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Telecom's policy pitfalls

Amit Mukherjee     November 27, 2007

What’s the surest way to ensure that India misses its telecom target of 500 million wireless connections by 2010? Just continue waffling about spectrum, infrastructure and rural connectivity as we currently are. In its recent report “Telecom: Catalysing the New Indian Economy”, research firm Frost & Sullivan has emphasised that transparent and supportive policy environment, better management of spectrum, greater telecom infrastructure investment and sops to service providers in rural areas are all crucial to sustain the country’s wireless boom.

Underscoring the need for an effective government policy, the study says improved coordination amongst different government agencies helps in creating conducive environment for the sector. But the cost of delay of decisions can impact investment of up to Rs 16.1 crore per day. Indirect cost could be substantial as telecom sector is the backbone of major export earners such as the IT and BPO industries.

In the absence of a clear-cut policy, the government and telecom companies have locked horns over the allocation of spectrum. Most of the players feel the need for more spectrum to expand rapidly or even improve the quality of service. Any delay in resolving these issues and deciding how spectrum should be allocated could cost dearly, cautions the study. Also, the report points out that to serve around 500 million customers by 2010, the country would need almost 333,000 telecom towers that transmit radio signals. With around 130,000 towers currently, there is a need for more infrastructure sharing, to expedite the growth.

It’s worth heeding to the report. Telecom has played a key role in facilitating economic growth not just directly, but indirectly. Its contributions to the national GDP has increased from 1.7 per cent in 1997 to more than 2.7 per cent in 2006. Gross valued added (GVA) of the industry as a percentage of GDP has increased from 0.8 in 2000 to 1.8 in 2006. Direct employment by Indian telcos stood at 432,771 in 2006 with the state-owned players employing almost 85 per cent of them.

The telecom sector, with 106 services in the tax net, has contributed the lion’s share to the government’s service tax income. In 2006, it paid Rs 5,186 crore, the report points out. “The telecom industry is facing the challenges of interconnectivity as well as growth and expansion within the sector,” points out Sanjeev Aga, Chairman, CII National Committee on Telecom and Broadband, and Managing Director, Idea Cellular.

Aga says the government should instil confidence in the industry by planning standard policies for the sector. He suggests that telecom policy should be integrated with the national planning process undertaken by the Planning Commission.

The next three years are likely to be difficult for the industry as players enter different geographies and socio-economic regions to spur growth. That’s when the problems will hit home harder.

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