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Telecom sector – challenges and prospects

Telecom sector – challenges and prospects

UPSC CSE Mains Syllabus: GS-3- Effects of liberalization on the economy, changes in industrial policy and their effects on industrial

Telecom sector – challenges and prospects


  •  Following years of breathtaking subscriber growth, tele-density is showing signs of strain.
  •  Some telecom players are facing an existential crisis due to brutal competition and the government demanding unpaid dues.
  •  At the same time, investors of different hues are lining up to invest in the space, signalling a belief that the industry still holds prospects of ample returns.


  1. Surge
  •  Tele-density has been increasing since the early 2000s.
  •  The trigger point was in 1999 when India moved away from upfront licence fee payments to a pay-as-you-go regime.
  •  Over time, India has seen subscribers with multiple SIM cards who want a feel of which service provider is better.
  • Temperamental
  •  In the lower rung of consumers, movement is higher as well as temperamental.
  •  The Telecom Regulatory Authority of India (TRAI) itself admitted that the actual numbers are 30% lower than the numbers being bandied about.
  •  This could be a COVID-19 effect where mass movement of migrant labour and joblessness could have resulted in surrendered SIM cards.

AGR and Tariff Issue:

  •  AGR comprises the regulatory fees that are broadly categorised into two areas.
  •  One is the licence fee which is 5% universal service obligation fee (USOF) plus 3% as licence fee. So that is 8%.
  •  Second comes the spectrum usage charges that range from 1% for 2,300 MHz up to 7-8%, depending upon whether the telcos are holding liberalised spectrum or unliberalised spectrum.

What experts say on this,

  •  This is huge and not an appropriate policy.
  •  In any country, the licence fee is not more than 3%, including the USOF.
  •  There is no reason why the government should levy a spectrum usage when the spectrum is auctioned.
  •  In the last auction in 2016, telcos gave ₹60,000 crore on buying spectrum.
  •  Spectrum is not something that will deteriorate. It doesn’t have depreciation or management costs associated with it. Hence, judicious amounts have to be fixed.
  •  The court ordered to include all revenues, except for termination fee and roaming charges, as a part of the AGR.
  •  There is a need to revise the AGR due, excluding the penalty.

Why 5G is different:

  •  India has moved from 1G to 2G, for both of which the operators were in full control and realising revenue.
  •  With 3G and 4G, we have seen Internet companies providing over-the-top services, and they have appropriated much value and relegated telcos to normal bandwidth providers.
  •  5G is going to be very different.
  •  5G is not about connectivity and high speed only; it is about creating an ecosystem.
  •  For example, in the case of healthcare, it is an ecosystem that would comprise telecom operators, healthcare providers, hospitals, governments, system integrators that provide Internet of Things and machine-to-machine communication.

Spectrum issues:

  •  India needs spectrum so that high bandwidth-intensive applications can be provided to end users.
  •  India is poor in allocating spectrum. There are specific spectrum bands which have been pending auction for a while now due to various reasons.
  •  India doesn’t have enough spectrums for operators despite the consolidation that has taken place.
  •  Operators need adequate spectrum to provide low latency, high coverage, highly reliable communication services.


  •  Accessibility to 5G is necessary. In this regard, a mix of fibre and Wi-Fi hotspots could be used.
  •  5G is a bandwidth that has to be used by consumers and consumers must have devices to use that bandwidth. There is also this debate using E and V bands for dense urban areas.
  •  There were consultations to use satellites to create points of presence, and distribution tributaries to users or connectivity to consumers directly like the new OneWeb satellite system.
  •  Analysis of the pros and cons is necessary before deploying the equipment’s.
  • Big corporates:
  •  It is Facebook, Google and other Internet firms that are putting in money.
  •  Because the value proposition is more on the content, and applications are abundant.
  •  India’s 650 million mobile broadband subscriber base is a huge potential base for any Internet firm to tap into.
  •  Because it will include the synergic operation of e-commerce along with this digital cloud offering as well as connectivity.

Source:”The Hindu”.


Give an account of the future prospects and challenges facing the Telecom sector. Should the government impose fewer regulations on the telecom sector for it to develop in the current scenario?