Given Indian telcos have invested over Rs 7.5 lakh crore so far, and could end up investing another Rs 5 lakh crore in just the next round of spectrum auctions—assuming the Trai recommendations are accepted, and that all bids take place at even the reserve price—it is not surprising that they were indignant when the net neutrality issue became as big as it did last year, and when it appeared the government was on the side of the net neutrality group.
With voice revenues dipping dramatically, from Rs 157 for Bharti Airtel in the December 2014 quarter to Rs137 in the December 2015 quarter, the last thing telcos want is over-the-top (OTT) players like WhatsApp voice and Skype eating into their revenues—while a one-minute call on the regular network gives telcos 50 paise or so of revenue, the same call on an OTT app will yield just 4 paise.
Theoretically, data revenues can make up the gap, but apart from the tariffs per MB being lower on data as compared to voice, the rate of growth of data services is slowing and, in any case, data services require a lot more high-cost spectrum than voice does, so the future investment requirements are much higher now—amortisation costs for Bharti Airtel have doubled in the last one year, to Rs 768 crore in the December 2015 quarter. That, of course, is why the telcos were thrilled when the department of telecommunications (DoT) sub-committee on net neutrality opined ‘the puritan view of Net Neutrality has practical limitations and it does not work in the real world’. After all, with 40% of Indians still without a mobile phone and 88% without any data services, if the telco profits are hit, the future rollout of data services is going to be hit badly. Indeed, if the Trai does come out against zero-rating and services like Free Basics, as its preliminary comments suggest it might, the access will be further limited.
While ensuring greater internet access to all Indians is really a concern the government needs to address, especially in the context of the prime minister’s Digital India initiative, the telcos need to ensure there is perfect clarity on net neutrality before the next auction takes place.
Even when the net neutrality issue came to the fore the last time, several MPs in favour of pure net neutrality pointed out that the telcos were short-sighted in bidding as much as they did since it was clear that OTT voice apps would eat into their revenues, more so when internet speeds improved as they are now. The government has, so far, been talking in various voices on pure net neutrality—that is, a WhatsApp doesn’t need a separate license to offer voice calls; while the communications minister has said he is in favour of net neutrality, the DoT sub-committee had something quite different to say. The short point is that with the DoT sub-committee’s report not binding on the government, telcos need to insist the government come out with its policy statement since that will have a bearing on what the real value of the spectrum they are bidding for is going to be.