Age of innovation – Opinion News

In 1997-98, when state-owned MTNL was starting its cellular services in Delhi and Mumbai, the then-incumbent operators protested that the move was not lawful. They had a point. The Telecom Regulatory Authority of India (Trai) was established earlier during the year and the Trai Act required that before bringing in a new service or an operator the government needed to seek the recommendations of the regulator over “Need and Timing”. This wasn’t done, and, naturally, the incumbent won their case.

In 2001-03, when Reliance Infocomm entered the telecom space with its fixed-line wireless in local loop technology masquerading as full mobile services, the incumbents protested again. They had a point because, once again, rules were bent and the regulator looked the other way. Once again, the case of the incumbents was proved because eventually the Supreme Court ruled in their favour and even Trai had to legitimise it by bringing in a unified access service licence.

In 2008-09, when the then-telecom minister A Raja brought in a set of new licensees, the incumbents once again protested because the entire procedure was riddled with irregularities. The case, once again, was proved when in early 2012, the SC cancelled the licences doled out by Raja.

In September 2016 Reliance Jio entered the market and totally changed the tariff structure by charging only for data and not voice. The company also offered free services to its customers for a couple of months. It became a hit and, within a couple of months, notched up a huge subscriber base. The incumbent operators cried foul, alleging regulatory capture by Jio. Cases were filed with the Competition Commission of India and even the SC but Jio emerged the winner. Today, it’s the largest telecom provider in the country and the cheap data prices brought about by it saw the country work and learn from home with ease during the two-year Covid period.

It also led to the emergence of over-the-top operators, who, leveraging the cheap Internet data, built a solid business of providing information-to-entertainment services, which has everybody hooked today.

Clearly, the era of regulatory battles is over and the age of innovation has begun. The entire competitive landscape has changed, entry barriers have eased, and regulation can no longer act as an obstacle to innovation.

Nothing highlights the change better than Red Hat’s chief technologist Azhar Sayeed’s observation that telecom companies need to emerge as technology companies—telco to a techco. “The telco to techco transformation has to happen. It’s not an if, but when. It is almost an existential crisis,” he said in a recent interview to an economic daily.

The apt observation comes at a time when telcos have ceased to be innovators, and worse, have started opposing any innovative communication product on the ground that it will destroy their investments and business. Their rigid stance is that all new communication-tech products should be subjected to the same rules which apply to them. Thus, they want OTTs to be regulated and have a revenue share arrangement with them. They want that spectrum for satellite broadband services should be auctioned. They do not want enterprises to be allocated spectrum directly to set up their private 5G networks. They are opposing a pilot which enables television channels to be broadcast directly on to mobile phones without going through cable or DTH. And most interestingly, they want e-commerce companies to send OTPs only through SMS and not through WhatsApp.

Instead of opposing anything to everything which can even remotely emerge as a challenge to their business, telecom operators need to ask themselves: when was the last time they came out with something really innovative? Nothing comes to mind after the Jio data revolution of 2016-17. All their recent innovative moves are limited to enhancing their average revenue per user by measures such as how feature phone users can be migrated to smartphones; prepaid users be moved to postpaid; and postpaid customers be made to buy all their other services like DTH, fixed broadband, OTT bundling, under common billing.

The telcos have forgotten that their licence agreement with the government does not provide them any sort of guarantee that any communication service in future needs to go through a process they went through. Their interpretation of the rules is also a bit skewed. For instance, in 1999, while moving towards a revenue share arrangement, the government also moved away from auctioning licences to auctioning spectrum. So, it’s the government’s right to fix the price of a licence or decide which kind of services need to have a licence and which do not. Further, spectrum for access services need to be auctioned, not everything.

Therefore, the telcos’ argument that OTT communication apps should be brought under a licensing regime is flawed. If their services do not need spectrum, it does not mean they need to share their revenues with telcos. A satellite broadband service is totally different in nature and is not an alternative to access services telcos offer, hence stressing that spectrum for it should be auctioned is flawed. Similarly, when did the government give them exclusive rights to offer DTH services or made it mandatory that commercial messages have to be sent only through SMS and not through any other channel like WhatsApp?

Merely investing in a service does not give telcos a right to hold to ransom other forms of emerging communication services. The era of dumb pipes carrying traffic is over. The faster they transform into a techco, the better.