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The future of the telecom industry: COVID-19, business, privacy, and competition

On May 5, we interviewed Rajan Mathews, Director General of the Cellular Operators Association of India. We discussed the pandemic, its effects on telecom operators, trends in cellular network traffic, privacy, Net Neutrality, and more. Watch the full interview here. An edited version of the interaction follows.


MediaNama: Do you have any numbers for us on growth in internet usage?

After the original quarantine announcement, traffic spiked by 30%, and after that it came down to a manageable 12–15% growth on networks. So we were seeing something like 6,900 petabytes of data flowing through the network, which puts us at a high rate of consumption. The usage was shifting very heavily to streaming video type services like YouTube and Zoom, very video-heavy content. That is understandable as people are working from home.

The significant issue that was addressed was how to control streaming video. That is one of the things we worked with the DOT on. Changing HD streaming to SD surprisingly did a lot to bring the load down on the networks. Amazon, Facebook, Netflix, and these other companies helped in making the traffic manageable. The DOT also helped us bring 900 base stations back online by coordinating with local municipalities. We now have only 70 offline base stations. That helped us deal with the additional consumption. 

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Another thing that helped was fibre cut incidents reduced substantially from a hundred a day to seven a day. Road laying and construction stopped, so we were able to bring online fibre that was normally set aside as redundancy. The combination of those factors was a big help, so we have been able to keep the networks running. Speeds are a little slower, but that is to be expected because of the rise in intensive usage in some areas.

MediaNama: Are you seeing any impact on revenue? Are people upgrading their accounts? Is a positive outcome expected for the telecom industry?

We are expecting an impact in the quarter starting this April. The 10% increase in revenue from increased tariffs and increased volumes in data consumption will have a positive impact for operators.

MediaNama: From an infrastructure perspective what demands do you have from the government?

One thing that’s become clear is when we have a big movement from commercial areas to residential areas, the paucity of cell towers is becoming a problem. In the past, people have resisted having cell towers in their backyard, whether it is due to fears or aesthetic concerns. It’s becoming clear that if you have only one network to speak of, the mobility network, cell towers become critical. The biggest learning from that is if we want to have the towers, we need commensurate opening up of right-of-way regulations to make laying infrastructure easier.

If you want a dynamic way of being able to deal with demand, fibre is needed. Only about 25% of our cell towers are connected by fibre because of right-of-way issues. Municipalities ask us for exorbitant fees to lay fibre. When we can’t get fibre, we have to rely on microwave spots. And for the last four years, we have not been able to get any increase in microwave spots. We have been asking for e-band and v-band. That has not happened. 

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Although we are self-sufficient and holding on right now, these are things we need to address going forward for the sustainability of our infrastructure.

MediaNama: What have been the bigger costs you have been seeing? Electricity going to existing towers, diesel costs, or adding small cells on existing towers?

The two main components are firstly power connections, as we need 24/7 power, and second, diesel-generator backup power. Those tend to be the biggest constraints. We are also installing batteries as an intermediate storage device in more towers. That gives us four hours of power supply, and if that is exhausted, the diesel generator kicks in. It’s a three-part structure. The biggest expense is the maintenance of these cell towers. We have over 500,000 of them, and some are in very inhospitable parts of the country. 

With the lockdown and travel restrictions, we had people lugging diesel on their backs and walking for kilometres at a time to get diesel into the cell towers, and that is clearly one of the big expense items. We also had to make sure smart hands [field telecom engineers] were available, repairing fibre cuts. These tend to be major expense areas.

MediaNama: In that sense, have you seen any positive impact from the fall in oil prices?

[laughs] In the retail level we don’t see that margin between wholesale and retail oil price being passed on to us. So diesel continues to be a significant power expense incurred for running our networks.

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MediaNama: We have seen instances of field engineers with passes getting beaten up by police. Are you seeing that still happen? What work is required to ensure that doesn’t happen?

When instructions were not getting down to the local level, there were several instances where our engineers were beaten up, apprehended, or not allowed to move. So we quickly created a list of all areas where this was happening and passed it onto the DOT. One of the big things that have really helped is the support we got from the DOT and their Telecom Enforcement Resource and Monitoring cells. They got in touch with the local law enforcement and were able to get this sorted out and allow movement of people and equipment. Now we don’t really face issues in a major way in this area.

MediaNama: On network traffic, could you give some color on what is going on? Jio said that data use went up from 1250 crore GB in the quarter ending December 2019 to 1254 crore GB in the quarter ending March 2020. What has the increase across operators been? If it has been 20–30%, where is the discrepancy coming from?

We have noticed on average an increase of 12–15 percent from normal. We noticed that the total petabytes of data turned out to be 6,900 petabytes of information flowing through the networks. When you reduce that to consumption per user, it has gone from 9 GB per user to 11–12 GB per user, most of it accounted by streaming video. One of the things that helped manage traffic was a shift in traffic. What we saw during commuting hours flattened out because there is no traffic.

What also happened is at the bottom of the pyramid, millions of people moved from urban areas to semi-urban or rural areas. So we saw a movement of usage geographically.

MediaNama: It’s been a couple months since streaming services and social media companies like YouTube, Facebook, and Netflix have started reducing video bitrates. They have extended this move’s end date twice. We’re over a month into the lockdown, so can operators now deal with usual video bitrates?

In spots, yes. The problem we’ve had is that we don’t see an equal spread of data consumption. You see it spiking in hotspots. So we have requested that [reduced bitrates] continue for a period of time. But as and when we get more comfortable with understanding the stability of the data— because in initial stages, we didn’t know how much was going to be consumed where and how. We have shifted from outdoor to indoor consumption, for instance. WiFi offsets some major parts of the burden, but when you shift to indoor coverage and depend on routers, some of that experience seeps in. That will be another major takeaway from this, that fixed home infrastructure needs to be expanded, getting people used to meshed networks inside, and so on.

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MediaNama: When do you think the telecom industry will be able to afford a 5G auction? Because the government looks like they need some money right now.

[laughs] They’re getting plenty of money from us, I assure you. As it stands, 30 paisa of every rupee we make goes to the government without coming back to us. That is one thing we have been complaining about. You have to leave more money in the hands of networks to invest in our networks, in quality of service, and in new technologies. 

On the 5G issue, the price point of the spectrum is three or four times what is being paid for similar bandwidth or spectrum internationally. But then look at ARPU. The average person pays 75 US dollars per month out of India, and here we get three dollars per customer.  

MediaNama: I’m not necessarily going to buy the ARPU argument. I remember back in 2008, 2009, operators were telling investors not to look at ARPU as a metric but average revenue per minute. So I’m not sure ARPU is the right metric here, as we could look at rupees per MB or a similar new metric.

What we try and tell investors is we can’t have one metric that explains everything. Clearly ARPU is a bit of math problem too, as a rise in nominal subscriber count could lead to a fall in ARPU. In a fast growth environment, there is that anomaly that creeps in. But ARPU is still a fairly decent metric.

MediaNama: What kind of a ceiling do you think exists in pricing for telecom operators in India? How much do you think is the scope in terms of elasticity of demand that operators can afford? Over the last six to eight months operators were culling low-ARPU customers to shore up metrics.

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We started a study on purchasing power about ten years ago, and based on our GDP numbers, average household income was 1600 USD, and now it’s 2000 USD. During that period in time, when you look at absolute ability to afford services, you notice that 6 years ago, the average person was spending 6% of their income on telecom services. Now that number is less than 1%.

So there has been a big shift in consumer surplus. So we think there is sufficient headroom, as it’s not profitable in the current situation for incumbent operators. It may be a little profitable for Jio, but for the rest of them, that headroom is not sufficient to pay the government and still be profitable.

MediaNama: Why does Jio have more room for profitability?

Cost of capital is one advantage one might have versus somebody else. The resources available to various entities and their debt is also another factor. If you can generate more from equity than debt, your unit costs come down. And using new technologies, that also helps. Until 2014, incumbent operators had to subscribe to 2G technology, we didn’t have a choice. In 2010/11 we had 3G technology come in and spectrum was available for 3G or 4G. Legacy operators have 70 to 80% of subscribers on 2G networks, and even though that number has come down, they still have to pay the costs of the legacy networks. Jio just runs one technology, 4G, and the cumulative benefit of that does give them a lower unit cost. The closest TRAI came to crunching the unit cost numbers was with the Interconnect Usage Charge, where they tried a cost-based methodology.

MediaNama: The FCC in the US has delicensed the 6GHz band and Europe is expected to follow soon. What is COAI’s stand on this? Are you asking the Indian government to do the same?

The government of India has to make a call in terms of whether it wants to delicense that band. All that operators are asking for is a level playing field. Delicensed spectrum happens to take place in WiFi, and 6GHz is really an extension of WiFi. Our point is that as long as we can maintain a level playing field, we’re okay. 

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MediaNama: In that sense do you have a problem with WiFi?

We don’t have a problem with WiFi, but we have a problem with WiFi being offered for commercial service purposes. WiFi was always intended for private use. Not for resale and making money out of it. If you enter that realm, you are creating an unlevel playing field. Because now you’ve got free spectrum and competing against a licensed person who has to pay for spectrum fees.

Our only point is if you’re going to use 6GHz spectrum, don’t come in and compete on the service side using free spectrum. 

MediaNama: The counterpoint to that is you can compete in the same space as well. Doesn’t the license of telecom operators give them an advantage and exclusivity, whereas it’s an open playing field in WiFi?

No, because guess what, even if someone earns revenue and doesn’t pay license fees and spectrum usage charges while selling WiFi, we have to. For every rupee that I earn, I have to pay 15%, and the other guy pays squat. How can I compete?

MediaNama: This is from an anonymous person: Jammu & Kashmir has been deprived of high-speed internet since last year, and especially in the time of a pandemic, what is your view on enabling 4G in Jammu & Kashmir? 

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We have always supported opening services in J&K. Obviously we have to defer to the government in saying that if they see a problem, we can’t put ourselves into the shoes of the security agency in terms of determining safety of life & limb and property. We have made it known that we would love to remove the restrictions and allow people to enjoy full access. Remember, we lose a lot of revenue too.

MediaNama: Why aren’t you a party in the Supreme Court case, if you want to open up and are losing revenue? In the Section 66A case, the IAMAI was a party to the case and asked for intermediary liability protections to be strengthened because the industry demanded it.

It’s a PIL that was filed, if I recollect correctly. On why we’re not a party, usually what happens is that we get consensus from everybody to go forward on these matters. If we do, we have to ask ourselves what added benefit there is in jumping in and paying a high price for lawyers to go in and present the case. So we’re saying if there’s somebody already representing the case, we will let it go on. These are not easy things to litigate around.

MediaNama: Airtel in one instance pushed back against unilateral John Doe orders leading to website shutdowns. A John Doe order once led to Google Docs suffering an outage. And then there is also the pornography ban. Is there any reason COAI and industry bodies don’t get involved in issues involving user rights? Internet shutdowns have impacted the telecom industry more than anyone I’d assume. Why is it that you don’t take a legal approach to some of these challenges? Does the industry view access to the internet as a fundamental right?

Initially we tried to work with the DOT on these matters. Under the license, DOT is well within their rights to ask us to do things. One problem we had was protocols not being followed when ordering shutdowns. The Ministry of Home Affairs then issued directions to the district magistrates on the protocol before shutting down the internet, and how it is not the first option before invoking it. I think there have been improvements. Whether going to court to materially change a license condition is difficult to parse.

We have always said that access to the internet is absolutely essential for the exercise of your fundamental rights. Whether internet access in itself is fundamental hasn’t been adjudicated as such. We have always tried to make sure that access to the internet and ability to connect to the internet are part and parcel of what consumers enjoy. 

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Most of our networks today are IP. The fact that most of our network today uses the IP protocol as a part of the core and slowly spreading into the radio access and backhaul parts of the network indicates that we are very keen to make sure that it’s fairly seamless at some point, and increasingly that’s what is happening. We are moving to principally data-oriented networks, and the distinctions will disappear after some time.

MediaNama: You’ve asked for app-enabled KYC verification for new customers. Is the government receptive to this, now that subscriber growth has gone to zero?

The DOT has been very supportive. One critical concern was working with the MHA. Every time KYC happens, it has to happen with the MHA, as it’s principally a security issue. In our submission, one thing that came up as problematic was physical delivery of the SIM. We realized that during a quarantine that might not be feasible. Now, when those restrictions are lifted, we have suggested some ways that we can do things online. If you’re online, you need a data connection. Both the DOT and MHA are viewing these recommendations and hopefully post the lockdown we could take them forward.

MediaNama: On KYC, to what extent have you seen the national security goals with which KYC was being introduced actually be accomplished? There have been countries where KYC was initially introduced, but later withdrawn. Has it been successful for you?

We do deal with counterfeits and rogue points of sale. There have been instances where that has happened. We try our best to ensure that we go after these people and get the rotten apples out of the basket. That’s an ongoing battle. In most of our cases, the TERM cells does audits every month. We have seen a compliance of over 90%. Clearly it does have a benefit, but is it 100% foolproof? Obviously not. One thing that is a challenge is identity. That’s why when Aadhaar came, the industry was keen because it got rid of a lot of ambiguity and authentication.

MediaNama: On the lack of new subscribers, you have likely seen an increase in traffic. But has that translated to increase in ARPU this quarter?

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Yes, that can be expected. But tariffs just kicked in, and it takes a couple months for them to go through the network, due to legacy price points and plans which are valid for 30 days. It takes a while for this to move through the python, as they say. In the quarter that starts in April, we should be able to see the benefits of that taking place. We’ll hopefully wait and see how that pans out.

MediaNama: Many years ago DOT had asked telcos to sharpen location data to 100 metres to begin with and eventually 50 metres, especially in states afflicted with Naxal violence. What’s the status of that demand? What kind of location sensitivity exists for cell tower triangulation now?

What happened is that when that original order came, the industry pushed back rather heavily. The ability to go to the level of precision asked for would have required a tremendous level of investment. The equipment and installing it on each cell tower was a big cost. When you looked at other parts of the world, it was principally driven by GPS on the handset. We said we ought to be able to look at that. Thankfully the DOT backed off on that particular request. Handset makers need to be a part of this conversation too, and India has its own GPS satellites in the air now. 

On the second question, triangulation now depends on the last cell tower connected to by a person, and distance from that tower. This is the sort of information we are able to provide right now.

MediaNama: The government seems to have asked for cell tower data for contact tracing information. How does that play out in terms of a privacy point of view? What notice, consent is in place? Do you inform users when their details are shared with the government when it is not for a law enforcement purpose but for sharing information for the pandemic?

We did raise this issue with the DOT, because certain information was asked from operators and we unanimously agreed that we are concerned at the massive amounts of data they were asking for in various geographies. The issue was the interest of the consumer being protected in terms of privacy and everything else. As you recall, the DoT came back very strongly and said this was anonymised data as per the Telegraph Act, 1885, as per the license conditions. We said, look, the only assurance we want is that when we give it to you, it will be subject to the safeguards you’re indicating, like anonymising, without providing call detail records and is only used for the purposes they are looking for.

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We asked them to ensure that it also doesn’t get to the hands of a third party. We have highlighted that and assurances have been given to us that they are putting in place appropriate safeguards for privacy. So we have to take it at that right now.

MediaNama: What sort of changes would you like to see in license conditions from a lawful interception perspective? Given the demand that telecom industry is facing for user data. Do you think the current framework for seeking information is accurate, or is there scope for improving privacy for individuals?

In general, the protocol basically says that it starts from the Home Secretary and then the local levels. One of the things we’d like to see is a strengthening of the protocol. There is judicial review, things can be brought to the appropriate judicial review. I think those are adequate.

MediaNama: There are about 300 orders per day for interception. How many of those actually make it to a judge or for judicial review?

Increasingly, we have automated the process. While permissions are still paper-oriented, and that’s appropriate, the enforcement is now in the Central Monitoring System, started by the government. All we’re obligated to do is provide connectivity from our network to the CMS. We don’t get involved in decrypting files. The only time that we have additional information requested is call detail records, or CDR, which has information about various aspects of the call at any particular point in time. If that is asked for, we download it from our networks and give it to them. If KYC information is required for persons of interest, we provide identity records. 

But the rest of the time, it’s really pretty transparent to the operator, because they are directly connected, and listening in or tracking traffic in real time. We don’t inject ourselves in their stream.

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MediaNama: Does the CMS also allow tracking of internet access data?

Yes it does, because at some point, it’s either in process on our networks or in storage on our networks. But most of that traffic is encrypted. The challenge for enforcement is the encryption levels these applications use when transmitting or storing the data.

Question from Rahul Sharma: Should India go for satellite+tower 5G?

We’ve always said that we’re open to all aspects of [5G]. The problem with satellite is it’s a monopoly with the government. The prices are also seven times the global average. It is not economically feasible to use it. Although it is useful, it cannot compete with terrestrial services. The government owns all the satellites and bandwidth, so if you’re a private operator, you need to go to them, and the pricing is not always feasible.

There is some inherent friction that needs to be addressed if this is to become a viable proposition.

MediaNama: On Net Neutrality: Now that it’s been around for a few years, and has become a part of the license conditions, what do you think about the relevance of differential data tariffs in the market we’re in right now? Do you think it makes business sense to have differential data pricing?

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All our operators agree to and support Network Neutrality. It is now enshrined in the license conditions, so there’s really no choice. The only discussion going on vis-à-vis Net Neutrality is network traffic management, and disclosures operators have to make about it. I’ll stay away from tariff issues since that’s what got us into this soup in the first place. I don’t think any customer today is complaining about affordability.

MediaNama: What do you think of the Jio-Facebook deal? 

I’ll take off my COAI hat for this one. 

When we look at the future of our networks, all our networks are converging to data networks. There is no differentiation between voice and data networks, the former is becoming obsolete. This will become even more true as we move into 5G. We’re talking about edge computing and all of this, it’s all computing. Which is data. I’ve always said that the future of our networks will tend towards an all-types-of-data environment, even in the access part. Spectrum will continue for mobility purposes, but by and large, it will all be reduced to zeros and ones. In that sense it’s digitised. 

Who are the people today who run the largest data networks? It’s Amazon, Facebook, Google and everybody else. They have a tremendous amount of expertise in running data networks. My personal point of view is that at some point it makes sense to synergise what we call our voice networks and data networks because when data flows, these artificial distinctions increasingly become obsolete and sometimes a hindrance. Look at present networks. You need a translation mechanism for IP versus voice in networks, and then retranslated at the end. There are friction points, and as we go forward, I think that this unlocks more value for our operators in the long term. 

MediaNama: There are competition concerns, saying the most dominant app, WhatsApp, the most dominant social network, Facebook, the dominant mobile network, Jio. Do you think that’s worrying, from your personal point of view?

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Jio themselves have said that they look forward to Competition Commission of India scrutiny.

You know very well, size in and of itself is not a determinant of anti-competitive behaviour. It’s what happens in terms of exercise of dominant market rights. It’s a question of something amounting to dominant market behaviour and being predatory. I think those would be the critical factors CCI would look at. From a personal point of view, the Supreme Court said that the CCI needs to define these terms, and that it is not TRAI’s ambit to define these terms, which is what TRAI tried to do previously, when we had to go to the court. I don’t know that that’s been completely done by CCI, in terms of saying what is a relevant market, what is a dominant market share, what predatory pricing involves in these dynamics…

I think the ball is in the right court, the CCI needs to take a look at this, as Jio themselves have indicated, and hopefully they’ll answer the types of questions you’ve raised.

Written By

I cover the digital content ecosystem and telecom for MediaNama.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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