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

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

Ericsson Mobility Report on 5G Subscriptions

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G technology

Mains level : Useful data about 5G in India

India 5G subscriptions are set to reach 500 mn by 2027, said Ericsson in its report.

Ericsson Mobility Report

  • The report has added that the total number of smartphone subscriptions is expected to be 810 million at the end of 2021.
  • It is projected to grow at a compounded annual growth rate of 7%, exceeding 1.2 billion by 2027.

5G penetration in India

  • 5G telecom services are likely to account for 39% of mobile subscriptions or about 500 million subscriptions in India at the end of 2027.
  • 4G is expected to remain the dominant technology in India in 2027.
  • 4G subscriptions are expected to reduce from 68% of mobile subscriptions in 2021 to 55% in 2027 as subscribers migrate to 5G.
  • However, 4G subscriptions are forecast to drop from 790 million in 2021 to 710 million in 2027, showing an annual average decline of 2%.

Back2Basics: 5G Technology

  • 5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks.
  • It mainly works in 3 bands, namely low, mid and high-frequency spectrum — all of which have their own uses as well as limitations.

Three bands of 5G

  • The low band spectrum has shown great promise in terms of coverage and speed of internet and data exchange, the maximum speed is limited to 100 Mbps (Megabits per second).
  • This means that while telcos can use and install it for commercial cellphones users who may not have specific demands for very high-speed internet, the low band spectrum may not be optimal for specialised needs of the industry.
  • The mid-band spectrum, on the other hand, offers higher speeds compared to the low band but has limitations in terms of coverage area and penetration of signals.
  • Telcos and companies, which have taken the lead on 5G, have indicated that this band may be used by industries and specialized factory units for building captive networks that can be molded into the needs of that particular industry.
  • The high-band spectrum offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength.
  • Internet speeds in the high-band spectrum of 5G have been tested to be as high as 20 Gbps (gigabits per second), while, in most cases, the maximum internet data speed in 4G has been recorded at 1 Gbps.

 

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

Private: Telecom sector in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues faced by Indian telecom sector

The article examines the challenges telecom sector in India is facing and suggests the measures to keep alive the competition in the 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.

Telecom Sector in India

  • India is currently the world’s second-largest telecommunications market and has registered strong growth in the past decade and a half.
  • The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector.
  • The deregulation of FDI norms has made the sector one of the fastest-growing and top-five employment opportunity generators in the country.

From plenty to monopoly

  • There was a time when the number of unique service providers in Delhi, Mumbai, Gujarat, Tamil Nadu and Karnataka were in excess of a dozen.
  • Fragmentation of spectrum and subscribers, it was argued, increased costs to operators.
  • Three or four effective rivals could produce outcomes in favor of the consumer, they argued.
  • Now, consolidation has occurred, mergers have materialised and exits have taken place.
  • The dominant narrative in telecom today is how to preserve competition in the market by way of numbers.
  • The threat of monopolization is real and palpable as incumbent private operators, Airtel and Vodafone Idea (Vi), struggle to keep pace.

Threat of duopoly

  • The theory of contestable markets suggests that as long as there is a real threat of entry, even monopolies will be compelled to behave as if they are operating in a competitive market place.
  • But this theory works in an environment where entry of a new player occurs once in a while.
  • India telecom market suffers from multiple entry barriers in the form of spectrum acquisition costs, the licence fee burden as a percentage of the Adjusted Gross Revenue (AGR), infrastructure requirements and the policy uncertainty.
  •  It is far-fetched to expect a new entrant to come in and demolish a potential monopoly.

About the package for the 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 license fees and penalties due to the government, the package increased FDI limits, extended license 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 challenges 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 percent of the richest Indians took home 77.4 percent of the wealth (compared to 73 percent the year before).
  • Moreover, 58 percent of India’s wealth was in the hands of 1 percent 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 percent increase in investment in telecom, for example, leads to a 3.2 percent increase in GDP growth for India.
  • Not only is the growth dividend positive, but it is also large.
  • Mobile as a means 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 marginalized 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 digitalization 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 license 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 reasonable expectation of policy to adapt quickly and not wait for a crisis to emerge.

Conclusion

Protecting competition and not competitors is a repeated refrain in policy circles. It is now up to the government to play its role and adopt measures to stimulate and fortify competition in Indian telecom without which our $1 trillion digital ambition will remain on paper.

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

Universal Service Obligation Fund (USOF)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Universal Service Obligation Fund (USOF)

Mains level : Not Much

The Union Cabinet has approved the provisioning of mobile services in over 7,000 uncovered villages through the Universal Service Obligation Fund (USOF).

What do you mean by Universal Service?

  • In the modern world, universal service refers to having a phone and affordable phone service in every home.
  • It means, providing telecommunication service with access to a defined minimum service of specified quality to all users everywhere at an affordable price.
  • In 1837, the concept was rolled on by Rowland Hill, a British educator and tax reformer, which included uniform rates across the UK and prepayment by sender via postage stamps.

What is USOF?

  • The Universal Service Obligation Fund (USOF) was formed by an Act of Parliament, was established in April 2002 under the Indian Telegraph (Amendment) Act 2003.
  • It aims to provide financial support for the provision of telecom services in commercially unviable rural and remote areas of the country.
  • It is an attached office of the Department of Telecom, and is headed by the administrator, who is appointed by the central government.

Scope of the USOF

  • Initially, the USOF was established with the fundamental objective of providing access to ‘basic’ telecom services to people in rural and remote areas at affordable and reasonable prices.
  • Subsequently, the scope was widened.
  • Now it aims to provide subsidy support for enabling access to all types of telecom services, including mobile services, broadband connectivity and the creation of infrastructure in rural and remote areas.

Funding of the USOF

  • The resources for the implementation of USO are raised by way of collecting a Universal Service Levy (USL), which is 5 percent of the Adjusted Gross Revenue (AGR) of Telecom Service Providers.

Nature of the fund

  • USOF is a non-lapsable Fund.
  • The Levy amount is credited to the Consolidated Fund of India.
  • The fund is made available to USOF after due appropriation by the Parliament.

 

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

Four-year moratorium for AGR dues

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AGR

Mains level : Stress in the telecom sector

In big bang reforms, the Union Cabinet approved a relief package for the telecom sector that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100% foreign investment through the automatic route.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 per cent and 8 per cent respectively.

Why is AGR important?

  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why do telcos need to pay out large amounts?

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.
  • While the exact amount telcos will need to shell out is not clear, as in a government affidavit filed in the top court, the DoT had calculated the outstanding licence fee to be over ₹92,000 crore.
  • However, the actual payout can go up to ₹1.4 lakh crore as the government is likely to also raise a demand for shortfall in SUC along with interest and penalty.
  • Of the total amount, it is estimated that the actual dues is about 25%, while the remaining amount is interest and penalties.

Is there stress in the sector?

  • The telecom industry is reeling under a debt of over ₹4 lakh crore and has been seeking a relief package from the government.
  • Even the government has on various occasions admitted that the sector is indeed undergoing stress and needs support.
  • Giving a ray of hope to the telecom companies, the government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

Issue of lower tariff

  • Currently, telecom tariffs are among the lowest globally, driven down due to intense competition following the entry of Reliance in the sector.
  • The TRAI examines the merits of a “minimum charge” that operators may charge for voice and data services.

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

Can India avoid a telecom duopoly?

Note4Students

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.

Way out

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.

Conclusion

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.


Source:

https://www.financialexpress.com/opinion/failing-to-connect-can-india-avoid-a-telecom-duopoly/2281486/

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

Lawsuit against 5G and the debate around

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G technology

Mains level : Issues with 5g rollout

A notable actor has filed a lawsuit in the Bombay High Court against the 5G telecom technology up-gradation, trial runs for which have started in India now.

What is 5G technology?

  • 5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks.
  • It mainly works in 3 bands, namely low, mid and high-frequency spectrum — all of which have their own uses as well as limitations.

Issues with the rollout

  • However, 5G and its rollout in many countries have been hampered due to fears over health concerns even some conspiracy theories as well, which have tried to link it with the coronavirus among other things.
  • The recent lawsuit is asking questions around the overall impact of 5G and low intensity radiofrequency (RF) electronic magnetic field (EMF) radiation on human health, and its environmental impact as well.
  • These concerns, while not yet proven, have been raised by various scientists before too.

Arguments raised in the lawsuit

  • It has stated that the ‘radiation’ it will emit will be “extremely harmful and injurious to the health and safety of the people”.
  • While using wireless devices one is in a constant dilemma about “RF radiation from wire-free gadgets and network cell towers”.
  • There is sufficient reason to believe that the radiation is extremely harmful and injurious to the health and safety of the people.
  • It wants the concerned department to certify that 5G technology is safe for humans and also animals and birds.

Why is 5G essential?

  • 5G promises to revolutionize mobile broadband and is a big generational leap over the existing 4G technology.
  • This new technology will be capable of not just ensuring fast internet on our phones, but also help power IoT (Internet of Things) networks to run connected cars and homes smarter.
  • It will also support the streaming of rich media.

Rollout status in India

  • 5G has not yet been rolled out in India though some companies have been given a trial spectrum to test 5G technology in the country.
  • Once this is over, it is expected that networks will go live with the 5G bands by the end of this year.
  • The 5G rollout is expected to gather pace in the country by 2022.

Fear around the impact of 5G radiation on human health

  • The claim is that the more powerful 5G waves will emit more radiation and cause harm to humans as well as other living beings.
  • Also, 5G will require more towers in order to ensure better connectivity, and since it will power more than just our smartphones, it will increase human exposure to such radiation in general.
  • This is an extension of the idea that cellular towers, which emit low-level RF-EMF radiation, are in general damaging our bodies.
  • But radiation from cellphone towers, mobile phones, WiFi routers is typically called non-ionizing radiation like radio waves, microwaves, and optical radiation.
  • RF fields have been classified by WHO’s International Agency for Research on Cancer (IARC) as possibly carcinogenic to humans (Group 2B).

Layman understandings over such radiations

  • There’s no doubt that radiation at very high levels, also referred to as ionizing radiation, heats up our tissue and can eventually lead to cancer.
  • This applies to medical devices such as a CT-scan machine or X-ray machine, which emit high-level ionizing radiation.
  • That’s exactly why doctors don’t recommend that you go get a CT scan for every health issue because it does increase unnecessary exposure to radiation.
  • But there are increasing concerns that our smartphones, other WiFi-ready devices such as laptops, and mobile phone towers which also emit low-level RF radiation are damaging our bodies given the constant exposure.

What WHO has to say?

  • On its page on 5G, the World Health Organization (WHO) says “no adverse health effect has been causally linked with exposure to wireless technologies.”
  • But it also states that “only a few studies have been carried out at the frequencies to be used by 5G.”
  • Given the growing concerns, the WHO is conducting “a health risk assessment from exposure to radio frequencies, covering the entire radiofrequency range, including 5G.”
  • This study will be published by 2022.

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

Govt. gives nod for 5G trials

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5Gi technology

Mains level : Paper 3- Permission granted for 5-G trial

Trials for 5G technology

  • The Department of Telecommunications (DoT) on Tuesday gave permission to Telecom Service Providers (TSPs) to conduct trials for the use and application of 5G technology.
  • The applicant TSPs include Bharti Airtel Ltd., Reliance JioInfocomm Ltd., Vodafone Idea Ltd. and MTNL.
  • These TSPs have tied up with original equipment manufacturers and technology providers which are Ericsson, Nokia, Samsung and C-DOT.
  • Each TSP will have to conduct trials in rural and semi-urban settings also in addition to urban settings so that the benefit of 5G technology proliferates across the country.
  • This formally leaves out Chinese companies like Huawei and ZTE from the 5G race in India.

About 5Gi technology

  • TSPs are encouraged to conduct trials using 5Gi technology in addition to the already known 5G technology.
  •  5Gi technology was advocated by India, as it facilitates much larger reach of the 5G towers and radio networks.
  • The 5Gi technology has been developed by the Indian Institute of Technology, Madras (IIT-M), Centre of Excellence in Wireless Technology (CEWiT) and IIT Hyderabad.

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

Government earnings from the spectrum auction

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Telecom Spectrum

Mains level : 5G technology and its rollout

The end of India’s first auction of telecommunications spectrum in five years was held with the government generating revenue of ₹77,815 crores from the exercise.

What is Spectrum?

  • Devices such as cellphones and wireline telephones require signals to connect from one end to another.
  • These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
  • The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves.
  • With the expansion in the number of cellphones, wireline telephone and internet users, the need to provide more space for the signals arise from time to time.

Spectrum allocations

  • Spectrum refers to the invisible radio frequencies that wireless signals travel over. The frequencies we use for wireless are only a portion of what is called the electromagnetic spectrum.
  • To sell these assets to companies willing to set up the required infrastructure to transport these waves from one end to another, the central government through the DoT auctions these airwaves from time to time.
  • These airwaves called spectrum is subdivided into bands that have varying frequencies.
  • All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.

How has the industry been since the last auction?

A lot has changed in the industry since 2016 when the previous auction took place.

  • In the last few years, there has been a consolidation in the industry, as a result of which there are only a few major players now.
  • While the user base has grown, the industry itself has witnessed unforeseen financial stress in the form of an important court case against it.
  • The reference is to the Supreme Court verdict last September that ordered telecom players to share revenues coming from even non-telecom services with the government.
  • It gave telecom companies 10 years to pay their Adjusted Gross Revenue (AGR) dues to the government, with 10% of the dues to be paid by March 31, 2021.

Try this question for mains:

Q.What are the various challenges faced by India’s telecom before the upgradation to 5G technology?

What about the 5G rollout?

  • The auction for 5G is likely to happen later.
  • In the auction that was held last week the government offered spectrum for 4G in the following bands: 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.
  • The “king” in 5G, the C-band, which is the band between 3,300 MHz and 4,200 MHz, was not on offer in this round of auctions.

How did this auction compare to the last round?

  • In 2016, about 40% of the 2,355 MHz of spectrum (at a reserve price of ₹5.6 lakh crore) was sold, giving the government ₹65,789 crores in revenue.
  • This time, the Centre has managed to get more.
  • The government said the revenue generated by the auction has exceeded its expectations, which was about ₹45,000 crore.

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

Cabinet approves PLI Scheme for telecom

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PLI scheme and various sectors

Mains level : Make in India promotions

The Union Cabinet has approved the production-linked incentive scheme for the telecom sector with an outlay of ₹12,195 crores over five years.

Why such a scheme?

  • The scheme aims to make India a global hub for manufacturing telecom equipment.
  • The sector is expected to lead to an incremental production of about ₹2.4 lakh crore, with exports of about ₹2 lakh crore over five years and bring in investments of more than ₹3,000 crores.

PLI Scheme

  • The PLI scheme aims to boost domestic manufacturing and cut down on imports by providing cash incentives on incremental sales from products manufactured in the country.
  • Besides inviting foreign companies to set shop in India, the scheme aims to encourage local companies to set up or expand, existing manufacturing units.

UPSC can directly as the sectors included in the PLI scheme. Earlier it was only meant for Electronics manufacturing (particularly mobile phones).

Benefits for MSMEs

  • For inclusion of MSMEs in the scheme, the minimum investment threshold has been kept at ₹10 crores, while for others it is ₹100 crore.
  • For MSMEs, a 1% higher incentive is also proposed in the first three years.

Employment generation

  • The scheme was also likely to generate 40,000 direct and indirect employment opportunities and generate tax revenue of ₹17,000 crores from telecom equipment manufacturing.

Which equipments?

  • The telecom manufacturing would include core transmission equipment, 4G/5G Radio Access Network and wireless equipment, access and Customer Premises Equipment (CPE), IoT access devices, other wireless equipment.

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

5G Technology and India’s preparedness

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G technology

Mains level : 5G technology and its rollout

 

The Department of Telecommunications (DoT) has sought inputs from telcos and other industry experts on the sale and use of radiofrequency spectrum over the next 10 years, including the 5G bands.

Try this PYQ:

Q. In India, which of the following review the independent regulators in sectors like telecommunications, insurance, electricity, etc.?

  1. Ad Hoc Committees set up by the Parliament
  2. Parliamentary Department Related Standing Committees
  3. Finance Commission
  4. Financial Sector Legislative Reforms Commission
  5. NITI Aayog

Select the correct answer using the code given below:

(a) 1 and 2

(b) 1, 3 and 4

(c) 3, 4 and 5

(d) 2 and 5

What is 5G technology?

  • 5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks.
  • It mainly works in 3 bands, namely low, mid and high-frequency spectrum — all of which have their own uses as well as limitations.

Three bands of 5G

  • The low band spectrum has shown great promise in terms of coverage and speed of internet and data exchange, the maximum speed is limited to 100 Mbps (Megabits per second).
  • This means that while telcos can use and install it for commercial cellphones users who may not have specific demands for very high-speed internet, the low band spectrum may not be optimal for specialised needs of the industry.
  • The mid-band spectrum, on the other hand, offers higher speeds compared to the low band but has limitations in terms of coverage area and penetration of signals.
  • Telcos and companies, which have taken the lead on 5G, have indicated that this band may be used by industries and specialised factory units for building captive networks that can be moulded into the needs of that particular industry.
  • The high-band spectrum offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength.
  • Internet speeds in the high-band spectrum of 5G have been tested to be as high as 20 Gbps (gigabits per second), while, in most cases, the maximum internet data speed in 4G has been recorded at 1 Gbps.

Where does India stand in the 5G technology race?

  • On par with the global players, India had, in 2018, planned to start 5G services as soon as possible, with an aim to capitalize on the better network speeds and strength that the technology promised.
  • Indian private telecom players have been urging the DoT to lay out a clear road map of spectrum allocation and 5G frequency bands so that they would be able to plan the rollout of their services accordingly.
  • One big hurdle, however, is the lack of flow of cash and adequate capital with some companies due to their AGR dues.

Global progress on 5G

  • More than governments, global telecom companies have started building 5G networks and rolling it out to their customers on a trial basis.
  • In countries like the US, some companies have taken the lead when it comes to rolling out commercial 5G for their users.
  • A South Korean company, which had started researching on 5G technology way back in 2011, has, on the other hand, take the lead when it comes to building the hardware for 5G networks for several companies.

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

What are Spectrum Auctions?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Telecom Spectrum

Mains level : Read the attached story

In the spectrum auctions scheduled to begin on March 1this year, the government plans to sell spectrum for 4G in the 700, 800, 900, 1,800, 2,100, 2,300, and 2,500 MHz frequency bands.

Q.What are the various challenges faced by India’s telecom before the upgradation to 5G technology?

What is Spectrum?

  • Devices such as cellphones and wireline telephones require signals to connect from one end to another.
  • These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
  • The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves.
  • With the expansion in the number of cellphones, wireline telephone and internet users, the need to provide more space for the signals arise from time to time.

Spectrum allocations

  • Spectrum refers to the invisible radio frequencies that wireless signals travel over. The frequencies we use for wireless are only a portion of what is called the electromagnetic spectrum.
  • To sell these assets to companies willing to set up the required infrastructure to transport these waves from one end to another, the central government through the DoT auctions these airwaves from time to time.
  • These airwaves called spectrum is subdivided into bands which have varying frequencies.
  • All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.

Why is spectrum being auctioned now?

  • The last spectrum auctions were held in 2016 when the government offered 2,354.55 MHz at a reserve price of Rs 5.60 lakh crore.
  • Although the government managed to sell only 965 MHz – or about 40 per cent of the spectrum that was put up for sale.
  • The need for a new spectrum auction has arisen because the validity of the airwaves bought by companies is set to expire in 2021.

How is the spectrum priced?

  • The reserve price of all these bands together has been fixed at Rs 3.92 lakh crore.
  • Depending on the demand from various companies, the price of the airwaves may go higher, but cannot go below the reserve price.

How will the payment plan work?

  • As part of the deferred payment plan, bidders for the sub-1 GHz bands of 700, 800 and 900 MHz can opt to pay 25 per cent of the bid amount now, and the rest later.
  • In the above-1 GHz bands of 1,800, 2,100, 2,300, and 2,500 MHz frequency bands, bidders will have to pay 50 per cent upfront, and can then opt to pay the rest in equated annual instalments.
  • The successful bidders will, however, have to pay 3 per cent of Adjusted Gross Revenue (AGR) as spectrum usage charges, excluding wireline services.

Who is likely to bid for the spectrum?

  • All major private telecom players in India are eligible contenders to buy additional spectrum to support the number of users on their network.
  • Apart from these three, new companies, including foreign companies, are also eligible to bid for the airwaves.
  • Foreign companies, however, will have to either set up a branch in India and register as an Indian company or tie-up with an Indian company to be able to retain the airwaves after winning them.

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

What is Interconnection Usage Charge (IUC) in Telecom?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : IUC

Mains level : TRAI and its regulations of telecom services

The termination charge for wireless to wireless domestic calls has been zeroed from January 1 onwards. Until now operators paid Interconnection Usage Charges (IUC) of 6 paise per minute on mobile calls.

We are heading for 5G and yet we were indulged in 2G era spat. Sounds strange, but finally IUC got away….

Interconnection Usage Charge (IUC)

  • IUC is the cost that a mobile operator pays to another operator for carrying through/ terminating a call.
  • If a customer of Mobile Operator A calls a customer of Mobile Operator B and the call is completed, then A pays an IUC charge to B for carrying/facilitating the call.
  • Essentially, it is the originating network compensating the receiving network for the cost of carrying the call. In India, IUC is set by the TRAI.

When was it introduced?

  • IUC was introduced at a time when some operators had a larger network footprint compared to new players.
  • In such a scenario, the larger operators had to be compensated for the investments it had to enable call completion. However, over the years this gap between operators has reduced.
  • All the remaining operators have identical network footprint when it comes to voice calls.
  • TRAI’s original deadline to phase out IUC was January 1, 2020.

What does it mean to Consumers?

  • For mobile users, this means that all voice calls will be free from now on.
  • While almost all operators had already started offering unlimited calls as part of their bundled pack, some were charging the 6 paise from consumers for paying IUC charges.
  • From January 1, operators will stop collecting the charges.
  • But other than that there will not be any significant gain for users. Tariff packs available in the market already offer data with unlimited voice calls.

What does the end of the IUC regime imply?

  • For the operators, the end of the IUC regime will lead to easier operations.
  • Many legal battles have been fought in the past over disputes related to IUC charges.
  • Now, the operators can keep whatever money they collect from consumers without having to keep a tab on where the call is terminating.
  • The change in the billing system will not have any significant impact on operators’ revenue.

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

Spectrum auction

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TRAI

Mains level : Paper 3- Ensuring the success of radio spectrum

The article analyses the factors influencing the outcome of the spectrum auction and suggests the measures to ensure the success and avoid the repeat of 2016 auction.

Details of the auction

  • Based on the recommendation of the Telecom Regulatory Authority of India (TRAI), the government is planning to auction spectrum in the sub GHz bands of 700, 800, and 900 MHz along with mid-band frequencies in bands of 1800, 2100, 2300, and 2500 MHz across the 22 Licensed Service Areas (LSAs) of the country.
  • The cumulative reserve price — and hence the potential revenue accrual to the government at reserve prices — is about $50 billion.
  • The total reserve price of spectrum put on auction in 2016 was about $90 billion while the realized value was just about one-tenth of that.
  • Hence, while the 2016 auction could be considered as a failure from the auctioneer’s point of view.

Factors determining the success of  the spectrum auction

1) Right reserve price

  • Research on a cross-country spectrum database shows that the reserve price significantly and positively correlated to the winning bid price.
  • However, a higher reserve price also inhibits bidders from bidding for more spectrum blocks.
  • If the quantity effect is more than the price effect, then it results in reduced revenues for the government exchequer, as happened in 2016.

2) Role of Over The Top (OTT) provider

  • Over The Top (OTT) providers who are providing substitute goods such as Voice Over Internet Protocol (VoIP); and capturing a greater mind share of customers while remaining relatively invisible to government regulators.
  • The rise of VoIP subscribers could have a positive effect on winning bid prices.
  • However, the erosion of the position of telcos in the overall digital value network of devices, connectivity, and apps, could result in a lower willingness to pay.

3) Allocation of unlicensed spectrum for WiFi

  • By off-loading mobile data, Wi-Fi supplements the carrier network and reduces the demand for mobile network capacity.
  • A number of countries including the United States have unlicensed the V-band spectrum in 60 GHz — pencil beam band.
  • Referred to as “wireless fiber”, the 60 GHz spectrum provides huge capacities in a limited area.
  • Wi-Fi 6 (a.k.a. IEEE 802.11 ax) that operates in the 2.4/5 GHz unlicensed band requires additional unlicensed spectrum allocation to provide Gigabit speeds.
  • The more the unlicensed spectrum allocation, the lower will be the demand for licensed spectrum.

4) Clarity on the availability of spectrum for auction

  • While there is an indication by the government that the spectrum for the 5G auction, namely 3.4-3.6 GHz, will be held in late 2021, the amount of spectrum that will be made available is not clear.
  • There is still uncertainty about the release of 26 GHz by the Department of Space for mobile services.
  • With this limited visibility, the bidders will be in a quandary whether to acquire the spectrum now or wait for subsequent auctions.
  • Further, some part of the current spectrum holding of all the operators is coming up for renewal in mid-2021, and hence there is additional pressure on them to retain them in the forthcoming auction.

Steps need to be taken

  • A re-visit of reserve prices and lower it further, especially that of 700 MHz which is the “golden band” for covering the hinterlands of the country.
  • Releasing more unlicensed spectrum in 2.4/5/60 GHz for proliferating Wi-Fi as a suitable complement to [the] carrier network.
  • This will also augment the deployments of the Public Wi-Fi project which the cabinet approved recently.
  • Provide visibility of future auctions, especially the quantum of the spectrum that can be put on the block in 3.3/3.6/26/28 GHz.
  • The government should release guidelines on how OTT platforms will be regulated and what will be regulated so that the telcos and OTTs can join hands to provide superior services for the benefit of the consumers.

Conclusion

The government should follow the steps mentioned here to make the auction of the spectrum a success.

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

Future of 5G in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G Technology

Mains level : 5G Technology and the Huawei issue

India, which has the highest average monthly mobile data traffic per smartphone, is expected to surpass 350 million 5G subscriptions by 2026, according to a report by Swedish telecom equipment maker Ericsson.

Also read:

[Burning Issue] 5G Technology

Ericsson Mobility Report, 2020

  • As per the report, four out of every ten mobile subscriptions in 2026 will be 5G globally with 5G subscriptions forecast to reach 3.5 billion.
  • In the India region, LTE (long-term evolution technology) subscriptions are forecast to increase from 710 million in 2020 to 820 million in 2026” by which time 3G will be phased out.
  • LTE remains the dominant technology in 2020, accounting for 63%.
  • Based on the reported timeline for spectrum auction for 5G services, India could have its first 5G connection in 2021.

Internet usage in India

  • In India, the reliance of people on mobile networks to stay connected as well as work from home during the pandemic has resulted in average traffic per smartphone is the global highest.
  • Low prices for mobile broadband services, affordable smartphones and increased time spent by people online all contribute to monthly usage growth in India.

Back2Basics: 5G Technology

  • It is the next-generation cellular technology that will provide faster and more reliable communication with ultra-low latency.
  • A government panel report points out that with 5G, the peak network data speeds are expected to be in the range of 2-20 Gigabits per second (Gbps).
  • This is in contrast to 4G link speeds in averaging 6-7 Megabits per second (Mbps) in India as compared to 25 Mbps in advanced countries.
  • Once 5G becomes commercial, users will be required to change their current devices in favour of 5G-enabled ones.
  • However, it is likely that the primary use of the technology will go beyond the delivery of services on personal mobiles devices.

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

Governing OTT Platforms

Note4Students

From UPSC perspective, the following things are important :

Prelims level : OTT

Mains level : Need for OTT media regulation

In a move that will have a far-reaching impact, the Union government has brought Over The Top (OTT) platforms, or video streaming service providers under the ambit of the Ministry of Information and Broadcasting (MIB).

Try answering this

Q.What is Over the Top (OTT) media services? Critically analyse the benefits and challenges offered by the OTT media services in India.

Background

  • The MIB has found a vast swathe of unregulated content, namely news online and Over the top (OTT) platforms which had escaped any architecture of regulation.
  • The print was regulated by the Press Council of India and Television, both News and Entertainment were being regulated by the Cable Networks Regulation Act (2005).
  • However, the content on online, the Government felt, fell into a black hole with no oversight.

What are OTT Media?

  • An over-the-top (OTT) media service is a streaming media service offered directly to viewers via the Internet.
  • OTT bypasses cable, broadcast, and satellite television platforms, the companies that traditionally act as a controller or distributor of such content.
  • The term is most synonymous with subscription-based video-on-demand (SVoD) services that offer access to film and television content.
  • They are typically accessed via websites on personal computers, as well as via apps on mobile devices (such as smartphones and tablets), digital media players, or televisions with integrated Smart TV platforms.

Regulating OTT

  • Currently, there is no law or autonomous body governing digital content. The recent move will give the government control over OTT platforms, which were unregulated till now.
  • From time to time, the government had indicated the necessity to monitor these platforms.
  • In October 2019, the government had indicated that it will issue the “negative” list of don’ts for the video streaming services like Netflix and Hotstar.
  • It also wanted the platforms to come up with a self-regulatory body on the lines of the News Broadcasting Standards Authority.

Self-regulation is not sufficient

  • Anticipating the government’s intervention, in January 2019, video streaming services had signed a self-regulatory code that laid down a set of guiding principles for content on these platforms.
  • The code adopted by the OTTs prohibited five types of content:
  1. Content that deliberately and maliciously disrespects the national emblem or national flag,
  2. Any visual or storyline that promotes child pornography
  3. Any content that “maliciously” intends to outrage religious sentiments
  4. Content that “deliberately and maliciously” promotes or encourages terrorism and
  5. Any content that has been banned for exhibition or distribution by law or court
  • The government had refused to support this code.

What lies ahead?

  • The government had been giving enough hints from time to time that it wanted to regulate digital media but the exact nature of the regulation it wanted to bring was not clear.
  • The government considers digital media and digital aggregators in the same breath but they are different things.
  • It is unclear whether it is looking at licensing or entry barriers, or any other curbs in digital media.
  • However, monitoring content 24×7 has its own challenges. Whether the Ministry will set up a committee involving the public to look into complaints received remains to be seen.

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

Regulation of Other Service Providers (OSP)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Other Service Providers (OSP)

Mains level : Various sectors of the economy

The Department of Telecom (DoT) has eased the rules for registration, submission of bank guarantee and other norms for other service providers (OSP) in the business process outsourcing (BPO) and information technology-enabled services (ITes).

Recall your basics from NCERT books… Sectors of the Economy … More precisely, the Tertiary, Quaternary and Quinary Sectors.

What are Other Service Providers (OSP)?

  • OSPs or other service providers are companies or firms which provide secondary or tertiary services such as telemarketing, telebanking or telemedicine for various companies, banks or hospital chains, respectively.
  • As computers made their foray into the Indian information technology space, a number of such OSPs, which were either voice or non-voice based, came into the market.
  • The sector required minimal investment but gave great returns in business, which prompted a large number of individuals and companies to float other service providing firms.

Registration of OSPs

  • The new telecom policy of 1999 suggested that all OSPs register themselves so that the government could keep a check on the usage of its resources.
  • Since most of these firms used leased telephone lines, this in turn used the telecom spectrum auctioned by the DoT, hence facing the regulation.
  • Further, the registration was also made mandatory to ensure that firms did not establish fake OSPs which swindled customers under the garb of providing telebanking and other such sensitive services.

What were the various registration norms for OSPs?

  • To start services in India, OSPs had to register themselves with the DoT and declare to the government as to how many employees were working in the firm as well as the area of service it was engaged in.
  • For example, if a firm wished to provide telebanking services, it had to tell the government the number of people working with the BPO and the state that firms catered to.
  • Further, the OSPs also have to declare whether they were providing services to domestic firms or international firms, and the nature of services being offered.

Significance of the new guidelines

  • The guidelines will make it easier for BPOs and ITes firms in many ways, such as cutting down on the cost of location, rent for premises and other ancillary costs such as electricity and internet bills.
  • The doing away of registration norms will also mean that there will be no renewal of such licenses and therefore will invite foreign companies to set up or expand their other service providing units in India.
  • This change, in line with the norms of countries in the West can also allow employees to opt for freelancing for more than one company while working from home, thereby attracting more workers in the sector.

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

Television Rating Points (TRP) System and its loopholes

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TRP, BARC

Mains level : TRAI and its regulations of telecom services

Mumbai police are investigating the alleged manipulation of Television Rating Points (TRP) by an extremely right-wing opinionated news reporter.

Try this question:

Q.What do you mean by “TRP Journalism”? Discuss the loopholes in the present system of self-regulation in Indian media.

What is TRP?

  • In simple terms, anyone who watches television for more than a minute is considered a viewer.
  • The TRP or Target Rating Point is the metric used by the marketing and advertising agencies to evaluate this viewership.
  • In India, the TRP is recorded by the Broadcast Audience Research Council (BARC) using Bar-O-Meters that are installed in televisions in selected households.
  • As on date, the BARC has installed these meters in 44,000 households across the country. Audio watermarks are embedded in video content prior to broadcast.
  • These watermarks are not audible to the human ear, but can easily be detected and decoded using dedicated hardware and software.
  • As viewing details are recorded by the Bar-O-Meters, so are the watermarks.

What is BARC?

  • It is an industry body jointly owned by advertisers, ad agencies, and broadcasting companies, represented by The Indian Society of Advertisers, the Indian Broadcasting Foundation and the Advertising Agencies Association of India.
  • Though it was created in 2010, the I&B Ministry notified the Policy Guidelines for Television Rating Agencies in India on January 10, 2014, and registered BARC in July 2015 under these guidelines, to carry out television ratings in India.

How are the households selected?

  • Selection of households where Bar-O-Meters are installed is a two-stage process.
  • The first step is the Establishment Survey, a large-scale face-to-face survey of a sample of approximately 3 lakh households from the target population. This is done annually.
  • Out of these, the households which will have Bar-O-Meters or what the BARC calls the Recruitment Sample are randomly selected. The fieldwork to recruit households is not done directly by BARC.
  • The BARC on its website has said that the viewing behaviour of panel homes is reported to BARC India daily. Coincidental checks either physically or telephonically are done regularly.

Vigilance activities by BARC

  • Certain suspicious outliers are also checked directly by BARC India.
  • BARC India also involves a separate vigilance agency to check on outliers that it considers highly suspicious.
  • And as per the guidelines of the Ministry of Information and Broadcasting, these households rotate every year.
  • This rotation is in such a manner that older panel homes are removed first while maintaining the representativeness of the panel.
  • The Ministry guidelines further say that the secrecy and privacy of the panel homes must be maintained, and asked the BARC to follow a voluntary code of conduct.

What are the loopholes in the process?

  • Several doubts have been raised on many previous occasions about the working of the TRP.
  • As per several reports, about 70% of the revenue for television channels comes from advertising and only 30% from subscriptions.
  • It is claimed that households were being paid to manipulate the TRP.

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

AGR dues issue in Telecom Sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AGR issue

Mains level : AGR disputes of Telecom companies

The Supreme Court has held that telecom firms will get 10 years to clear their adjusted gross revenue or AGR dues and that the National Company Law Tribunal (NCLT) should decide whether or not spectrum can be sold under the Insolvency and Bankruptcy Code.

Try this PYQ:

Q. In India, which of the following review the independent regulators in sectors like telecommunications, insurance, electricity, etc.?

  1. Ad Hoc Committees set up by the Parliament
  2. Parliamentary Department Related Standing Committees
  3. Finance Commission
  4. Financial Sector Legislative Reforms Commission
  5. NITI Aayog

Select the correct answer using the code given below:

(a) 1 and 2

(b) 1, 3 and 4

(c) 3, 4 and 5

(d) 2 and 5

Supreme Court rule on AGR dues

  • In its judgment, the SC gave all telcos a 10-year timeline to complete the payments of AGR dues, instead of the old 20-year schedule suggested by the DoT.
  • It also directed telcos to pay 10 per cent of the total AGR dues by March 31, 2020, following which they can make payments in annual instalments between 2021 and 2031.
  • The non-payment of dues in any year would lead to the accrual of interest and invite contempt of court proceedings against such companies.
  • A crucial issue of whether the spectrum could be sold under IBC will now be decided by the National Company Law Tribunal.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 per cent and 8 per cent respectively.

What is the issue about?

  • All the telecom companies that operate in India pay a part of their revenues as licence fee and spectrum charges to the Department of Telecommunications (DoT) for using the spectrum owned by the government.
  • In its definition of AGR, the DoT had said that telcos must cover all the revenue earned by them, including from non-telecom sources such as deposit interests and sale of assets.
  • The telecom companies were opposed to this and had challenged this definition of AGR in several forums, including the Supreme Court.
  • On October 24, 2019, the SC had upheld the DoT’s definition of AGR.
  • Though the telcos sought a review of the judgment, it was dismissed by the top court which had then insisted that telcos clear all the dues by January 23, 2020.

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

Adjusted Gross Revenue (AGR) in Telecom Sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AGR

Mains level : AGR disputes of Telecom companies

The Centre and telcos assured the Supreme Court that they would not conduct any re-assessment or re-calculation of the Adjusted Gross Revenue (AGR) dues, which now stands at ₹1.6 lakh crore.

Try this question for mains:

Q.What are the various challenges faced by India’s telecom before the upgradation to 5G technology?

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 per cent and 8 per cent respectively.

What is the issue?

  • The Bench observed that 15 or 20 years was not a reasonable time period and the telcos must come forward with an appropriate time frame.
  • The Centre had earlier urged the court that up to 20 years be given to the firms for the payments.
  • The telcos said they were in no position to give fresh bank guarantees for the payments.

Why is AGR important?

  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.

Read the complete issue here at:

Explained: Adjusted Gross Revenue (AGR) in Telecom Sector

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

Trending in news: 5G Technology

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G Technology

Mains level : 5G Technology and the Huawei issue

One of India’s business tycoon recently announced that his company’s telecom venture has designed and developed from scratch, a complete indigenous 5G solution ready for deployment.

Try this question from CSP 2019:

Q.With reference to communication technologies, what is/are the difference/differences between LTE (Long-Term Evolution) and VoLTE (Voice over Long-Term Evolution)?

  1. LTE ‘is commonly marketed as 3G and VoLTE is commonly marketed as advanced 3G.
  2. LTE is data-only technology and VoLTE is voice-only technology.

Select the correct answer using the code given below.

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

What is 5G?

  • 5G or fifth generation is the latest upgrade in the long term evolution (LTE) mobile broadband networks.
  • The first generation of networks allowed only mobile voice calls to be made, while the second generation allowed mobile voice calls as well as sending of short text messages.
  • It was the third generation or 3G network which allowed web browsing on mobile devices, the speed and latency of which improved with fourth-generation or 4G networks.
  • The 5G networks will have even faster speeds with latency down to between 1-10 milliseconds.

(Note: Latency is the time a device takes to communicate with the network, which stands at an average of up to 50 milliseconds for 4G networks across the world.)

How does 5G work?

All 5G networks chiefly operate on three spectrum bands.

  • The low-band spectrum has been proven to have great coverage and works fast even in underground conditions. However, the maximum speed limit on this band is 100 Mbps (Megabits per second).
  • In the mid-band spectrum, though the speeds are higher, telcos across the world have registered limitations when it comes to coverage area and penetration of telephone signals into buildings.
  • The high-band spectrum offers the highest speed but has extremely limited network coverage area and penetration capabilities.

The telcos using this band rely on the existing LTE networks and will need to install a number of smaller towers to ensure adequate coverage and high-speed performance.

What does it mean to be 5G ready?

  • Globally many companies have been deploying 5G networks across their service areas as early as 2018.
  • Not only the network, but the devices will also have to be 5G ready for customers to be able to enjoy the maximum benefits of the latest upgrade in mobile broadband.
  • One of the major improvements in 5G is the use of beam tracking to follow all devices on the network to ensure consistent connection in real-time for the device.
  • 5G networks are also designed to multiple-input multiple-output (MIMO) efficient which improves signal throughput for all devices on the network.

Where does India stand on the deployment of 5G?

  • Companies, both telecom service providers and their equipment vendors, have completed lab trials of 5G network components but are yet to commence field trials, which were initially scheduled to happen last year.
  • For the same, telecom companies are awaiting allocation of test spectrum from the Department of Telecommunications (DoT).
  • The service providers have already tied up with equipment makers like Nokia, Ericsson, etc for deploying their 5G networks.

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

What is the National Numbering Plan?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TRAI, National numbering plan

Mains level : National numbering plan

The Telecom Regulatory Authority of India (TRAI) has recommended that a new National Numbering Plan be issued at the earliest so that a uniquely identifiable number can be provided to every subscriber in India.

The TRAI and Telecom Disputes Settlement and Appellate Tribunal are quite often seen in the news.  Most recent was the dispute risen due to AGR dues.

TRAI has a wide range of jurisdiction over Telecoms. Keep a track on all such news.

National Numbering Plan

  • The management of numbering resources is governed by the National Numbering Plan.
  • The Department of Telecom administers the numbers for fixed and the mobile networks based on the ITU’s Telecommunication Standardization Sector (ITU-T) recommendations.
  • TRAI has recommended automated allocation of numbering resources be done using number management system software to speed up the process

Broadly, the TRAI has recommended:

  • switching to an 11-digit mobile number,
  • reallocation of mobile numbering resources surrendered by operators who have shut shop and
  • prefixing zero for all mobile calls made from fixed line

Issues with 11 digit number

  • TRAI said that some serious problems are anticipated with a change in the mobile number from 10 to 11 digits.
  • Migrating to 11 digits would require widespread modifications in the configuration of switches involving cost.
  • This would also cause inconvenience to the customers in the form of dialling extra digits and updating phone memory.
  • This could lead to more dialling errors, traffic, and loss of revenue to telecom operators.

Still, why need a plan as such?

  • The total number of telephone subscribers in India stands at 1,177.02 million with a teledensity of 87.45% at the end of January 2020.
  • This increasing digitization would pave the way towards the dream of digital India and mobile economy.
  • Thus, it has become necessary to review the utilization of numbering resources in the country.
  • Considering the above scenario the implementation of the TRAI’s recommendation with solutions to possible issues would help for sustainable growth of the telecommunication services.
  • Hence TRAI needs to review the utilization of the numbering resources and make some policy decisions to ensure that adequate resources are available for sustainable growth of the telecom services.

Back2Basics: Telecom Regulatory Authority of India (TRAI)

  • The TRAI is a statutory body set up under section 3 of the Telecom Regulatory Authority of India Act, 1997.
  • It is the regulator of the telecommunications and its tariffs in India.
  • The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI.
  • TRAI regularly issues orders and directions on various subjects such as tariffs, interconnections, quality of service, DTH services and mobile number portability.

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

TRAI wants set top boxes to be made interoperable

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TRAI

Mains level : TRAI and its regulations of telecom services

The Telecom Regulatory Authority of India (TRAI) has recommended that all set-top boxes (STBs) in the country must be interoperable, meaning that consumers should be able to use the same STB across different DTH or cable TV providers.

The TRAI and Telecom Disputes Settlement and Appellate Tribunal are quite often seen in the news.  Most recent was the dispute risen due to AGR dues.

TRAI has a wide range of jurisdiction over Telecoms. Keep a track on all such news.

Why such a recommendation?

  • TRAI noted that while the STBs deployed in the cable TV networks are non-interoperable, those by DTH players complied with licence conditions to support common interface module based interoperability.
  • However, in practice, even in the DTH segment the STBs are not readily interoperable.
  • The lack of interoperability of set-top boxes between different service providers deprives the customer of the freedom to change her/his service provider.
  • It also creates a hindrance to technological innovation, improvement in service quality, and the overall sector growth.

About TRAI

  • The TRAI is a statutory body set up under section 3 of the Telecom Regulatory Authority of India Act, 1997.
  • It is the regulator of the telecommunications and its tariffs in India.
  • The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI.
  • TRAI regularly issues orders and directions on various subjects such as tariffs, interconnections, quality of service, DTH services and mobile number portability.

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

Online versus offline

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3-Ensuring fair competition and dealing with the problem of predatory pricing.

Context

Any intervention to “correct” pricing essentially involves placing a higher weightage on the assumed losses of competitors/producers than on the consumer’s apparent gains. This is not a straightforward exercise.

Duopolies and scrutiny by the CCI

  • Duopolies in the most segment: The online marketplace or the platform/intermediation service market is now largely characterised by duopolies in most segments:
    • Amazon and Flipkart in e-commerce, Uber and Ola in transport, Zomato and Swiggy in food service, MakeMyTrip and Yatra in travel bookings.
    • Some niche players do exist in these segments, but by and large, the market has been carved up by large players.
  • Why CCI is scrutinising these companies? Several of these companies have come under the scrutiny of the Competition Commission of India (CCI).
    • What are the issues involved? The issues involved here have far-reaching ramifications for both online and offline market places. Some of the more contentious issues are:
    • Do such market structures restrict online competition?
    • Are the players engaging in predatory pricing?
    • If so, is it driving out both online and offline competition and does this adversely impact consumer welfare?
    • Is there a need for policy intervention, and, if so, what should be the underlying framework?

Lower barrier to entry not translating into greater competition

  • Market not working as per theory: In theory, the online market structure should facilitate greater competition given the lower barriers to entry. But this may not be the case.
    • Take-over: Most other firms in the segments mentioned above have either been taken over or have folded up.
  • What is the reason for the emergence of such marker structures
  • Positive feedback loop: One explanation for the emergence of these market structures is that as companies grow, with more users coming on board these platforms, they benefit from what CCI calls positive feedback loop.
    • This leads to market concentration.
    • Difficulties for new players: Given the network effects, which are common in digital spaces, it becomes difficult for new players to enter these spaces, and gain market share as there isn’t much space for many such networks.
  • Capital intensive market: Another possible explanation is that, contrary to perception, the online space is highly capital intensive.
    • Deep pockets are required to fund the discounts to get customers on board initially.
    • Such market structures are more likely in capital deficit countries like India.
  • Incumbents restricting new entrant: Incumbents, as in other sectors, may also engage in various strategies to restrict entry and thus competition.
    • Even small actions by these platforms coupled with the network effects can adversely impact competition.

Predatory pricing-issues involved in it

  • Allegations of predatory pricing driving out the competition: Many allege that these two-sided online platforms engage in predatory pricing or below-cost pricing either by funding it themselves (deep pockets) or by squeezing producers.
    • This drives out the competition — both online as well as offline.
    • Predatory pricing is anti-competition, to begin with.
    • How it is harmful to the customers? While consumers do benefit in the short run, once the competition is driven out, the platform starts raising prices to recoup previous losses.
    • But is it that straightforward?
  • What are the issues involved in predatory pricing?
  • First- Assessing whether a platform is engaged in predatory pricing.
    • In India, it is defined as price falling below average variable cost — may not be a straightforward exercise.
    • Why it is not a straight forward exercise? The dynamics of online pricing (prices change over time), their unique cost structures — in such two-sided platforms, prices/costs on both sides should be seen in conjunction — as well as the impact of economies of scale and organisational efficiency in lowering costs, all need to be factored in.
    • Discount for clearing inventories: Besides, one would also have to take into account that even offline firms engage in deep discounting to clear inventories.
    • As do both online and offline firms to acquire customers in the early stages of their business.
  • Second-The impact of such pricing strategies on competition and on consumer welfare must be carefully assessed.
    • Driving out competitors is not equal to driving out the competition: It is quite likely that once the competition is eliminated and the platform starts to raise prices, new players will enter the market, attracted by higher prices.
    • Driving out competitors may not be the same as driving out the competition — though the extent to which new firms are able to enter the market will depend on the degree to which barriers to entry exist.
    • Concerns of recovering the losses: Platforms will be mindful that losses will be hard to recover, and may not engage in below-cost pricing to drive out competitors for extended periods.
    • Consumers are unlikely to lose out as prices are likely to remain low.
  • Third- Possibility of collusion
    • There is also an argument for closer examination of such market structures because of the possibility of collusion.
    • Customers moving towards cheaper options: In most such markets, as the consumer has little to differentiate between the two platforms, it is the price that sets them apart.
    • Consumers tend to gravitate towards the cheaper option. This ensures continuous competition between the major players to offer low prices.
    • Possibility of customer left with no option: It is possible that at some point, the players will find it in their interest to venture into some sort of agreement that allows both of them to survive, rather than be engaged in a race to the bottom — as has seemingly happened in the telecom sector.
  • Fourth- Linking predatory pricing with abuse of dominant market position must be reexamined.
    • The dominant position is not always linked with predatory pricing: As the experience of the telecom sector shows, a dominant position may not be a prerequisite for predatory pricing.
    • Accepting this argument would imply that if regulatory intervention is required to check predatory pricing, it could kick in before market power or dominance is established.
    • Taking into account deep pockets: Alternatively, the definition of market dominance could be expanded to take into account deep pockets.

Conclusion

  • Set of guidelines instead of the fixed framework: Any intervention to “correct” pricing essentially involves placing a higher weightage on the assumed losses of competitors/producers than on the consumer’s apparent gains. This is not a straightforward exercise. Having a fixed predetermined framework is unlikely to be helpful. Instead, it would be more useful to have a set of guiding principles based on which regulatory intervention, if required, can be undertaken.
  • Safeguarding competition not competitors: Competition policy should be driven by safeguarding competition, not competitors. It should seek to bring about greater transparency in pricing and reduce information asymmetry.

 

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

Adjusted Gross Revenue (AGR)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AGR

Mains level : AGR disputes of Telecom companies

The Supreme Court came down heavily on the Department of Telecommunications (DoT) for issuing a notification that asked for no coercive action against telecom companies even though they had not paid the adjusted gross revenue (AGR) dues by the stipulated deadline.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees.

What does SC order on AGR mean?

  • The order by the top court means that the telecom companies will have to immediately clear the pending AGR dues, which amount to nearly Rs 1.47 lakh crore.
  • Vodafone Idea, which has to pay up nearly Rs 53,000 crore, faces the prospect of shutting down business.
  • Bharti Airtel, which faces a payout of more than Rs 21,000 crore, could also be in trouble for not paying the AGR dues on time.
  • Other than the telcos, non-telecom companies could also be facing huge payouts individually, which amount to total of Rs 3 lakh crore.

What exactly did the government notification say?

  • The Licensing Finance Policy Wing of the DoT last month directed all government departments to not take any action against telecom operators if they failed to clear AGR-related dues as per the Supreme Court’s order.
  • The order came as a huge relief for operators — mainly Bharti Airtel and Vodafone Idea — that would have otherwise faced possible contempt action for not paying dues by the deadline that ran out on that same day.

No more relief to telecoms

  • Bharti Airtel and Vodafone Idea together owe the telecom department Rs 88,624 crore.
  • Prior to the DoT order restraining coercive action, the companies had told the government that they would wait for the outcome of the Supreme Court hearing.
  • Reliance Jio paid up its dues of Rs 195 crore on January 23.
  • As things have turned out, however, the companies have got no relief from the Supreme Court.

What is the background of SC’s AGR order?

  • On October 24, 2019, the court had agreed with DoT’s definition of AGR, and said the companies must pay all dues along with interest and penalty.
  • Bharti Airtel and Vodafone Idea had tried to persuade DoT to relax the deadline and, after failing, moved the court seeking a review of its judgment.
  • The court dismissed the review petition in mid-January, and also did not extend the deadline for paying AGR dues.
  • It had, however, agreed to hear the companies’ modification plea.

Where does the government stand in this situation?

  • The payout by telecom and non-telecom companies is likely to lead to windfall gains for the central government, which could help it close some of the fiscal deficit gap for the current financial.
  • At the same time, however, the government will be under pressure to ensure that the telecom market does not turn into a duopoly if Vodafone Idea does indeed decide to shut shop.
  • It will also have to manage the payouts to be done by non-telecom companies as most of them, such as Oil India, Power Grid, Gail, and Delhi Metro Rail Corporation are public sector units.

What does this situation mean for customers and lenders?

  • If Vodafone Idea does exit, an Airtel-Jio duopoly will be created, which could lead to bigger bills, considering it was the cutthroat competition in the sector that made mobile telephony and Internet almost universally affordable.
  • The AGR issue has triggered panic in the banking industry, given that the telecom sector is highly leveraged.
  • Vodafone Idea alone has a debt of Rs 2.2 lakh crore that it has used to expand infrastructure and fund spectrum payments over the years.
  • The mutual fund industry has an exposure of around Rs 4,000 crore to Vodafone Idea.

Assist this newscard with:

Explained: Adjusted Gross Revenue (AGR) in Telecom Sector

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

Missed call

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- AGR issue and its impact on the telecom sector of the country.

Context

As the dust settles after the Union budget and the Supreme Court’s decision to not provide relief to telcos from their licence fee liabilities, it is an appropriate moment to step back and examine how we got here.

The issue over the definition of AGR (Aggregate Gross Revenue)

  • What is AGR issue: Since the New Telecom Policy of 1999 (NTP 1999), operators were required to pay a percentage of their AGR to the government as licence fees instead of a one-time licence fee.
    • License fee based on earnings: This was done in exchange for moving operators from fixed licence fee-based on irrationally exuberant bids they had made in the mid-nineties-to a regime that determined licence fee based on revenue earned, thereby de-risking the obligation.
    • Why it matters? What constitutes AGR is important for the purpose of the computing licence fee and thousands of crore are dependent on this.
  • Consequences of ambiguity over the definition of AGR: Bundling – a pervasive phenomenon in most telecom markets have not taken off in India.
    • What is bundling? Product bundling is a marketing strategy that involves offering several products and/or services for sale as one combined product.
    • The fear is that handset sales will also come under the purview of AGR. Handsets, it could still be argued are part of the service offering.
    • Dividend on earning is considered as the part of AGR: Interest and dividend earnings on investments have also been included in AGR.

Unfair practices and cancellation of licences by the court

  • Controversy over conversion charges: In 2003, “limited” mobility service was converted into a fully mobile service with a one-time payment of Rs 1,658 crore as “conversion” charges, generating controversy. It was labelled as a “back door entry” to full mobility.
  • Disguising international calls as domestic: Around the same time, the DoT used to levy a fee of Rs 4.75 per minute on international calls known as “access deficit charge” (ADC) to fund universal coverage. It is well known that an operator disguised international calls as domestic to bypass ADC.
  • Showing call revenue as internet services revenue: For some time, internet services attracted lower or no licence fee and it became expedient for operators to indulge in license fee “arbitrage” by showing more revenue from internet services.
  • Inflating subscriber numbers: Another manoeuvre was to inflate subscriber numbers to gain access to scarce spectrum in the days when fresh spectrum was administratively assigned based on subscriber numbers.
  • First come first serve policy: Finally, the shameful spectacle was the battle fought by operators to jump the queue to deposit earnest money for gaining rights over the spectrum that was oddly sought to be assigned by a method called “first come first served” and whose definition itself was quite elastic.
  • Cancellation of licence by the Court: Thereafter, in the litigation that inevitably followed, the Court cancelled 122 telecom licences and mandated allocation of spectrum by auction.

Conclusion

  • Erosion of trust between the public and private sector in general and in the telecom sector, in particular, has been a negative externality of the reform process.
  • Restoration of trust between public and private sector is necessary: In this context, the appeal made by the finance minister during her budget speech for the restoration of “vishwaas” between the public and private sectors and between citizens and government is critical

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

[pib] UNCITRAL

Note4Students

From UPSC perspective, the following things are important :

Prelims level : UNCITRAL

Mains level : Not Much

 

An International Arbitration Tribunal has dismissed all claims brought against  India in entirety. The arbitration arose out of the cancellation of Letters of Intent for the issuance of telecom licences to provide 2G services in five telecommunications circles by reason of India’s essential security interests.

UNCITRAL

  • The UN Commission on International Trade Law (UNCITRAL) is a subsidiary body of the U.N. General Assembly responsible for helping to facilitate international trade and investment.
  • Established by the UNGA in 1966, UNCITRAL’s official mandate is “to promote the progressive harmonization and unification of international trade law” through conventions, model laws, and other instruments that address key areas of commerce, from dispute resolution to the procurement and sale of goods.
  • UNCITRAL carries out its work at annual sessions held alternately in New York City and Vienna, where it is headquartered.
  • The Tribunal constituted in accordance with the UNCITRAL Arbitration Rules 1976 is seated at the Hague, Netherlands, and proceedings are administered by the Permanent Court of Arbitration.

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

Telecommunication Consumers Education and Protection Fund (TCEPF)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : TCEPF, TRAI

Mains level : Telecom regulation in India

The Telecom Regulatory Authority of India (TRAI) has informed that telecom service providers will need to deposit all unclaimed money of consumers, including excess charges and security deposit, in the Telecommunication Consumers Education and Protection Fund (TCEPF).

Telecommunication Consumers Education and Protection Fund (TCEPF)

  • The TCEPF Regulations, 2007 have been amended to provide the basic framework for depositing unclaimed money of consumers by service providers, maintenance of the TCEPF and other related aspects.
  • Any unclaimed / unrefundable amount belonging to consumers in the TCEP fund will be utilized for the welfare measures of the consumers.
  • With this amendment, service providers will deposit any unclaimed consumer money of any form such as excess charges, security deposit, plan charges of failed activations, or any amount belonging to a consumer, which service providers are unable to refund to consumers.

Why such move?

  • The TRAI observed that there is a need to bring clarity among service providers in depositing money which they are unable to refund to the consumers.
  • While some service providers were depositing money only on account of excess billing revealed in the audit, others were depositing unclaimed money such as security deposits and plan charges of failed activations.

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

Millimeter Spectrum

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Millimeter Spectrum

Mains level : Rolling out of 5G services in India

The DoT plans to auction the 24.75 – 27.25 gigahertz (GHz) spectrum in the 5G band in March-April 2020.

Millimeter Spectrum

  • The new spectrum under the 5G band called the ‘millimeter-wave bands’ is separate from the 8,300 megahertz (MHz).
  • The millimeter-wave band or extremely high-frequency frequency spectrum is mainly designed for usage in airport security scanners, closed-circuit television, scientific research, machine-to-machine communication, and military fire control.

What’s so special with this MM spectrum?

  • As the wavelength becomes smaller, the cell size becomes less, which is the footprint of the relay station. This will be used more by the industry.
  • If we you already have fiber connection and want to reach houses, this will be through millimeter bands.

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.

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

[oped of the day] One Step Forward, two steps back for telecom sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Telecom sector - policy issues

Context

Policy uncertainty is not good for investment. Despite that caution, the Indian telecom sector has been the beneficiary of vast amounts of investments from both domestic and foreign sources. 

Telecom sector

    • Investment – The magnitude of foreign investment in the telecom sector since the 1995 liberalization stands at $40 billion.
    • Policy – The National Telecom Policy (NTP) of 1994 acknowledged for the first time the need to create a world-class telecommunications infrastructure, and the centrality of private investment to achieve. 

Regulator

    • Inviting private investment without an independent regulator was flawed thinking. 
    • The Department of Telecommunications (DoT) had also devised a regime that was skewed in its favour and was essentially anti-private sector. 
    • Litigation became the norm. Eventually, the Supreme Court pronounced that private investments cannot happen without a regulator. 
    • Excessive and severe discord between DoT and TRAI  led to litigation, which in turn prompted the government to dissolve TRAI and its adjudicatory powers were given to a special tribunal for telecom, TDSAT, which came into being in 2000.

Spectrum

    • Spectrum assignment has been another instance of policy uncertainty. Until 2001, the spectrum was assigned through auctions via a contrived administrative procedure linked to subscribers. 
    • This created perverse incentives to game the system during 2003-08. 
    • The more subscribers you could show on your network, the more spectrum you were awarded. 
    • Certain operators inflated subscribers to gain spectrum. Others lobbied to jump the queue when the first-come, first-served criterion was selected as the assignment method. 
    • The Supreme Court came down on the impropriety in assigning spectrum and cancelled 122 telecom licences in 2012. 
    • It justified its judicial overreach in the larger public interest and pronounced that assigning spectrum to be done through an auction. 
    • Auctions continue to be the norm today and have become a millstone around the sectors neck.

Licence fees

    • The definition of sector revenue is linked to licence fees. 
    • Because telecom operators have to pay a percentage of adjusted gross revenue (AGR) to the government as licence fee, its accurate calculation is of vital importance. 
    • Its genesis dates back to 1999 when the market contributed to the exaggerated bids by new entrants.
    • Unable to honour their bids, operators were granted a migration package in which licence fee became a percentage of revenue. 
    • The deal has now become a bone of contention between DoT and operators. 
    • The department contends that for AGR calculations all revenues earned by operators must be included. Operators reason that AGR should only include revenue from telecom services. 
    • The Supreme court had sided with DoT creating a $19 billion burden on the sector. 

Way ahead

    • The endless litigation reflects an institutional malaise and deep trust deficit between the private and public sectors.
    • Unless we resolve this, telecom will not live up to its promise and will impair our digital future.

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

Explained: Adjusted Gross Revenue (AGR) in Telecom Sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AGR

Mains level : Slowdown in the Telecom sector


  • In a strongly-worded order, the Supreme Court of India upheld the Department of Telecom (DoT)’s interpretation of “adjusted gross revenue” (AGR).
  • This came as a huge blow to telecom service providers.
  • Following the order, the telcos are now staring at dues of an estimated ₹1.4 lakh crore, which needs to be paid to the government within three months.
  • Most industry players and analysts have argued that the payout of the huge amount could be the final straw for the already distressed sector.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.

Why is AGR important?

  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why do telcos need to pay out large amounts?

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.
  • While the exact amount telcos will need to shell out is not clear, as in a government affidavit filed in the top court, the DoT had calculated the outstanding licence fee to be over ₹92,000 crore.
  • However, the actual payout can go up to ₹1.4 lakh crore as the government is likely to also raise a demand for shortfall in SUC along with interest and penalty.
  • Of the total amount, it is estimated that the actual dues is about 25%, while the remaining amount is interest and penalties.

Is there stress in the sector?

  • The telecom industry is reeling under a debt of over ₹4 lakh crore and has been seeking a relief package from the government.
  • Even the government has on various occasions admitted that the sector is indeed undergoing stress and needs support.
  • Giving a ray of hope to the telecom companies, the government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

Issue of lower tariff

  • Currently, telecom tariffs are among the lowest globally, driven down due to intense competition following the entry of Reliance in the sector.
  • The TRAI examines the merits of a “minimum charge” that operators may charge for voice and data services.

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

Can the government intercept WhatsApp?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Over the Top services; End to End encryption

Mains level : State surveillance; Social Media

News

The TRAI is studying the possibility of bringing platforms such as WhatsApp under the ambit of “lawful interception”.

Lawful Interception

  • Lawful interception of online communications platforms such as WhatsApp, Skype, Signal or Telegram has been a long-running debate.
  • It has ranged governments and regulators across the world against technology companies and privacy activists. 
  • The authorities want such platforms to provide access to messages, calls, and their logs to law-enforcement agencies to aid them with investigations. 
  • India, too, has made demands for traceability of communications from instant messaging platforms.

Why is TRAI looking at the lawful interception of online messaging apps?

  • Issue of OTTs – The telecom sector watchdog has been carrying out consultations to build a regulatory framework for over-the-top service providers (OTTs).
    • OTTs are the platforms that use the infrastructure of traditional telecom companies like the Internet to offer their services. 
    • TRAI has been looking at the regulation of OTTs since 2015 when mobile companies first raised concerns over services such as WhatsApp and Skype causing loss of revenues by offering free messaging and call services.
  • Regulatory regime – The other argument made at the time was that these services do not fall under the licensing regime prescribed by the Indian Telegraph Act, 1885, and operated in a regulatory dark spot.
  • There are concerns about the lack of a level playing field between telecom companies and OTT service providers, including the economic aspect. 
  • With the boom of data consumption in the country over the last two or three years, the regulator began looking at the security facet of the regulatory imbalance between the two kinds of players. 
  • While telecom players are subjected to lawful interception as per the telegraph law, OTT platforms, as they are not licensed, are not subject to interception by law enforcement agencies.

How will the regulator proceed with the proposal now?

  • TRAI will submit its views to the Department of Telecommunications (DoT), which will decide on the next course of action. 
  • Currently, the regulator is studying global practices as far as a lawful interception on online platforms is concerned. 
  • It is also looking into whether other regulators and authorities have been provided any facilities for interception of communications, and could suggest that the platforms should provide the same facilities to the Indian government.

Under which laws are telecom firms currently subject to lawful interception?

  • The Indian Telegraph Act, 1885 states that on the occurrence of any public emergency, or in the interest of public safety, 
    • the central government or a state government can take temporary possession as long as the public emergency exists or the interest of the public safety requires the taking of such action 
    • of any telegraph established, maintained or worked by any person licensed under the Act. 
  • This mandates telecom companies to provide access to messages, calls, and logs of these in case a court order or a warrant is issued. 
  • However, the government is not relying on The Telegraph Act to meet this objective. It wants the platforms to come up with a solution to enable traceability.

So, are messages sent and received on these platforms not traceable?

  • Apps such as WhatsApp, Signal, Telegram, etc. claim to provide end-to-end encryption of their messages. 
  • This has caused some uncertainty among the authorities on how they can seek access to messages.

The case of WhatsApp

On the FAQ page on its website, WhatsApp states: 

  • We will search for and disclose information that is specified with particularity in an appropriate form of the legal process and which we are reasonably able to locate and retrieve. 
  • We do not retain data for law enforcement purposes unless we receive a valid preservation request before a user has deleted that content from our service.
  • It also says that in the ordinary course, WhatsApp does not store messages once they are delivered. 
  • Undelivered messages are deleted from servers after 30 days. 
  • As per the WhatsApp Privacy Policy, they may collect, use, preserve, and share user information if it is reasonably necessary to
    • keep users safe
    • detect, investigate, and prevent illegal activity
    • respond to legal process, or to government requests
  • They also offer end-to-end encryption for the services. End-to-end encryption means that messages are encrypted to protect against WhatsApp and third parties from reading them.

And what is the situation elsewhere?

  • Currently, there is no jurisdiction anywhere in which messaging apps have been known to provide access to their messages. 
  • Pressure on such services to provide access for law-enforcement purposes has been rising everywhere. 
  • The United States Department of Justice has made fresh arguments for access to encrypted communications. The New York Times reported that Attorney General William P Barr has written to Facebook CEO Mark Zuckerberg, pointing out that companies should not “deliberately design their systems to preclude any form of access to content even for preventing or investigating the most serious crimes”.
  • In India, Law and IT has repeatedly stressed the need to be able to trace messages to prevent serious crimes. 
  • The Indian government has conceded that encrypted messages may not be accessible. 
  • It has asked the platforms to provide the origin of messages that could possibly incite violence or other mischievous acts.

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

[op-ed snap] A land of missed calls and revised deadlines

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Telecom pricing and challenges

Context

Telecom service providers have reduced the ringing limit for outgoing calls to 25 seconds. 

Call duration – costing

  • The sounds that alert us to incoming calls are not exactly costless. 
  • Every ring eats up radio frequency, and Indian telecom companies cannot be faulted for wanting to move towards international standards. 
  • So far the majority view was in favor of rings that last 30 seconds. It was lost in a haze once Reliance Jio set the cut-off limit for its outgoing calls to 25 seconds, and its rivals Airtel and Vodafone Idea followed suit. 
  • Such a short ring duration lends itself to accusations of being designed to induce callbacks from call recipients who are unable to respond in time. 
  • Under a “calling party pays” framework, an operator that originates a call must pay a termination fee to the network that answers. 
  • This means a net gain is made if more calls come in than go out to other networks. 
  • This intake constitutes a sizeable chunk of operator revenues.

Technology offers benefits

  • As technology pulls down the cost of carrying voice traffic, termination fees are to be phased out. 
  • The payment system is currently the subject of a policy tweak to set a sunset date for it. 
  • Packet-switched networks, such as those using 4G cellular technology, render these charges redundant. 

Challenges

  • It is expected that domestic telecom firms would have upgraded their grids and moved their legacy subscribers on these networks by the end of this year. 
  • The shift has been very slow. Every second cellular subscriber in India is still on either a 2G or 3G network. 
  • Only about half the handsets selling are 4G-enabled. 
  • Setting up new networks is one thing, getting subscribers to embrace them is quite another. Jio took just three years to expand its share of subscribers to around one-third of the total by bundling cheap tariff plans with elementary handsets hooked to its network. 
  • Bharti Airtel and Vodafone Idea were left vastly indebted by the large sums they paid for 2G and 3G spectrum. For them, pushing most of their subscribers to the latest available generation of mobile technology has been a far stiffer challenge.

Change in regulations 

  • The axing of termination fees was to mark India’s mass up-gradation
  • There is a need to address the incentive that operators have to resist change
  • If the status quo persists, millions of mobile subscribers could be left with outdated means of communication. 
  • The burden of high spectrum fees has already acted as a drag on the adoption of new technologies. 

Way ahead

  • As India gears up to roll out 5G services, telecom regulation must help the sector strike an optimal balance. 
  • The country has always taken a dual-lane approach to wireless telephony. A slow lane is alright, so long as the fast lane keeps up with the rest of the world.

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

[op-ed snap] Trai’s attempt to review tariffs raises concerns

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : TRAI NTO on channel subscriptions

CONTEXT

Discovery Communications filed a writ petition in the Delhi High Court against TRAI’s new consultation paper on tariffs regarding broadcasting and cable services. 

Background

  • It seeks a stay on the consultation paper saying that it lacks objectivity, transparency and fairness of approach. 
  • Discovery argues the consultation paper is based on the assumption that television broadcasters are responsible for manipulating and distorting pricing of channels, thereby affecting consumer choice.
  • TRAI is attempting to review the six-month-old new tariff order (NTO), which allowed consumers to choose their channel on an à la carte basis with broadcasters having to declare the maximum price of each channel separately. 
  • Several research studies found that instead of lowering the monthly cable and DTH bills for the consumers as was intended, the new framework led to an increase in monthly charges.
  • Several broadcasters raised concerns about the new consultation paper. They say that the Trai’s move favours the distribution platform operators (DPOs) such as cable and DTH services. 
  • They feel that under the new tariff order the distribution platforms have gained the most as they get a fixed network capacity fee (NCF) of ₹130 for 100 standard definition (SD) channels and ₹20 for the next slab of 25 SD channels. 
  • The new consultation seeks to review broadcasters’ bouquets to check misuse of flexibility in pricing. 
  • By regulating the channel pricing, it is not allowing broadcasters to monetize their IPR
  • Trai assumes that à la carte is the preferred choice among consumers, although it offers no research by way of evidence.

Broadcasting and NTO

  • Broadcasting in India has always been a standoff between broadcasters and DPOs, and the DPOs have always been winning. 
  • Trai, as well as the ministry of information and broadcasting, have always seen their role as controlling broadcasters, never the DPOs.
  • DPOs have other advantages, too. If you have to be part of the first 100 free-to-air (FTA) channel bouquet of a DPO, you have to pay a carriage fee.
  • Also, they are pushing their own bouquets onto the consumers. 
  • At present no distributor platform has the capability to offer complete à la carte channel choice involving various permutations and combinations for each and every consumer. 
  • The new tariff order robs a consumer of his chance to discover new content as he was getting many channels for a very low monthly fee.
  • The new tariff order and the new consultation paper may kill the smaller channels. There is nothing wrong if weaker channels piggyback on stronger ones. 

CONCLUSION

Consumer should get actual choice and be able to pay only for what he watches. The revised tariff order seeks to make amends, but Trai has not acknowledged the mess it created.

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

Explained: Huawei controversy and 5G rollout in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G technology

Mains level : Huawei Row

  • The telecom minister has said that India would conduct field trials for 5G telephony in the first 100 days of the new government.
  • One question that has been asked is whether Chinese equipment manufacturer Huawei will be able to participate in the trials.
  • Huawei was blacklisted by the US government for American companies to do business with after it was alleged that the company shared data with the Chinese government through the backdoor.

Why did US blacklist Huawei?

  • Huawei is the world’s largest maker of telecommunications equipment and the No. 2 vendor of smartphones, ahead of Apple Inc.
  • However, notwithstanding its dominance, the US has effectively banned Huawei from selling its products after a 2012 congressional report stated that Huawei could be a security risk.
  • According to the US, Huawei’s owners have close links with the Chinese military and, as such, the company cannot be trusted with data.
  • The treatment of Huawei has become a massive reason for further straining the already fraught diplomatic relations between the US and China.

India stand on the Huawei controversy

  • Following Huawei’s blacklisting several countries were asked to take a stand on whether or not to allow the company to operate.
  • Certain countries such as the UK did not follow the US and cited benefits to operators from Huawei’s cost-efficient technology as the reason behind not banning the firm.
  • While India is yet to take a stand on whether or not to allow Huawei in 5G trials, officials at the telecom department have indicated that a decision will be taken in consultation with the MHA and MEA.
  • Huawei, however, has said that it is ready to sign a “no-backdoor” agreement with the Indian government and telecom companies to ensure that no snooping is allowed on its network.

Where does India stand on the rollout of 5G vis-a-vis other countries?

  • Deliberations are still on whether to give spectrum for 5G in the 25 GHz and 28 GHz bands.
  • This is one of the factors causing a delay in the auction of airwaves necessary for 5G deployment.
  • In February last year, Airtel and Huawei conducted a lab trial for 5G during which a user throughput of 3 Gbps was achieved. However, not much has moved since then.
  • A committee of the telecom ministry recently cleared the proposal to allow few Indian companies to conduct 5G spectrum trial.

What happens after field trials are conducted?

  • Field trials allow operators and equipment makers to prove that the network they have built in a laboratory also works outside in a field.
  • Even after conducting the field trials, operators will have a long way to go before commercial rollout primarily because of the lack of availability of the necessary spectrum.
  • Some telecom companies, however, have questioned the need for rolling out 5G in India given that focus is still on the propagation of 4G services, especially in the hinterlands of the country.

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

[op-ed snap] Caution on spectrum

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Auction of spectrum may not be a good idea.

CONTEXT

  • On Monday, the Telecom Regulatory Authority of India (Trai) reiterated its stance on the issue of spectrum pricing, including that of 5G, for the upcoming auctions.
  • This was in response to the Digital Communications Commission, the apex decision-making body of the Department of Telecommunications, which had sought a review of the Trai’s August 2018 recommendations on the auction of spectrum.

Reviewing the Trai’s recommendations

  • The commission’s call for reviewing the Trai’s recommendations came amid concerns over the financial health of telcos, and worries that demand for spectrum is likely to be muted as consolidation in the sector has effectively left only three private telecom service providers.
  • But, in its response, Trai has stayed with its earlier position, stating that all relevant factors, such as the methodology, assumptions, as well as developments between the spectrum auction held in October 2016 and its recommendations, released in August 2018, have been considered.

Telecom sector and revenue

  • Over the years, the telecom sector has been a major source of revenue for the government.
  • And at a time when the Centre is struggling to meet its revenue targets, higher proceeds from spectrum auctions could provide the much-needed boost to government coffers.
  • But the temptation of revenue maximisation should be resisted when there are legitimate concerns over the financial health of the sector.

Lessons from the last bidding

  • Aggressive bidding by telcos in the 3G auctions in 2010 marked a turning point in the industry’s fortunes.
  • As a result of the pile-up in debt, highly indebted telcos exercised restraint in the 2016 spectrum sale, with the government realising only Rs 65,789 crore as revenue against Rs 5.63 trillion (base price) worth of spectrum that had been put up for sale.
  • The price war, which began in September 2016, only exacerbated the already precarious financial position of incumbents.
  • Their deteriorating finances have also taken a toll on the government’s revenue. In 2018-19, the Centre was able to collect only Rs 39,245 crore through licence fees and spectrum usage charges, as against the initial target of Rs 48,661 crore.
  • In comparison, it had collected Rs 70,241 crore in 2016-17.
  • While average revenues per user (ARPUs) have risen of late, a turnaround is still some time away.
  • With precarious finances, a repeat of the 2016 auction is a possibility.

Implications for Telecom Sector

  • At such high prices, cash-strapped operators will find it difficult to bid, without sinking even more into debt.
  • This could impact their capital expenditure, leaving them with fewer resources to invest in towers and fibre optics.
  • Acknowledging the issues plaguing the sector, the telecom minister, Ravi Shankar Prasad, has recently set up a panel to rationalise levies, and to look into other issues.
  • While it might be difficult to set aside Trai’s recommendations, the government would do well to think carefully through the implications of the recommendations, before rushing to auction high-priced spectrum.

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

5G network in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 5G and its comparison to 4G and 3G

Mains level : Read the attached story


  • Recently the Union Communications Minister has announced that the government will be holding an auction for spectrum, which includes airwaves that will be used to offer 5G or fifth-generation services.
  • While some countries such as South Korea and the U.S. have begun rolling out commercial 5G services, India is yet to begin trials for.
  • India is targeting 2020 as the launch year for 5G in the country.

What is 5G?

  • It is the next generation cellular technology that will provide faster and more reliable communication with ultra low latency.
  • A government panel report points out that with 5G, the peak network data speeds are expected to be in the range of 2-20 Gigabits per second (Gbps).
  • This is in contrast to 4G link speeds in averaging 6-7 Megabits per second (Mbps) in India as compared to 25 Mbps in advanced countries.
  • Once 5G becomes commercial, users will be required to change their current devices in favour of 5G-enabled ones.
  • However, it is likely that the primary use of the technology will go beyond delivery of services on personal mobiles devices.

Utility of 5G

  • 5G is expected to form the backbone of emerging technologies such as the Internet of Things (IoT) and machine to machine communications.
  • It would be supporting a much larger range of applications and services, including driverless vehicles, tele-surgery and real time data analytics.
  • One of the primary applications of 5G will be implementation of sensor-embedded network that will allow real time relay of information across fields such as manufacturing, consumer durables and agriculture.
  • 5G can also help make transport infrastructure more efficient by making it smart.
  • 5G will enable vehicle-to-vehicle and vehicle-to-infrastructure communication, making driverless cars, among other things, a reality.
  • The ultra low latency offered by 5G makes the technology desirable for such use cases. Latency is the amount of time data takes to travel between its source and destination.

Economic impact

  • 5G is expected to create a cumulative economic impact of $1 trillion in India by 2035, according to a report by a government-appointed panel.
  • According to a separate report by telecom gear maker Ericsson, 5G-enabled digitalization revenue potential in India will be above $27 billion by 2026.
  • Additionally, global telecom industry GSMA has forecast that India will have about 70 million 5G connections by 2025.

What about spectrum auction?

  • The government plans to undertake spectrum auction in the current calendar year.
  • In a first step towards preparing for these auctions, the Telecom Regulatory Authority of India (TRAI) had in August last year recommended that entire available spectrum be put to auction in the forthcoming sale.
  • As a result a total of 8,644 MHz of spectrum will be put on sale, making it the largest ever such auction.
  • For 5G spectrum, i.e. the spectrum in 3300-3600 MHz which will be put out for bids for the first time, the regulator has recommended a pan-India reserve price of about Rs. 492 crore per MHz for unpaired spectrum.

Needs infrastructural revamp

  • Besides the spectrum, 5G will require a fundamental change to the core architecture of the communication system.
  • Simply upgrading the existing Long Term Evolution core will not be able to support the various requirements of all 5G use cases.
  • A report on 5G by Deloitte stated that it is anticipated that the industry might require an additional investment of $60-70 billion to seamlessly implement 5G networks.
  • With the entry of 5G into the Indian networks, the earlier generation mobile technologies (2G, 3G and 4G) will continue to remain in use and that it may take 10 or more years to phase them out.

Way forward

  • It is widely accepted that 5G’s value for India may be even higher than in advanced countries because of the lower levels of investments in physical infrastructure.
  • 5G may offer ‘leapfrog’ opportunities by providing ‘smart infrastructure’ that offers lower cost and faster infrastructure delivery.

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

[op-ed snap] Saving BSNL

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : There is a need to revive BSNL to strenghten telecom Sector.

CONTEXT

The Centre must take immediate steps to revive Bharat Sanchar Nigam Ltd if it wants to achieve the objective of reaching 100 per cent tele-density in rural areas and keep telecom services affordable for the common man.

Need to revive BSNL

1. Counter to any monopolistic venture – While private operators have taken over the market with billions of dollars in investments and cost-efficient operations, India’s telecom consumers need a public sector entity like BSNL as an effective counter to any monopolistic venture that may arise due to the ongoing financial stress in the sector.

2.Less number of players – From as many as nine operators, intense competition and below-cost pricing have reduced the number to just three players.

3. The pressure to increase tariffs – The larger surviving operators, who have so far managed to sustain their operations, are under pressure to increase tariffs.

4. Fear of shut down of telecom networks – The highly leveraged balance sheets of these operators could also force them to slow down the rollout of next-generation data networks to rural and economically unviable areas.

5. Catering rural area – In this context, it is important to have a strong PSU telecom company which will not only prevent private players from increasing tariffs as an easy means to escape financial stress but also ensure that rural consumers are catered to.

Past Efforts to revive PSUs

  • There have been many attempts earlier to improve the company’s operations, but most of them remain on paper.
  • Sam Pitroda’s Committee – For example, a committee headed by Sam Pitroda, then advisor to the Prime Minister, offered a 15-point plan to turnaround the PSU, including trimming staff, divesting 30 per cent equity, adopting a managed services model for its various operations and inducting a chief executive from the private sector. This plan has not been acted upon.
  • Time is running out, though. BSNL has, in 14 years, moved from Navratna status to being declared as a sick PSU, with cumulative FY2009-18 EBIT losses of 82,000 crore.

Step Forward

To prevent any further erosion of value, the Centre must do three things.

1. Divestment – First, divest all the real estate land parcels owned by the company and invest the proceeds into buying all the technology BSNL needs to be at par with private players.

2. Implement Pitroda committee’s proposal – Second, implement the proposals of the Pitroda panel, especially those related to cutting down staff costs and hiving off various businesses into different verticals.

EXAMPLE – Here, the Centre can study how British Telecom, once a struggling PSU in the UK, was turned around.

3. Autonomy – Finally, remove all political interference and appoint a strong, independent management to run the company.

Conclusion

This will not only secure the future of BSNL, but also ensure that affordable digital services reach every nook and corner of the country.

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