Liberalization of the telecom sector has provided a platform for India to address many of its challenges. Today, the platform is broader, services are converged and efficient as the sector is equipped with new-generation technology and innovation. There were massive transformations in terms of technology, competition, and pricing in the past but the last few years have pushed the sector into a new era where adapting to future technology and providing quality of experience are challenging the traditional voice and data businesses.
The sector has finally consolidated to 3-4 serious players. Government’s priority for connectivity and ambitious projects like Digital India and Smart City have provided new opportunity and helped to address challenges in the regulatory policies. Amidst many challenges, the rise in data services, popularity of emerging technology, and digitization drive have attracted USD 8.8 billion foreign direct investments in the communication sector.
The Indian digital economy is poised to reach USD 1 trillion by 2025 inclusive of the USD 150 billion telecom sector, the USD 20 billion IoT market, and the USD 50 billion digital payments market. The blurring line between telecom and technology provides a trillion dollar opportunity for the telcos in the following areas.
Adoption of exponential technology. High-speed broadband has huge socio economic benefits as every 10 percent increase in adoption can add 1.38 percent to the country’s GDP. There was a massive improvement in 4G and broadband adoption as the sector added 136 million broadband subscribers (almost 11 million per month) in 2017-18. Still almost 900 million people are yet to be connected which provides a huge opportunity to add value to the economy. 5G will supersede 3G and 4G with a speed up to 10 Gbps, higher capacity to serve better QoS, negligible latency, and the ability to connect billions of connected devices. The government has allocated INR 5 billion (USD 77 million) for 5G development with an aim to introduce 5G by 2020 whereas some operators, network vendors, and technology institutes are investing for the development of the technology and massive MIMOs are already being tested successfully by several operators. The success of 5G lies on timely introduction, readiness of ecosystem, and a liberal regulatory framework.
Creating a smarter society. In urban areas, telecom services are the new enablers for the next-generation smart society. IoT and M2M devices backed by robust telecom networks are enabling smarter services such as home security and surveillance, connected vehicle, digital payment systems. The smart city market is expected to reach USD 47.70 billion by 2023 which provides a huge opportunity.
Converged services where subscribers get access to voice telephony, wired and wireless broadband, and television services along with content, Internet of Things (IoT), and financial payments with a bundled package and single bill are getting popular and provide a new stream of revenue in the sector while minimizing the churn.
Utilizing digital infrastructure. The digital infrastructure such as Aadhaar, UPI, India Stack, m-banking, online market place, and e-governance services are providing innovative ways to address the lack of physical infrastructure in the country by using the vast network of telecom. Aadhaar has already issued 1.22 billion identity cards and authenticated almost 23 billion transactions. 114 banks are using UPI which is responsible for USD 8.2 billion worth of transactions till date. The applications are user friendly, secured, and available in both feature and smartphones. All these transactions happening in telecom network provide a huge opportunity for the sector.
Building an intelligent network. Mobile data consumption has increased 144 percent and has reached 2360 petabytes (105 GB) by December 2017. The average Indian consumed 11 GB of 4G data/month which will rise as the 4G network coverage is expected to cover 90 percent of the country in next 2 years. To sustain such demand and to create a smart efficient network, operators have started investing in fiber optic network and technologies such as network function virtualization (NFV) and software defined networks (SDN).
Enabling rural inclusion. The rural tele density of 58.45 indicates that a huge chunk of rural community is still unconnected. Telecom services at USD 0.0026/min and data tariff of USD 0.25/GB should be affordable by the rural community provided the infrastructure is in place. Type B and C circles consumed around 50 percent (~ 1000 petabytes) of the total data consumed via 4G internet indicating a rising demand of data and regional content in rural areas. While the government is connecting gram panchayats with fiber backhaul, providing last mile connectivity can create a good revenue stream for operators.
Investing in emerging technology. Next-generation technologies such as IoT and AI will help operators to improve customer experience, reduce frauds and security issues. Operators are using AI to optimize their networks. AI chatbots are virtual service agents helping to solve consumer issues. Huge amount of digital information is being used along with AI and ML to fight frauds and provide better services to the consumers in real time with enhanced security.
While the operators are transforming their business models to adapt to the next-gen consumers, the sector needs to overcome some impediments to realize the true potential of telecom 2.0.
Plunging profit margin. Though the telecom players have invested heavily in network and QoS, continuous fall in data and voice tariffs have put the profit margin in danger. While the telcos are liable to repay Rs 7.7 trillion (USD 110 billion) sector debt, they also need to pay huge levies.
Poor quality of service. The sector has abundance of spectrum post consolidation to provide new technology and better QoS whereas lack of physical infrastructure such as fiber backhaul, telecom towers, small cells, wi-fi access points are major challenges to provide better QoS to the subscribers. Better policies and regulations for right of way, and radiation norms will help improve the QoS significantly.
Increasing investment demands for infrastructure and security. The growth of subscribers, connected devices require telecom operators to upgrade their existing infrastructure as well as create new infrastructure to provide reliable and secured network. Emergence of new security threats is posing new challenges for operators. Telcos are committed to spend around USD 10 billion on Infrastructure which will put additional pressure on their financial health.
Unclear regulatory environment. Apart from high tax and right of way issues, there still exist ambiguities between gross revenue (GR) and adjusted gross revenue (AGR). Layers of service providers, that is, network, infrastructure, and services are resulting in cascading of taxes. Spectrum usage charges (SUC), spectrum pricing, and interconnect charges need be rationalized.
Impact of social media. Availability of budget smartphones and cheaper data tariffs have eased the accessibility of social media among Indian youth. Almost 65 percent of the millennials communicate with each other digitally than through personal interaction. With 270 million Facebook users, 30 million Twitter users, and 225 million monthly YouTube subscribers, Indians are among the highest consumers of social media. The average Indian spends 52 minutes per day watching videos which is expected to rise to 67 minutes in 2019. Addiction to social media is increasing which has a huge negative impact on work productivity, interpersonal relationships and physical fitness. This needs to be addressed intelligently by all players. This is one of the reasons why the networks are getting choked up as the data consumption has gone in petabytes.
The Indian economy is poised to grow to USD 10 trillion by 2030 where the digital economy is expected to contribute 18–23 percent to the GDP. Next-generation telecom as the backbone will play a crucial role in building the digital economy. It will need continuous effort from operators, policy makers, as well as the end users to address the challenges efficiently and in a timely manner.