New Government’s 125-day Blitz: A Good Time To Rekindle Telecom, OTT Play

The new NDA Government’s strategic 125-day business blitzkrieg could be the perfect stage to pull out this rabbit, as even just a few judicious steps can get India’s telecom magic crooning again, with OTT players beating on the drums. A breather will get the warring duo to do the profit-jig, welcoming the ordained blessings of policy jazz and related hip-hop. The recent bloody-nosed elections saw all manner of trade promises and claims being made; it is time now to lay rhetoric to rest and walk the talk.

Let’s take a 'dekko' at the runup to the policy dash. The pre-polls Narendra Modi Government raised heckled eyebrows when it asked bureaucracy to put together a 100-day business plan, which the new dispensation would unleash to celebrate the ‘Third Coming’.

That coming has happened, but in ways no one even imagined just a few weeks back. It is the coalition nature of the Modi 3.0 book that has got its thinktank to pen a frantic 125-day policy chapter, to show everyone that it means business for the next five years.

On telecom and OTTs, there’s much to be done to get the duo breathing, a must before they can start running again. To begin with, there is an urgent need to revisit how they are governed. While telcos come under the Indian Telegraph Act, OTTs are governed by the IT Act. The two are, thus, governed by different ministries, the Telecom Ministry and the Ministry of Electronics and Information Technology, respectively.

Why are they all daggers-drawn now, having lived together peacefully for years, even feeding off one another? Well, telecom provides the connectivity, while OTT firms dish out the content, mopping up 80 per cent of the revenues. Today’s cash-starved telcos, who spent billions on setting up and maintaining networks, feel these costs should be shared.

“If telco traffic consumes only 20 per cent of the network capacity, with the balance coming from large-traffic generators (‘OTTs’), then they (the latter) should contribute to network deployment and maintenance,” says Lt General Dr SP Kochhar, Director-General, Cellular Operators’ Association of India (COAI), which represents several private telcos.

Interestingly, Kochhar’s predecessor TV Ramachandran disagrees. “Telcos enjoy rights that OTTs do not, such as spectrum ownership, numbering resources, PSTN interconnect and right of way to build infrastructure. OTTs are not interested in owning spectrum or building networks and, thus, cannot be governed by laws that govern telcos,” says Ramachandran, a former champion of telco rights and now president of the Broadband India Forum (BIF), whose member list includes the likes of Meta, Netflix, Google and Amazon.

This is how two former buddies have turned into arch business rivals, over profitability that is anyway wafer-thin. With margins thinning further amid seething competition, the rift is getting wider. Conflict between the two erupted recently when 128 start-ups wrote to the Telecom Regulatory Authority of India (TRAI), arguing that over-arching regulation of OTTs would go against the principles of Net Neutrality.

The Government can bring about a truce by rationalizing the monitoring and governance structure for these two interdependent industries. This would be a good policy starting point and provide clarity and predictability, preventing further escalation of hostility between telcos and OTTs, a worldwide trend. Deutsche Telekom, Telefónica, Optus and Vodafone have raised the issue of ‘fair usage’ charges. We don’t want that battle in India.

Skirmishes between telcos and OTTs always have one ending – loss of experience or higher costs for customers. It happened when Facebook (now Meta) launched its free internet.org service to bridge the digital divide in India; it shut down soon as some telcos complained. It also happened when Airtel launched Zero, where content providers were to pay for bandwidth-usage. The TRAI was summoned again and that was that.

For customers, these ‘outages’ hold a double whammy. From the time these services and thus accruing revenues have been turned off, OTT players are quietly removing premium and ‘favourite’ content off the screens and putting them on their menu card, along with a hefty price-tag. It is this practice that is seeing India’s TV couch potatoes suddenly paying to watch hot Hollywood hits and old-time classics. This will only escalate with time.

Other steps the Government needs to take to alleviate the revenue pain for telcos and get them back to profitable ways is to provide further moratoriums on payments or convert them into equity, pending or upcoming. Without getting into who is at fault, the truth is that India’s wannabe telcos bid outrageously high prices for spectrum, especially the 3G variety. Over time, cash-flow issues and mounting debt saw telco after telco exit the Indian market. Why, even Vodafone-Idea is part-owned by the Indian Government because of this.

The authorities also need to think hard before imposing additional burden on telcos, as the few survivors are also bleeding heavily. For instance, there is a proposal to charge telcos for the number series allocated by TRAI. In a market as flagellated as India, the move will see lower SIM offtake and higher costs for telcos. With their backs to the wall, telcos will have no option but to pass the burden of SIM card payments to the consumer.

Yes, TRAI is right when it points out that as many as 22 crore mobile phone numbers are in the ‘Service Suspended Pending Disconnection’ list of telcos, and the same should be used. Telcos should pull up their socks, mumble their apologies and put these numbers to use at the soonest, but not under the threat of costs that will break the camel’s back.

Spectrum fees and instalments, interconnect charges, AGR dues, bank loans, international debt, cost of freebies, promotions and marketing expenditure – the financial burden on telcos is staggering. It is late in the day to point fingers at who made atrocious revenue and profitability forecasts a decade ago. Rather than break fingers, the new Government would do well to use its planned blitz to point them in the right direction, one that leads to stability for telcos (and dependent OTTs) and greater collections for the exchequer.