Configuring India’s Digital Ecosystem

Context: In light of Digital communications driving various aspects of all the sectors, policies must favour consortiums of local players.

Need for Government Intervention in the Digital Ecosystem: The following challenges requires the government to indulge with consortiums to build India’s digital ecosystem.

• The threat of Monopolistic Dominance: Overwhelming dominance rarely benefits the public interest even of the prices start incredibly low.

• For E.g. Facebook’s announcement in April to invest $5.7 billion in Reliance Jio provides capital and capacity to dominate communication in India.

• Dependence on China and Need for Self-Reliance: Dependence on imports and China is untenable for our increasing and strategic requirements: 

• Absent enabling policies: due to which Indian manufacturers have to succeed offshore to sell within the country.
• Colonial Mindset: Government acting as the colonial overlord and people as serfs with a vote, whose weakness can be targeted for electoral victories.

• Imposes a Zero-Sum Framework: symbolizing the government versus the rest situation.
• In reality, the situation need not be zero-sum, as evidenced by past service growth and government collections through revenue sharing,

Challenges in the Telecom/Digital Sector: 

• Deteriorating Telecom Sector: Telecom sector players are struggling with debt and tax burdens and continue tax battles with the government which render them unable to compete.
• Unsustainable low tariffs: Due to the price war and sectoral debt from auctions, the telecom firms have insufficient profits for further improvements:
• High Opportunity Cost of Disruption and Deprivation of Services: 

• Service levels are compromised by resource constraints (dropped calls, slow speeds)
• Service Provider needs investment to improve and extend coverage and to design constructive educational, skill-building, and medical services.

• Declining Operator Revenue: Even with the huge population using the internet, the operator revenue has been declining for a few years:

• Operator revenues grew strongly from mid-2003 through FY2012, flattened for five years (FY2013-17), then declined after FY2017.

• Declining Government’s Revenue: After 2004, government collections flattened, then declined (barring retrospective charges). 

Way Forward:

• Enhance Services and Increase Revenue: 

• Straightforward adoption of global norms for wireless in 60GHz, 70-80GHz (V-band and E- band) and unused UHF (500- 700MHz) restricted to operator use.

• Ensure Qualified Competition: 

• Create a consortium with a minority anchor, bringing financial, technological, and delivery capability to compete with Jio’s dominant platform.
• Stop Predatory Pricing: The government should be able to create a balance through the consortium, For E.g. it can provide minority stake to BSNL/MTNL in the consortium.
• Ensuring Transparency: Criteria for the development of the domestic capacity to conform to the World Trade Organization rules.

• Promote Self-Reliance: through support to local manufactures keeping in mind the following prerequisites: 

• Policies framed to provide access to local manufacturers and service providers conforming to WTO requirements
• Ensuring Market access through continuing orders.
• Ensuring their collaboration to supply, install, and facilitate operations, maintenance of requisite equipment.

• Avoiding Rhetoric and Politicking: The Union and state governments need to understand these components and execute them from a national perspective.
• Incentivize coordinated actions: like formations of consortium.