What a year it was…online, connected, wired, wireless, streamed, digital, and virtual. Children, families, consumers, businesses and governments—all of us learnt our own ways to deal with the ‘new normal’, across all walks of life.
The unsung heroes at the foundation of this rapid metamorphosis were the telecom operators. Three things suddenly happened:
1. Data traffic patterns inverted – people were no longer connected on a work day from their usual place of business, but rather connected from their homes and other remote locations.
2. Data demand surged—people took to online platforms to keep themselves entertained, working people were connected for extended hours and academics went online. India’s mobility traffic increased up to 30%i during the peak of the pandemic.
3. Usage proliferated—there were more connected applications (across B2C and B2B), like never before.
India’s telcos quietly, consistently and resiliently went about doing their job. India’s monthly data traffic in 2020 was upward of 300+ petabytes (that’s about 350 years of uninterrupted HD video streaming!). Telecom connectivity helped contain impact of the pandemic and continual lockdowns on homes as well as businesses. This has been a phenomenal effort considering some of the key pivots and perhaps rather underrated, since this is something all of us always take for granted.
As we head to the budget for 2021-2022, we find two key areas to solve:
Taking care of our heroes
India’s telecom ecosystem is at the cusp of great opportunity. As deployment of 5G technology across the world has started increasing, move to next-generation networks is imminent. These technologies will have the potential to transform how industries operate – creating competitive advantage and unlocking new opportunities for innovation. This network and technology upgrade will be significant, capital intensive and akin to nation building. As such, a key budget expectation would be to see how the telcos (across public and private sector) are incentivised for investing for the long term of India.
There are a number of considerations and the government could choose some appropriate ones. Some examples include:
1. Investment incentives such as accelerated allowances on capital expenditure.
2. Additional benefits for procuring network gear manufactured in India to promote ‘Make in India’.
3. Corporate tax breaks / tax holidays to balance the financial burden – both on spectrum and capital intensive investments.
4. GST is another angle. Government may consider rationalizing GST rates, in view of telecom services being identified as an essential service. Amendments to enable telcos to claim GST input credit on telecom towers may also be considered.
5. Staggered tranches for spectrum payouts and other input related subsidies could further ease financial outlays.
6. Another key consideration is also the rationalization of telecom regulatory fees – across Adjusted Gross Revenues (AGR) and Spectrum Usage Charges (SUC).
Building a telecom ecosystem of the future
India’s telecom sector has inherently seen some fault lines. Particularly, telecom infrastructure metrics continues to lag behind global peers. For instance, India’s per capita fibre coverage (the backbone which carries all telecom traffic) is 8-10 times lower than some of the relatively mature telecom markets. Approximately one third of India’s telecom towers are fibre connected, comparatively this ratio is north of two thirds in other markets. Fixed broadband penetration in India is at 7.5% of households— again very low compared to some of the peers. Unless these fault lines are corrected, India will not reap the full benefits of future upgrades in next generation technologies.
Here, we expect to see some reasonable Government allocations towards fiberisation of the nation. The National Broadband Mission envisages an expenditure of ₹30,000 crores for the project. The Government of India can consider an increase in the country’s annual budget for financing universal broadband access and simultaneously increase efficiency in utilization of the Universal Service Obligation Fund (USOF) India can allocate a percentage of its GDP in the annual budget as an investment towards the development of this critical infrastructure.
India’s Digital Telecommunications Policy and the National Broadband Mission have set up a robust roadmap of achieving some of these targets. With the appropriate policy interventions (such as right of way, public private partnerships) and relentless execution, India can make the most of these sectoral inflection points.
The economic benefits of a connected nation are undisputed. Broadband is demonstrated to be a GDP multiplier and one of the most effective levers available. Our telecom heroes will have an opportunity to shape a new future for businesses and consumers on the strength of advanced wireless technologies such as 5G and will continue to provide the bedrock for other industries to recover and thrive in. A helping hand from the government is imperative for India to forge ahead confidently towards building a telecom ecosystem of the future.
Views are personal. the author is partner, Deloitte India.