India’s telecom revolution is largely predicated on the sector’s independent regulator
When the definitive narrative of the telecommunications sector in India is written, mention of several milestones will be made—among them, the incredible feat of reaching a billion connections will surely occupy a lot of space. Other landmarks will include the national telecom policies of 1994 and 1999, introduction of an ‘independent’ regulator, the Telecom Regulatory Authority of India (Trai) in 1997, separation of the regulatory and adjudicatory functions by creating the telecom tribunal TDSAT in 2000, introduction of ‘calling party pays’ in 2003, the wireless in local loop (WLL) affair of 2001 and, of course, spectrum auctions since 2001. Though the sector and its stakeholders have been vilified on occasions and justifiably so, this is not a moment to rake up dirt, but to distribute credit and accolades to the several institutions that have played their part in this remarkable journey. In a reversal of Mark Antony’s dictum, we are, for the purpose of this piece, going to resurrect the good and inter the bad—letting bygones be bygones, in this moment of joy.
That this moment coincides with one year of the new government is an accident, but both NDA and UPA governments can take credit for some defining changes in the telecommunications sector. First, therefore, the department of telecommunications (DoT) for recognising in 1994, and then again in 1999, that technological change in telecom made introduction of competition consistent with collective welfare. Introduction of competition, especially when the department was in charge of distributing the privilege of a telephone connection, must have been a hard political decision. Competition, in the later years, would destroy the elitist nature of communication. In 1999, the government, on a collective plea by private sector mobile operators, agreed to reduce their licence fee burden that threatened business continuity. The sector successfully migrated to the revenue-share licence fee regime that continues today. It was again a courageous call, and found potential imitators in a Europe struggling to roll out 3G services in 2000 due to the irrational bids of their own mobile operators.
Trai’s role in sector outcomes has been special as well. Set up in 1997 to provide oversight for fair competition in consumer interest, its baptism was turbulent. It could easily have succumbed to political pressure, especially in its early years, thereby establishing a custom of being conforming and accommodating. To its credit, it did not. Instead, many of its decisions incensed the public sector that was reluctant to accept the authority of the new regulator. Thus, 70% reduction in the charge for leased circuits, steep reductions in long distance and international call charges, introduction of CPP so that mobile subscribers did not have to pay R16.80 for incoming calls were decisions that did not go unchallenged. But these were nonetheless crucial in establishing Trai’s autonomy and intent. And Trai stuck to its guns. In March 1999, it issued a landmark tariff order attempting to rebalance tariffs (increasing rentals and reducing call charges) to reflect costs more closely, upsetting especially the Left-leaning states. There were anti-Trai demonstrations including in two legislative assemblies and it was variously branded as anti-consumer, anti-public sector and also anti-private players. Someone perceptively remarked that if Trai was being bashed by all parties, it must have been doing a good job. Indeed, in 2004, Trai was named the “Asia Pacific’s Regulator of the Year”.
The role of service providers (especially the private sector mobile operators) has been extraordinary, if not decisive.
Competition has been fierce, growth brisk and sustained by astonishingly low prices. Mobile impact in India has been both profound and disruptive. The mobile has succeeded where other technologies have not. What has been breathtaking about the mobile is the pace of adoption—there have been periods when India added more mobile phones in a month than it did phones in 50 years since Independence. When India awoke to life and freedom in 1947, it had 100,000 fixed line phones for a population of 340 million. In May 2015, it has more than a billion connections, of which 973 million are mobiles! Teledensity has increased from one-third of 1% to over 80%, underlining clearly a “mobile-first” development trajectory. The decadal growth between 2000 and 2010 was an incredible 1,650%. It is now folklore that more Indians have access to a mobile phone than to a bank account, electricityor even a toilet. From a luxury when it was introduced, mobile service is now used every day by millions of Indians. There is no doubt that for certain small businesses and sole proprietorships, the mobile pays for itself.
The triggers for the massive increase in mobile penetration have been many. The effective price per minute for an outgoing mobile call has dropped from R15.30 in 1998 to R0.50 today (see graph). Innovation, or jugaad if you will, is firmly rooted in the local context. Thus, micro pre-paid, per-second billing, cash-back for receiving calls and low-priced handsets, inter alia, abridged entry costs at different points in time. Micro pre-paid allows recharge options for as low as R10. Other features of pre-paid reducing subscriber entry costs have included lifetime validity, full-value recharge and special ‘on-net’ tariff plans that proved decisive for the price-sensitive Indian market.
Another Indian innovation was the operator-pioneered WLL service that went from being an extension of the poor cordless telephone that worked only in the neighbourhood to being a fully-functional mobile operation. In the ultimate analysis, its impact on competition in the market was seminal.
Last, but not the least, credit must go to the “Argumentative Indian”, borrowing from the title of a book by Amartya Sen that evocatively captures the Indian trait of talking. The spoken word has always been relatively egalitarian—the democratisation of the mobile simply catalysed this convergence. Armed with the new toy and faced with numerous other infrastructure deficits, the Indian spoke like never before with minutes of use soaring to 500 on average for the month. But the high price of the non-CPP days had also taught her to be thrifty. Thus, India became and continues to be the ‘missed-call’ capital of the world, the word easily slipping into the Oxford Indian English dictionary and, of course, advertiser phraseology. There are delightful anecdotes of mobiles being charged in electricity deficit rural areas for a fee by an entrepreneur on a bicycle armed with a ‘car battery’. ABCD—astrology, Bollywood, cricket and devotion—are staple offerings on the mobile, the combination of consumer parsimony and operator innovativeness creating uses and applications across a host of other disciplines, such as business, politics, health, education, banking and agriculture, where traditional structures are giving way to new ones, thanks to mobile networks. Mobile communications have done more than giving Indians a voice, they have empowered people to make their own choices.
The journey to a billion mobile subscriptions has been extraordinary. India’s experience in telecom shows that it is possible to create a context for public and private sector collaboration in other infrastructure segments, however daunting it may be. Telecom has benefited from a governance structure that includes creation of an increasingly independent regulator, along with easier rules for market entry, a mechanism for funding of universal access, management of scarce resources, access to interconnection and bottleneck facilities and enforcement of regulatory rules via the creation of a dispute settlement tribunal. The telecommunications sector in India best reflects the benefits of persistence and creative incrementalism that have cumulated to produce a billion connections. It is justly a moment to celebrate.
Mansi Kedia and Parnil Urdhwareshe assisted with the article
The author is director and chief executive, ICRIER. Views are personal