • DoT can waive these charges, fully or partly. If it decides to go ahead and recover these charges from all operators, the industry will face an unprecedented crisis.
    • TRAI always held that revenue from operation of non-telecom services should not attract licence fees. It recommended it to the government in 2006 and in 2015. 
    • The government should review the levies on the operators. This might soften the blow on a promising industry.
    • The government should take a holistic view so as to ensure Digital India does not get off track.
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