Regulatory Impediments Holding Back Telecommunication Growth

High taxation limiting the entry of new players

In addition to AGR, the telecom industry pays the Centre 30% of its earnings after each round of auction, in addition to the upfront spectrum costs. The revenue share model, which was adopted in 1999 when the spectrum was allocated based on subscriber criteria, should be abandoned.

In a recent letter to Telecom Secretary Anshu Prakash, the Cellular Operators' Association of India (COAI) stated that telecom remains one of the most heavily taxed sectors and that the government must recognize that the current revenue sharing regime of around 32 percent of revenue outgo as taxes and levies are "unsustainable." It argued that such a high rate of taxes would be damaging to the industry's growth owing to a constant shortage of spare funds to reinvest.

COAI emphasized in the letter that the industry urgently needs significant financial reforms to put it on a path of sustainable and orderly growth.

Reduced taxes and levies, increased tenure, appropriate reserve prices, and better payment conditions for auctioned spectrum are all part of COAI's policy prescription. In addition, the sector has lobbied for a lower interest rate for delayed payment liabilities, a reconsideration of the AGR definition, the establishment of a floor price, and the elimination of financial and performance bank guarantees, among other things.

Aligned pricing

Regulatory organizations are pressuring businesses to match their pricing to their production costs, which makes the competition tough. However, the telecom business must survive in a digital India, and to do so, the country needs three players who are not on the verge of bankruptcy.

To govern more effectively, the industry needs decentralized buying and decision-making power.
Profit margins are shrinking, thus carriers must improve the quality of their data and communications to adapt to a digitally altered world.

Because of the shrinking user base and rising adjusted gross income, healthy competition among competitors is becoming difficult. Low revenues, high taxation policies, and massive expenditures in spectrum and infrastructure have wreaked havoc on the business, stifling competition in India's telecom market.

For the Future

We need a clear regulatory framework that prevents excessive entry and operators from attaining economies of scale. Excessive pricing rivalry in income generation must be avoided since it will inevitably result in a lack of resources for attracting investments and innovation.

It has been stated that any telecom business should have at least five "roughly similar rivals" for customer advantages; however, the numbers can vary significantly depending on the scenario, and India now only has two companies in the lead, with the second operator on the verge of bankruptcy.

Furthermore, no business is required to have a dominant position (this would mean a market share of 40 percent or more should not likely exist). The primary goal of policies and telecom laws should be to influence market results in ways that affect pricing, output, service quality, service innovation, and healthy competition.