Two is too few

Source: Livemint

Relevance: Essentiality of Fair competition in the market

Synopsis: The telecom sector in India may soon see a duopoly soon. Since the Vodafone Idea is facing various issues to remain afloat creating circumstances for emergence of Duo Poly (Reliance Jio and Bharti Airtel).

Issues with Telecom sector

1. Declining Average Revenue per User (ARPU): ARPU decline is sharp and steady which is combined with falling profits due to predatory pricing.
2. Limited spectrum availability: Available spectrum is less than 40% as compared to European Union and 50% as compared to China.
3. Low Broadband penetration : According to International Telecommunication Union (ITU), broadband penetration in India is only 7%
4. Competition from over The Top Applications: Applications such as Whatsapp providing free chatting platform is affecting the revenues of telecom service providers
5. Duties on telecom equipment – Nearly 85% of Indian Telecom equipments are imported, thus duties on such products affect expansion and investment.

Suggestions

• Insolvency and Bankruptcy Code ‘s provisions can be used to save Vodafone Idea.
• Change in perspective: Telecom firms should not be viewed as just source of revenue. They are critical for empowering millions with better digital tools and ensuring easier access to public services
• Government of India should play a facilitating role in fostering competition. The goal of Digital India requires competition to be sustained.
  • Government of India should lower at least some of the levies that are raised from telecom companies, finding a solution to lay down 5G technology without causing much pain to the providers and promise regulatory stability.

Way Forward

Emergence of a duopoly will hamper public interest. Hence, competition is necessary in such a critical sector. Markets with a regulatory structure that encourages competition have at least three to four large telecom service providers.

Terms to know:

• IBC