Telcos need three more bold decisions

Source: Business Standard

Relevance: Resolving issues plaguing the telecom sector in India

Synopsis: Undoing the retrospective tax amendment affecting Vodafone Group and Cairn Energy among others was an excellent move, and proves what the government can do. These moves must now be followed by further policy changes. A brief look at some of them. 

Problems that remain 
  • Overreach in Adjusted Gross Revenue (AGR) definition (this issue is quite evident; several times SC has set aside such claims). AGRs for telecom operators need to be defined rationally. 
  • Spectrum allocation and pricing: This structure needs to be completely changed. Instead of requiring companies to make up front payments (in auctions) for spectrum allocation, rules can be made which allow its usage to be paid for by a share of revenues. This will make spectrum costs an operating expense, and will not require enterprises to make up-front capital investments, as with other resources: Electricity, water, and leased land.
    • Moreover, currently the spectrum is priced at five times the Organisation for Economic Co-operation and Development (OECD) nations, whose per capita income is 15-20 times higher than us.
Implications

Like retro tax, these problems have restricted telecom and digitization support, limiting our capacity, hereby leading to an adequate communication infrastructure. This has led to issues in many areas such as energy and water management, education and skilling, healthcare, and productivity across sectors —commerce, transportation, hospitality and tourism, manufacturing, agriculture— and in mitigating environmental impact.

Suggestions/Measures
  • A rationally, fair and transparent definition of Adjusted Gross Revenue. 
  • Wider swathes of spectrum for high data throughout; better wireless access network. 
  • Sharing of spectrum and facilities among operators, which will likely be the norm in 5G and 6G, providing a high multiplier to network usage, while considerably reducing capital investment needs countrywide.
Way forward

Constructive emphasis on infrastructure support is the way forward. The major changes of using spectrum as a shared resource with payment for usage through a share of revenues, in combination with undoing retro taxes and AGR, are the required steps. There are different ways to do this, and the government needs to steer the process through consultations to an acceptable way for us to move forward with 4G, 5G and beyond, for effective communications and digitisation.

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