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Management gurus counsel that running businesses is akin to playing games. Solutions to intricate management problems are taught most effectively through the technique of playing complex games. However, whatever be the complexity of the game, there are always definite rules by which the game is to be played. Like held by Milton Friedman, \u201cThe only social responsibility of business is to use its resources and engage in activities designed to increase its profits\u2026.so long as it stays within the rules of the game, which is to say, engages in open and fair competition, without deception or fraud\u2026\u201d Hamlet might however, lament herein that, \u201cAy, there\u2019s the rub ...\u201d For, in the game of telecom, particularly in India, what \u2018clever\u2019 manoeuvres may come to create \u2018headaches\u2019 for the referees \u2013 the powers-that-be, for enforcement of fair play rules, must give us a pause.<\/p>

Telecom is, in many ways, a very unique market. It depends, for its lifeblood, on the government. This is because spectrum, the fundamental resource without which, mobile telecom service is, simply, impossible to provide, is held and allocated only by Government only. The other critical resources of Right of Way for setting up infrastructure and Number resources are also only available from Govt. Apart from these characteristics, it should also be appreciated that, in this industry, amazingly, a player has to remain interconnected with his or her business rivals\/competitors in order to survive! Otherwise, it is curtains for both\/all. This is indeed unique. One struggles to imagine a Maruti Udyog having to be interconnected with Toyota and\/or Mercedes Benz or a Tata Steel needing to cohabit with Essar or Jindal Steel for survival of either or all\u2026<\/p>

Apart from being characterised by the above special constraints, telecom is also one of the most regulated sectors in India. It is rigorously governed by the Indian Telegraph Act, 1885, which unambiguously regulates all aspects relating to \u201cestablishing, maintaining and working telegraphs\u201d (ie telecommunications) in India. Section 4 of the Act clearly stipulates that telecom is the exclusive privilege of the Central Government but that the Central Government may grant a licence, under specific terms and conditions and for a suitable payment consideration, to any person. It is thus clearly illegal for any entity to offer a voice,text or video-based communication service in India without a licence from DoT. Licences so issued to telecom operators have very stiff commercial, technical, security, and other operating conditions.Telecom is a capital-intensive sector and, in India, the operators have invested over Rs.750,000 crores till date for creating state-of-the art (inclusive of 4G) digital infrastructure. Revenues generated are about Rs.250,000 crores p.a, of which it contributes close to Rs.70,000 cr to the Exchequer by way of sector-specific levies and duties. This does not include the income taxes and the various customs and excise duties paid by the sector. The highly-competitive sector, which delivers one of the lowest mobile tariffs in the world, has a huge debt overhang of over Rs.380000 crores and is in significant financial stress.<\/p>

Given the above scenario, the least that one would expect is that the very challenging telecom game in India is played as per the same rules, whether they be reasonable or extremely harsh, by all the players in the field. No regulatory advantages or concessions for any player.<\/p>

<\/p>

However, this seemingly-simple ask does not elicit a satisfactory response here. Every now and then, it is seen that some players quietly get into the licensed field through a back-gate and without a proper permit and start playing the same game as the other official players but follow very different and hugely-advantageous rules. Obviously, pandemonium prevails and all suffer - the official game-organisers, the licensed players, the investors and audience etc. This has happened a couple of times before and the requisite policy & legal corrections imposed large costs on the economy and the public in various ways. Sadly, this is happening even today in front of all. As Othello might put it, \u201cChaos is come again!\u201d<\/p>

While the recognised telecom and internet operators are playing to the tough licence and regulatory conditions, we have an intriguing situation created by the unofficial entry of a new class of players, aptly described by the TRAI as \u2018Over-The-Top Communication Service Providers, or, OTT CSPs who offer very similar services but are not licensed. Clearly, there will be immense regulatory advantages for the unlicensed OTT CSPs who pay no telecom-specific duties and levies, pay no income taxes, do not have make heavy investments for spectrum and network infrastructure, no onerous security obligations & compliances, no regulatory compliances etc,- a truly enviable state, - a veritable Utopia! Quite understandably, they seem to believe, like Keynes, that \u201cthe avoidance of taxes is the only intellectual pursuit that carries any reward.\u201d And, they are happily reaping in the large arbitrage rewards! Is the loss of large revenues to the licensed TSPs and ISPs be ignored? As noted by TRAI, due the messaging apps offered by OTT CSPs, indicatively, the licensed telecom operators\u2019 SMS revenues, instead of growing annually, declined in the year before last, by Rs 3700 to 4000 crores. The GoI would consequently have lost about Rs 1200 crores through the avoidance of telecom specific levies apart from the loss of Income Tax etc. All this only on account of texting.<\/p>

One might think that the loss in respect of messaging would be made up by the rise in data usage due to the OTT CSPs riding the telecom carrier through the internet. Unfortunately, the reality is to the contrary. Situation worsens on data which is a spectrum guzzler. As noted by the TRAI, on average, the telecom operators earn about 25p per Mb of data whereas the average size of a one-minute internet VOIP call is around 150 Kb. However, while the operator gets 50p per min of traditional voice call the earning for the internet call is only about 4p per min. The average internet call is for 12 mins while the traditional voice call only 2mins. It is glaringly obvious that the high spectrum and network infrastructure costs can never be covered by the extremely meagre income from data\/internet call.<\/p>

It is not merely about operator\u2019s revenues. We could brush aside these as business risks, or, more appropriately, waive off the licence restrictions on existing telecom operators to ensure fair competition.However, the Utopia of the OTT CSPs presents other challenges. As per the TRAI (Consultation Paper dated 27 march, 2015), \u201cThe TSP (Telecom Service provider) whose network is being utilized for delivering the OTT service has no control, no rights and no responsibilities for the content on these apps and no claim on the latter.\u201dThis is surely serious. Do we turn a blind eye to the threat posed to national security by the security non-compliances? Do we condone the lack of accountability for quality or income tax no-compliance? Would the Hon\u2019ble CAG permit the losses to the Exchequer of several thousands of crores to be written off? One could go on\u2026<\/p>

The game is complex and at an advanced stage of rule-breaking \u2013 \u2018it\u2019s just not cricket!\u2019. We need to act immediately to correct. And, there may not be a perfect solution. But, as John Maynard Keynes beautifully observed, \u201cIt is better to be roughly right than precisely wrong.\u201d And, today, we are wrong - undoubtedly and precisely.<\/p>","blog_img":"retail_files\/blog_1463640794_temp.jpg","posted_date":"2016-05-19 12:23:18","modified_date":"2016-05-26 19:15:57","featured":"0","status":"Y","seo_title":"How telecom play is challenging in India","seo_url":"how-telecom-play-is-challenging-in-india","url":"\/\/www.iser-br.com\/tele-talk\/how-telecom-play-is-challenging-in-india\/1510","url_seo":"how-telecom-play-is-challenging-in-india"},img_object:["retail_files/blog_1463640794_temp.jpg","retail_files/author_1463649813_temp.jpg"],fromNewsletter:"",newsletterDate:"",ajaxParams:{action:"get_more_blogs"},pageTrackingKey:"Blog",author_list:"TV Ramachandran",complete_cat_name:"Blogs"});" data-jsinvoker_init="_override_history_url = "//www.iser-br.com/tele-talk/how-telecom-play-is-challenging-in-india/1510";">