India is digitising faster than almost every other country—40% growth in internet users in the next five years and the absence of connectivity for 65% of the country are just a couple indicators that define the growth potential of the sector.
Roti, kapda, makaan … and internet. When Ranveer Singh’s character in the film Gully Boy gives us this updated version of an Indian’s bare necessities of life, we find ourselves nodding in agreement. After all, the Supreme Court granted Indians the internet as a fundamental right. We are a nation united by an incessant thirst for more information and instant connections. India is digitising faster than almost every other country—40% growth in internet users in the next five years and the absence of connectivity for 65% of the country are just a couple indicators that define the growth potential of the sector. However, while there is certainly much hype about India’s digital future, there are some worrisome challenges on infrastructure readiness and shortcomings in some of our approaches. There is much to be done, humongous investments to be made, and much critical infrastructure to be created to realise our true potential as future leaders in digital communications.
The landmark National Digital Communications Policy (NDCP 2018) was gazette-notified months ago and is thus a firm law of the land. It has outlined a clear way forward with goals to fiberise India, improve spectrum usage and satellite communications, and get 5G-ready. However, there is a rising concern in many quarters that there has been inadequate progress to implement the policy items. Precious time has been lost already with irreparable losses.
Improve broadband speed and capacity to enhance economic benefits: While mobile broadband take-up is high, we need to understand that our mobile broadband speeds are only about one-third the global average of 23.6 Mbps (EY). If we are so vis-à-vis global average, one can well imagine how poorly placed we’d be compared to the better regimes. One must also realise that high broadband speeds are required to extract maximum economic benefits from broadband and reduce the quality issues that plague us. Today, we are deriving only suboptimal benefits.
Even as regards fixed broadband speeds, India ranks a low 67 in the world (Speedtest Global Index). Moreover, only 7% of our country has internet through fixed-line connections (TRAI). The world average is 46%. Top quality downloads at high speeds with minimum delay need fixed-line internet. Think business needs, video downloads and more. Mobile internet cannot shoulder this burden alone.
India’s mobile broadband is crunched at over 90% utilisation. The international best practice is 60-70% to ensure a high quality with next-generation services. We have to augment resources to enhance broadband capacity. One reason for the capacity crunch is the limited broadband spectrum allocation. As much as 40% of unused spectrum is lying idle at unrealistically high reserve prices that inhibit spectrum take-up. Enormous value loss to the economy. Consumers, businesses and individuals only get limited access to high-quality, high-speed fixed-line internet, thus hindering productivity. If reformed, we can create 60-65 million jobs across sectors by 2025 (McKinsey).
The IT, BPM, digital communications services, and electronics manufacturing sectors are expected to double their GDP contribution to $435 billion in the five years. Newer sectors are digitising at a rapid pace and can accelerate productivity. Agriculture, education, energy, financial services, healthcare, logistics, retail, government services and labour markets could create $10-150 billion of incremental economic value (McKinsey). This will further drain the already limited fixed-line connections. While fiberising India is imperative, we need to upgrade the quality of our fibre networks, and provide fibre-to-home services.
Facilitate a growth mindset—give businesses a fair chance: Indian telecom service providers (TSPs) offer lowest user tariffs but are laden with some of the highest levies in the world. Licence fees and levies at 12% of revenue, GST anomalously at 18% for service (although only 12% for mobile phones), and exorbitant spectrum auction reserve prices make it prohibitive to operate. In most countries, such regulatory fees are negligible. Comparing with China, the US, Europe and even developing countries, it is as if TSPs in India are forced to move deep under water while others soar unencumbered in the skies. A reduction in levies and duties will allow TSPs to compete freely, embrace innovations, and invest in infrastructure to move forward.
TSPs’ collective debt stands at a staggering Rs 4.2 lakh crore (ICRA). Meanwhile, revenues are down due to user tariffs at unviable levels. The industry is squeezed from two sides, the government and the consumers. To survive in the fierce marketplace, TSPs are luring customers by giving them attractive phone and data pricing, and access to more video content.
It must be remembered that, since 1995, it was the private mobile operator community that was the proud flag-bearer of privatisation and liberalisation, and put Indian telecom on the world map. Ironically, these same offspring of competition and liberalisation and reforms are now bitterly opposing such progressive forces and initiatives. All because of the financial condition of the sector. This is a lose-lose-lose situation for all concerned. How can digital growth happen in such an environment? The onus is entirely on the government to act.
Much to do in manufacturing: Again, it is difficult to envisage digital leadership without domestic manufacturing capacity growing concurrently with foreign players in India. Both customer-facing equipment like smartphones and the digital network infrastructure need to be fully developed and operational. Certainly, credit is due to more than 150 domestic units producing mobile phones, but a closer look reveals that these are mere assembly units and the value added is in single digits. We need to move up the value chain rapidly or else India will continue to slide behind its global peers. Moreover, obviously, policy conditions are clearly not favourable because domestic units are going broke and even well-heeled foreign players who own over two-thirds of the capacity are only finding mere assembly with minimal value addition viable. What does this say about a nation aspiring to be one of the top digital players in the globe?
Future-proof our digital nation: Ensuring a digital future does not come cheap. We need an investment of Rs 4.2 lakh crore just to get India 5G-ready (EY). Add to this the costs of smart cities, fiberisation, satcom modernisation and digital skill-building—one would be talking of over nearly Rs 1 lakh crore over the next five years. With the telecom sector trying to cope with its crushing debt, how will it make the enormous investments for our digital future?
Again, although data take-up is high, the overwhelming percentage of our data usage is video—which is mostly entertainment. This is not optimal for the required economic growth. Just last year, we had 42% growth in digital media and digital platform subscriptions (FICCI-EY). This is an essential response to market demands. However, we need to proactively boost the amount of digital business-to-business, financial, industrial and other data transactions. We need government initiatives to educate and bring awareness about the benefits of digitising to the agriculture, healthcare, public safety, logistics management and other sectors. Only then will we see strong benefits across sectors. In 5G and overall digitisation, we cannot continue to be telecom-centric and need to embrace more verticals.
The challenges are huge, but I remain hopeful that we will focus on the ambitious goals set and work together to address the fundamental issues influencing our digital progress.
(The author is honorary fellow of the IET (London), and President of Broadband India Forum. Views are personal.
Research inputs by Chandana Bala)