Telecom sector needs a regulatory roadmap

The biggest challenge that the telecom sector faces is regulatory uncertainty, feels Prashant Singhal, Partner & Telecom Industry Leader, Ernst & Young. “A clear regulatory roadmap will ensure that the sector is not continuously bogged down in controversy,” he suggests, during the course of a recent email interaction with Business Line.

Excerpts from the interview.

At the start of the century, or even mid-decade, what were the policy expectations in the telecom sector to be fulfilled by the end of the first decade?

At the beginning of the decade, the Indian telecom industry burdened by high licence fees was struggling to survive. It was then that the Government came with the New Telecom Policy (NTP ‘99). It allowed telecom operators to move from a licence fee regime to a revenue share era.

Since then, the growth has been only gaining steam. From a little over a million mobile subscribers in 2000, today there are more than 500 million subscribers. Yet, mobile operators are adding over 14 million new subscribers each month.

The sector has crossed all targets set by NTP ‘99. Against a target of 15 per cent telecom penetration by 2010, it is at 45 per cent now. The 15 per cent target was reached in September 2006 itself. Similarly, while the NTP set a target of 4 per cent rural teledensity by 2010, the country already has a 15.35 per cent rural teledensity as of June 2009.

The other big move in 2000 was to corporatise Bharat Sanchar Nigam Ltd (BSNL). The idea was to delink it from the Department of Telecommunications (DoT), the licensor. That has ensured BSNL’s emergence as a strong incumbent.

However, despite all this, there are areas where progress is quite slow. The 3G auction is a classic case. Despite the TRAI coming up with its recommendations on 3G in September 2006, the auctions are yet to happen.

Another area where growth has been limited is in broadband. Against a target of 20 million subscribers by end 2010, there are just 7.4 million broadband subscribers as of end October 2009.

At the close of 2009, where are we?

There is no doubt on the success of the sector. Almost all the targets that were set have been reached. It is by far one of the most competitive sectors. However, the intense competition has led to a shortage of spectrum.

The concern over the slow growth of broadband could also be covered once the broadband wireless access (BWA) auctions take place in 2010.

The Government also needs to come out with a clearer mandate on mergers and acquisitions in the sector. Consolidation will also lead to better management of spectrum.

For 2010, what should be the agenda?

The immediate focus of the Government should be on completing the auction of 3G and broadband wireless access (BWA) spectrum. It should then ensure that mobile number portability (MNP) is introduced across the country. That should be followed up by allowing the entry of mobile virtual network operators (MVNOs).

At a larger level, the biggest challenge that the telecom sector faces is regulatory uncertainty. The Government needs to draw up a well-defined regulatory roadmap for the next few years. This will result in greater investor optimism.

A clear regulatory roadmap will ensure that the sector is not continuously bogged down in controversy. Considering that communications is a key sector for overall economic development, this should be the topmost priority for the Government.