COMPETITION AND REGULATORY CHALLENGES IN THE TELECOM SECTOR: AN IN-DEPTH ANALYSIS

Author:  Nishica Srivastava, a student at Amity University 

INTRODUCTION

The word telecommunication originates from the Greek word ‘tele’ which means distant and the word ‘communicare’ which in Latin means to share. Telecommunication is essentially the sharing of messages and information over long distances. This sector first flourished with the invention of the telegraph. Over time it has become much more sophisticated and now involves high-tech infrastructure like satellites. Globally it has become one of the largest and most dynamic market.

The sudden rapid growth in India can be attributed to the escalating internet penetration, data services at competitive prices, availability of cheap mobile phones etc. These factors have undoubtedly played a crucial role in the skyrocketing emergence of this market. The competition in this sector is intense in India as it involves a tussle between stalwarts like Reliance Jio, Bharti Airtel, BSNL (Bharat Sanchar Nigam Limited), Vodafone Idea etc. The competition is so cut-throat, especially after the entry of Reliance Jio, that it has forced the market players to come up with innovative pricing strategies, marketing methods and various collaborations. 

Policies introduced by the government like Digital India and BharatNet have contributed to the proliferation of the telecommunication market in India. These policies aimed to bolster digital literacy and provide access to convenient online facilities in rural areas and bolster connectivity. The initiative to establish the Universal Service Obligation Fund (USOF) opened the door for expansion of telecom services in rustic and backward parts of the country.

OVERVIEW OF THE REGULATORY FRAMEWORK OF THE TELECOM SECTOR IN INDIA

The regulatory framework governing the Indian telecommunications sector consists of a number of Acts, rules, regulations, guidelines, etc, enforced by the government. The main statutes regulating the sector include:

1. The Indian Telegraph Act 1885 
2. The Indian Wireless Telegraphy Act 1933 
3. The Telecom Regulatory Authority of India (TRAI) Act 1997 
4. The telecoms policy amended from time to time, the latest being the National Digital Communications Policy 2018 (the NDCP 2018), which was approved in September 2018;
5. The Broadband Policy 2004; and
6. The Information Technology Act 2000 (the IT Act).

COMPETITION CHALLENGES IN THE INDIAN TELECOM SECTOR 

Telecommunication is one of the world’s most competitive and most rapidly evolving markets. Intense competition in this sector is driven by a rivalry between businesses to create more dependable or cost-effective goods. Numerous developed countries, including the United States, Canada, and China, are pursuing policies to limit corporate rivalry.

Globalization has reduced distances and accelerated national and international communication processes. Already, the telecommunications business has aided economic growth, education, medicine, e-government, and agricultural development. Almost all sectors nowadays rely on telecom to carry out their operations and activities as efficiently as possible.

Global telecom markets seek for economic efficiency across jurisdictions. However, externalities in the telecom sector might emerge even when all economic players are price takers. Externalities, in general, generate market inefficiency. If a market outcome is economically inefficient, a change in telecom service use and/or production may result in higher profits for enterprises, higher benefits for consumers, or both. In general, economic market structures can be defined as perfect competition, monopolistic competition, oligopoly, or monopoly, which is decided by a number of enterprises and their competition. Since perfect competition is not possible, we might strive for the telecom sector to have a monopolistic competitive structure, with numerous companies offering products that are distinct, restricted price setting ability, and an abundance of entry barriers, as opposed to an oligopolistic situation with a handful of companies offering vital price setting and entry barriers. 

Numerous competition challenges impact the telecom sector in India, and they play a very vital role in deciding the marketing strategies employed by different competitors to survive the cut-throat competition in the marketplace. Several of the most significant hurdles are described below:

1. Price competition- With the recent entry of Reliance Jio into this specific sector, the Indian telecom market has experienced severe price competition among the numerous market businesses. This has resulted in market tariff wars. Such competition puts enormous strain on the financial stability of telecom companies, but it favours consumers by lowering and rendering more accessible services.
2. Financial stress – Due to the fierce competition in the telecom business, the economic resources of the competitors are under a lot of pressure. In light of the intense competition, telecom enterprises must allocate or invest capital on infrastructure, technological improvements, and other areas to differentiate themselves from competitors, putting significant economic pressure on the corporations. Due to the ongoing need for expansion and renovations, many enterprises in this area are heavily in debt.
3. Market saturation – The telecom sector’s marketplaces are tremendously crowded, making it difficult for newcomers to enter as well as existing businesses to attract new customers. As a result, competition for retaining the consumer base and getting a larger market share has increased through inventive and new marketing methods. 
4. Consolidation pressure – High levels of competition and stress on companies’ financial resources contributed to corporations merging with competing businesses in this segment of the market. While this leads to market stability, it additionally minimizes the general number of firms in this industry, which may have a detrimental effect on competition dynamics.
5. Consumer expectation – Customers nowadays prefer not only reasonable prices, but also innovative, faster, higher-quality connectivity and offers. To achieve such demanding standards, enterprises must constantly revamp and enhance their infrastructure and quality of service, which causes an adverse impact on their resources. 
6. Technological innovations – Following the launch of 5G networks, the telecom sector is at an important turning point. It is critical for all telecom providers to make the transition to 5G, but they must do so while balancing existing obligations and the competitive pressures that they currently face. 

REGULATORY CHALLENGES IN THE INDIAN TELECOM SECTOR

Policy design in the telecommunications industry focuses on achieving goals based on certain criteria such as technological impacts of an action, cost effectiveness (benefits and costs), distributional equity, functional practicality, and administrative viability, among others. The most important aspect to consider is quantifiable indicators for the same, which may include, for instance, rural and distant telecom service penetration. India, as one of the globe’s major financial technology places of interest, has used its telecom potential to further develop its economic empowerment goals, and in this context, state-owned telecoms play an essential part in remote connectivity infiltration, particularly in rural regions that are inaccessible.

In a highly competitive, globalized economy, the telecommunications sector leads the way in terms of productivity and technological development across industries. However, as a consequence of this proclivity for innovation, telecoms confront substantial regulatory problems. The overarching problem that regulatory affairs departments face is the ongoing upheaval in the regulation landscape. As previously stated, the speed of innovation in telecoms renders regulatory structures fragile, whether it is due to the swift implementation of new legislative measures or the lapse of existing laws. Furthermore, in an attempt to account for the rapid pace of change, legislation may become vague, making the current situation even more challenging to navigate. 

The Telecom Regulatory Authority of India (TRAI) regulates the telecom sector in India. The Government of India formed TRAI as an independent regulatory entity to supervise and govern the telecommunications sector in the country. It was established to foster impartial competition, safeguard the interests of customers, and encourage the telecom sector’s orderly development and expansion. TRAI oversees development and enforcement of different regulations, such as those governing service quality, spectrum allocation, interconnection, issuing licenses, and determination of tariff rates. 

As it oversees and governs India’s dynamic and fast-growing telecom market, the Telecom Regulatory Authority of India (TRAI) faces a number of regulatory problems. Among the major challenges are:

1. Rapid Technological Breakthroughs: The telecom business is characterized by quick advances in technology, such as the switch to 5G and the expansion of digital services. TRAI faces a constant struggle to adapt regulations to keep abreast with the latest developments.
2. Net Neutrality: The concept of net neutrality envisions a free, impartial, and equal internet connection and access to all notwithstanding their device, place of connection and the application used. Net neutrality encourages all internet service providers to not discriminate against data and internet users and to treat everyone in a neutral manner. However, a regulatory issue exists in defining and implementing net neutrality standards while allowing for acceptable traffic control. TRAI must achieve a balance that ensures equal internet access without limiting innovation or investment.
3. Quality of service: Establishing and maintaining Quality of Service (QoS) norms is vital for providing a great telecom consumer experience. The challenge for TRAI is to ensure that operators consistently follow these standards.
4. Optimal Spectrum Allocation: Spectrum or frequency allocation is the process of distributing the electromagnetic spectrum in an equitable manner often between market competitors. Spectrum is an expensive and limited resource that must be allocated optimally. TRAI must develop robust spectrum allocation policies that satisfy the requirements of telecom operators, encourage fair competition, and make the implementation of cutting-edge technology easier. 
5. Resolving Grievances: Consistent efforts are required to ensure efficient avenues for handling consumer complaints, such as billing disputes or service quality issues. The TRAI must endeavour to improve consumer protection procedures in the telecom industry.
6. Balancing Financial Health: A regulatory difficulty involves striking the right balance between preserving telecom operators’ economic viability and prohibiting anti-competitive behaviours or monopolies. TRAI must develop an environment that stimulates economic investments while also encouraging fair competition.
7. Reducing Uncertainty: Frequent changes in regulatory policies can cause telecom operators to be uncertain. TRAI bears the responsibility of providing predictable and reliable regulatory frameworks to industry operators in order to support long-term planning. 
8. Streamlining Processes: It is critical for the development and enhancement of telecom services to facilitate effective and timely infrastructure distribution, including addressing Right of Way issues. Right of Way issues refer to the challenges incurred in obtaining permission for the installation and maintenance of the necessary infrastructure. The task of expediting regulatory processes to enable infrastructure growth falls to TRAI.
9. Data Privacy and Cybersecurity: As the relevance of data services grows, TRAI must manage problems linked to ensuring adherence to cybersecurity and data privacy legislation in order to secure customer data and information and to ensure such data is not misused or falls in the wrong hands. 

Addressing these difficulties effectively requires TRAI to take a proactive and flexible approach, working in conjunction with stakeholders from the industry and taking into account the larger socioeconomic implications of its regulatory actions.

CONCLUSION

The heightened competition, embodied by trade wars and breakthroughs in technology, has benefited consumers enormously by increasing affordability and improving services. This competition, however, brought about financial difficulties for telecom businesses, resulting in restructuring and exits.

Regulatory issues have created additional levels of complication, ranging from spectrum allocation and pricing to net neutrality and data privacy. The Telecom Regulatory Authority of India (TRAI) plays a key role in balancing the needs for free competition, protecting customers, and sustainability of this industry.

As India approaches the 5G era, the regulatory framework must evolve to accommodate technical improvements and ensure that the transition is seamless. Finding a happy medium between supporting innovation, protecting consumer interests, and fostering a financially viable telecom sector is a crucial necessity.