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

The growth and inclusion potential of India’s telecom sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Challenges facing the telecom sector

Context

Shortly after the Cabinet announced nine structural and procedural reforms in September to address the deep financial woes of telcos, Vodafone Idea and Bharti Airtel hiked their tariff.

About the package for telecom sector

  • The telecom relief package announced by the government in September supports proposals that have been repeatedly presented to the government by the regulator, industry associations and think tanks.
  • Risk of duopoly: With the risk of a duopoly looming large, the government was pushed to take up these long-pending decisions that included nine key changes.
  • Provisions in the package: Besides providing immediate relief on payment of licence fee and penalties due to the government, the package increased FDI limits, extended licence tenure to 30 years from 20, removed charges on spectrum-sharing and proposed timelines for spectrum auctions.
  • The package will undoubtedly have a positive short-term impact and perhaps safeguard competition in the future.

Reforms and  challenge of addressing the inequality

  • From socialist to market-oriented economy: In July this year, we celebrated three decades of India’s 1991 reforms, one that catapulted India from being a socialist economy with a heart but no trickle-down, to a market-oriented economy with a mind but also very little trickle-down.
  • Inequality has been a feature of both models.
  • The 2018 Oxfam report showed that 10 per cent of the richest Indians took home 77.4 per cent of wealth (compared to 73 per cent the year before).
  • Moreover, 58 per cent of India’s wealth was in the hands of 1 per cent of the country’s population.
  • Changes in the modes of distribution: In the pre-1991 period, the principal modes of redistribution were taxation and public sector operations.
  • In the post-1991 period, it has been a combination of taxation, technology, smartphones and the associated direct benefit transfers.

Role of telecom sector in addressing the challenge of achieving growth and inclusion

  • High growth dividend of telecom sector: Every 10 per cent increase in investment in telecom, for example, leads to a 3.2 per cent increase in GDP growth for India.
  • Not only is the growth dividend positive, it is large.
  • Mobile as a mean of financial integration: At the same time, the mobile phone has become a means for sophisticated financial integration, as shown by the expanding usage of pre-paid payment instruments and mobile banking.
  • The Jan-Dhan Yojana (JDY) attempts to include the marginalised and unbanked through technology.
  • As of October 2021, a total of 440 million bank accounts have been opened and more than 310 million RuPay cards have been issued under the latter, indicating the large unmet demand for banking services.
  • Making transfers predictable and targeted: The Jan-Dhan-Aadhaar-Mobile (JAM) trinity ties the Aadhaar number to an active bank account, making income transfers predictable and targeted.
  • There is already evidence that payments through Aadhaar-linked bank accounts have increased efficiency and reduced leakages.

Way forward

  • Predictable and less erratic telecom policy: The benefits of digitalisation could have been much larger and more widespread had telecom policy been more predictable and less erratic.
  • That Indian reforms more often than not happen on the back of a crisis is true for the telecom sector.
  • The principal motive of the New Telecom Policy of 1999 was to rescue the deeply indebted sector of its own reckless bidding by replacing the fixed licence fee system with a revenue-sharing regime.
  • In hindsight, it was the right thing to do since it threatened business continuity.
  • The move to auction spectrum “for all times to come” in 2008 was necessitated by the administrative bungling in spectrum assignment.
  • Quick adaptation: A question we pose is why did it take a crisis — a grave one at that — to push the needle on policy change?
  • It is a a reasonable expectation of policy to adapt quickly and not wait for a crisis to emerge.

Consider the question “Telecom sector could play an important role in achieving the growth with inclusion. In context of this, examine the challenges facing the sector and suggest the measures to deal with these challenges.”

Conclusion

The seemingly naïve question about the adaptation in policies may not be as credulous for the intensely dynamic digital markets. For there is no point shutting the stable door after the horse has bolted.

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