Thursday, December 31, 2009

2009: Sad Year for Indian Telecom; 2010: Unlikely to be better

I spent the entire Oh-Ohs (00's) decade working on telecom. NTP '99 heralded the real opening up of the Indian telecom sector and every spare hand was diverted to telecom... and boy, has it been an exciting ride! More than 500million subscribers were added during this period; we have seen tariffs hit all-time lows; 8 new submarine cables connected India to the rest of the world... the achievements are endless to recount here.

However, I am saddened by the manner this decade ended. 2009 has to count as the year that promised so much but delivered almost nothing. The most talked about disappointment, of course, was the postponement of the 3G & BWA spectrum auctions. What is more disconcerting was that major decisions that would have created true customer choice - Number Portability, MVNO and Internet Telephony - were put off, on some pretext or the other. Even the one decision (this year) on Calling Cards could not be implemented because the terms and procedures are yet to be finalized.

Most people are happy about the entry of new (mobile) operators and consequent reduction in tariffs. I am not so sure, though. Adding new (facilities-based) players to a reasonably crowded market is not necessarily in the best interest of the industry or the customers. While it does result in some short-term pricing benefits, the common resource used by all of them is scarce spectrum -- the more fragmented it gets, poorer the quality of service. So while we have so-called lowest tariffs, we also have poor service levels. Instead, the Government had the opportunity to introduce new forms of competition (& customer choice) through MVNO and Internet Telephony, but dragged its feet on those decisions.

Telecom policy-making was at its worst this year, with no clarity on who was responsible and in what direction we were headed. What we needed was an NTP 2009; what we got was EGoM meetings and TRAI consultation papers.

2009 saw Bharti losing out an opportunity to become a global leader in the mobile business; in fact, none of the Indian companies could capitalize on the recession (& low valuations) in developed markets to make any large, bold moves/acquisitions. Intense tariff pressures in the domestic market dented their valuations - most analysts reacted with a Sell on the Indian telecom sector, probably for the first time in the last 5-8 years.

Will 2010 be different? I do not see much cause for cheer: the fundamental problem around policy-making is not likely to go away in a hurry. 3G & BWA auctions might happen in early 2010 (only because the Government is counting on the auction money in this financial year!), but networks/services would be available only towards the end of the year, in a limited manner. The camps on both sides of MNP, MVNO and Internet Telephony are strong and therefore, I expect status quo will prevail - for all practical purposes.

It will feel good to be proven wrong.


Rajesh said...

I couldn't agree more. However, just a couple of minutes back the government has announced postponement of MNP to March. It was a really sad year for the telecom industry. But there is light at the end of the tunnel. 2010 will witness the emergence of 3G, WiMax and MNP.


Anonymous said...

With the opening of bandwidth and th eresultant channels we should see zero cost for voice calls , only value added service like 3g should cost money. The fiber channel is so vast that tariff should maturally fall, this hasn't happened in a while and now market is realising the reality that the indian public was kept under dark so far. So I see it right .