How draft National Telecom Policy 2011 affect foreign equipment vendors

The National Telecom Policy 2011 has several references to the global context, besides its overwhelming reference to becoming a self-sufficient telecom nation. In his national address, Kapil Sibal, Minister of Telecommunications & HRD, mentioned several measures to make India a global telecom hub in terms of manufacturing, VAS and other internationally-followed telecom practices.

Judging from past experience, these lofty ambitions have never come to life, due to problems unique to our country in terms of a telecom market with the highest number of service providers, but lowest ARPUs and tariffs, the urban-rural telephony divide, underutilization and hoarding of spectrum, insufficient fixed line penetration, inadequate broadband and internet penetration, and disunity amongst telecom bodies, to name the most important.

However, the telecom minister and his ministry seems determined this time to put preaching into practice, and has thus come out with clear-cut strategies for implementing these goals, in a measured time-frame.

The draft NTP 2011 released by the Minister of Communications is expected to take the country into the next stage of inclusive growth. We understand that the government will now initiate the consultative process across multiple stakeholders including the telecom operators. Idea Cellular will actively participate in this consultation as the country formulates its new telecom policy. There are several areas that are included in the proposals and we will need to review each of them with our experts, before reverting to the policy maker, with our comments,” said Idea Cellular in a statement.

One of the key questions is what effect NTP 2011 will have on the global perspective?

One of the most obvious effects relates to the goal of making India a global hub for telecom manufacturing, while becoming self-sufficient to supply 80 percent of the country’s own telecom equipment needs by 2020, which will include domestically-manufactured telecom networks. While 80 percent of telecom equipment today is imported, due to poor quality of indigenous equipment, the telecom ministry now plans to spend more to bring R&D and local telecom manufacturing on par with international standards, making more provisions for entrepreneurship and local manufacturing to be encouraged, with a Rs 2,50,000 crore domestic demand within the country itself.


This follows DoT’s directive for the 12th Five-Year Plan to provide 100 percent preference to indigenous telecom equipment  and products. In April, TRAI has also recommended an increase of indigenous telecom products from three percent in 2009-10 to 80 percent by 2020. To take this forward, TRAI had said that it would provide incentives to operators and Indian manufacturers. The Centre also said that it had plans to restrict import of telecom equipment to a maximum of 20 percent over an eight-year period, while funding a National Electronics Mission, and incentivizing telecom, IT and electronics manufacturers to boost production. Kapil Sibal also reiterated the same statement, saying that the telecom ministry would support advanced electronic manufacturing for telecom equipment.

However, this move will affect foreign equipment vendors, for whom India and South Asia are the most lucrative market for export of telecom equipment. In recent months, foreign equipment vendors like NSN, Ericsson, Alcatel-Lucent and ZTE have expanded their India presence, opening several R&D facilities, to jointly manufacture telecom equipment in India. Since global markets are now facing a cash crunch, investment in telecom equipment has dropped, so India reducing or cutting off its telecom imports, will have drastic effects on foreign equipment vendors.

Another aspect of the NTP 2011 that will have far-reaching effects on India’s global relations, are the broadband initiatives. With a mission to provide -broadband for all’ and -on-demand’, with a special focus on rural areas, while using broadband for purposes of governance, education and finance, among others, the telecom ministry aims to achieve a target of 175 million broadband users by 2017 and 600 million by 2020, while increasing rural tele-density from the current 35 percent to 60 percent by 2017 and to 100 percent by 2020. The ministry also aims to actively increase broadband speed for all from 256 Kbps to a minimum of 2 Mbps by 2015, and 100 Mbps by 2020. Broadband will also be utilized from other sources like radio, satellite, TV, cable and others.

This is a welcome move from the global perspective, as it will mean that India may finally be able to get new technology and products at the same time as they are released globally. As of now, it takes close to six months to a year, for new products to reach India, since the technology available is not on par with that offered abroad. Increasing broadband  penetration will also help in quicker migration to next-generation technologies like 4G and LTE, currently in trials abroad and making optimum use of the same. The ministry’s decision to look into freeing up more spectrum on a 5-year basis and shifting existing service providers to alternate frequency bands, to make provision for new technologies will also help in this respect. 3G has also not reached its optimum potential in India, due to poor broadband penetration in the country, and hence new 3G-based devices are taking time to enter the Indian market.

MNP has been very successful abroad, but in India has not garnered much traction. However, combined with abolishing roaming charges, allowing subscribers to keep their mobile numbers when they move to another city in the country, with no roaming charges, will pave the way for more innovation in this respect, as is the case abroad, paving the way for free calls between networks in the future. However, Indian operators who are already under pressure for low tariffs and ARPUs, will stand to lose a huge chunk of revenues from subscribers, with roaming fees being lifted both for 2G and 3G. Very recently, mobile operators were pulled up by TRAI for increasing mobile tariffs, while 3G operators were pulled up for making roaming arrangements  among themselves, without taking prior permission from the government or paying the fee to the government in this regard.

The decision to recognize telecom as an infrastructure sector and relax M&A norms for consolidation, as well as reducing overall taxation on the telecom sector, as well as carriage charges, will also help in more investments from MNCs and global telecom companies, who are currently put off by the high cost of taxation and fees they have to pay on a yearly basis for operating in the country. The decision to segregate the network service operator and the network delivery operator providing different roles for each, may also help to encourage FDI in the sector, while making telecom services seamless. Creation of a finance co-operation to facilitate investment in the telecom sector will also ease investment procedures for global companies.

Security is yet another important aspect, which foreign equipment vendors like Chinese equipment manufacturers and RIM have been facing issues with in India, for inability to provide security of equipment and lawful interception  resulting in a ban of Chinese telecom equipment for a few months last year. While service providers have to ensure security of data flowing through their networks, there was a conflict between them and the government when they were asked to set up security monitoring cells by themselves, and train people for the same. After this, the DoT said that it would set up a central security monitoring unit, and bring in professionals from abroad to train Indians to work in this unit.

Taking this forward, NTP 2011 aims to develop systems for lawful assistance, and build capacity for lawful interception and monitoring, while making provisions for the government and service providers to share the cost of implementing security measures, and standardizing telecom equipment, so standard of security for all telecom equipment whether local or foreign is universal. This step will no doubt come as a big relief to foreign equipment vendors, who have been struggling for months with the government to establish a single security standard, which all can abide by, while testing their own equipment at source as well.

The recognition of telecom as an infrastructure sector is a good step and it would give telecom operators some relief on the tax front. The new guidelines to allow net telephony from phone is also a welcome move and it will have a major impact on the unified communication industry, according to Frost & Sullivan.

In the new policy we had some expectations on Government’s clear roadmap on spectrum renewal charges and reframing. Though the move to create a Spectrum Act to look into this is a good step, we fear that it will delay the process for determining the spectrum related liabilities for the operators,” said Frost & Sullivan in a statement.


Considering revenue generation as secondary and abolishing roaming, with focus on QoS is really going to pave way for the entire ecosystem. Spectrum sharing, pooling and trading would allow the operators to increase QoS without any significant expenses and open a parallel revenue stream. Unified licensing regime and transparent allocation policies at market rates would prevent any controversies. However, it would be interesting to watch the implementation as 600 Million broadband users, at 100 Mbps and 80 percent domestic manufacturing by 2020 really looks optimistic. 

Other proposed features of NTP 2011, like setting up of training institutes for telecom, in accordance with global standards, making provisions for transitions from IPv4 to IPv6 the standard that the world is currently migrating to, and formulating new policies to address cloud services and M2M issues, are also steps in the right direction to bringing Indian on par with global telecom standards. The decision to bring in more applications on IPv6, will also aid in the goal of making India a global VAS hub, as declared by the telecom minister.


According to a recent report by Gartner, the investments in the telecom sector are set to reach $566 million in 2012, up from $512 million in 2011, with IT spend going up to $1.8 billion in 2012. FDI investment in the telecom sector in India has witnessed a significant decline of almost 35 percent, with total FDI investment in FY2011 pegged at $1.7 billion, as compared with $2.6 billion in FY2010. Investments in this sector by leading operators were also down by 50 per cent. It is hoped that the NTP 2011, will change these statistics, with its heavy emphasis on making India a global telecom hub.



By Beryl M
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