New Delhi: Consumers will likely focus on the fact that it does away with roaming charges, telcos on the spectrum and licensing norms it details, and Internet service providers on Internet telephony, which it effectively allows, but analysts and telecom executives say the most significant thing about the National Telecom Policy (NTP), 2012, that the Union cabinet approved on Thursday, is that it lays out the policy regime for telcos and Internet service providers for at least part of the next decade.
That should bring some cheer to a business that has been roiled by controversy and which has rapidly lost sheen among investors and lenders.
New road map: Telecom minister Kapil Sibal.(Pradeep Gaur/Mint)
To be sure, it won’t put an end to contentious issues such as the price at which spectrum should be auctioned (which will be decided by a ministerial group) and the proposed refarming norms where some telcos will be required to surrender spectrum in a certain bandwidth for that in another. But it will provide a blueprint for reform of the current regulatory environment and eventual unify the market across the country. The reform agenda seeks to limit the discretionary power of the government and instead enhances the role of the market in determining the pricing of telecom assets such as spectrum.
Spokespersons for Bharti Airtel Ltd, Idea Cellular Ltd, Tata TeleServices Ltd and Reliance Communications Ltd declined to comment on the policy. Telcos operating on the dominant GSM technology platform, especially those that have been in business for at least five years, are sparring with the government on the proposed spectrum pricing and refarming norms, which they believe will render their businesses unviable.
The new policy comes at a time when the Indian telecom sector has been severely hit by regulatory uncertainty and upheaval due to corruption investigations against the former minister, A. Raja, and a 2 February Supreme Court verdict that cancelled 122 licences allocated to nine companies in January 2008 by him.
Communications minister Kapil Sibal said the government aims to provide 70% rural teledensity (39% at present) by 2017 and 100% by 2020, through the policy. “The policy seeks to provide a predictable and stable policy regime,” Sibal said.
The NTP 2012 document is a framework document, based on which all telecom policy decisions are made by the government. The document is meant to set out the direction of change of one of the country’s most dynamic sectors. This is the third such document put out by the government after one in 1994 and a second in 1999.
The new policy is expected to give some clarity to potential investors looking at entering the world’s fastest growing and second largest telecom market. This policy is expected to be in place for the next 10 years, a statement from the department of telecommunications (DoT) said, adding that it will operationalize the policy by bringing out detailed guidelines, “as may be considered appropriate, from time to time”.
Key changes in the current policy being brought in by the new policy include the move to delink spectrum from the licence, a proposal first moved by the Subodh Kumar-headed DoT committee, in its recommendations in 2010. The delinking allows spectrum, considered a scarce national resource, to be treated as a commodity and made use of after a market-discovered price is paid for it to the government. Thus far, most spectrum has been bundled with the licence and allocated to mobile companies.
Interestingly, the cabinet has made four changes to the policy. These relate to removing the need for a spectrum Act as well as the clear demarcation of turf related to policy decisions of DoT and the Telecom Regulatory Authority of India (Trai).
“We will also review Trai Act. In addition, policy-making function will continue to remain with government. Trai will not make any policy. Any major policy changes in future will be brought back to cabinet,” Sibal said.
The cabinet has also deleted revenue generation as a priority of the NTP 2012, making affordability and availability of effective communication the core vision and goal.
As reported by Mint on 24 June, the NTP has also said that the concept of circles, or telephone-operating areas, will be eventually done away with, and the government will work towards integrating all the 22 circles into one national circle. This would mean the abolishing of national roaming and the ability of a telephone user to use the same number across the country without having to get a new connection. Phone users would also be able to keep their numbers when changing their service providers across the country and not just within a circle as currently possible. DoT officials said this would take at least another two-three years to implement.
The removal of roaming could mean a hit on the revenues for the older incumbent operators. According to analysts, the higher impact will be on older GSM companies that have approximately 5-7% of revenue coming from roaming charges.
“This would be negative in the short term for operators as they would lose roaming revenue. However, in the long run, usage increase with no roaming charges might offset the revenue loss caused to the operators,” Hemant Joshi, partner, Deloitte Haskins and Sells, said.
The NTP aims to make India a hub for indigenous manufacturing, research and development and intellectual property creation, enabling the country to become a centre for converged communications services and greater participation by the country in international standardization bodies. “The Union cabinet will decide the manufacturing policy within a month’s time,” Sibal said. The cabinet also approved the unified licencing regime and authorized DoT to finalize the new unified licensing regime with the approval of the communications minister.
Analysts expressed optimism over the policy. “Telecom accounts for 3% of the Indian GDP and is likely to cross the 6% of GDP mark if the policy is implemented in letter and spirit. The approval has come at the right time, as the country’s GDP growth rate is falling, which is at a nine-year low,” Joshi said.
The NTP also clearly says the government will have to make clear the amount of spectrum that will be made available every five years; this will enable operators to design their network and services more efficiently. The policy also aims to provide broadband for all at a minimum download speed of 2 Mbps, allowing full voice over Internet protocol, and promotion of cloud computing and next-generation networks, including IPv6.