Prof NK Goyal, Chairman Emeritus, Telecom Equipment Manufacturers Association (TEMA) believes that more than anything else, Indian industry needs to be provided with proper market access in order to make the country a manufacturing hub for telecom equipment.
What has been the impact of the ongoing consolidation on players in the telecom gear segment?
Consolidation is a worldwide phenomenon that happens in most sectors. Now it has two aspects. It is good for the companies, because when two companies merge, they are able to get more market share and power. However, it is not good for the consumer as it deprives him of alternative choices. If you would recall the days of telecom operators in India a few years ago, we had several firms in the market. And they were offering one paisa per second billing plan. Now with the merger of some of those companies, that benefit has gone away. Similarly, in the case of equipment manufacturing, when we had seven, nine or ten manufacturers, we were able to enjoy good bargaining power. But globally there are only a few select manufacturers: Huawei, ZTE, Ericsson and Nokia.
In September, none of the telecom operators bid for a government-funded rollout of mobile networks in uncovered parts of the Northeast region under the Comprehensive Telecom Development Plan approved by the Cabinet two years ago. Do you think easing of tendering norms would have helped?
No, I don´t agree. In any country, when a new player wants to enter the market, the existing players or incumbents oppose his entry. When we opened up licensing for the private sector, MTNL was trying to get the license for GSM, and we witnessed a number of court cases at that time. And there was a big controversy between MTNL and BSNL on the one hand and private operators on the other over so-called points of interface (POI). Now moving on to the government´s plan of providing telecom connectivity in the Northeast, whenever such a proposal comes up, there are certain existing companies or players that are bound to oppose it. The existing players have been in the country for the last many years. They have all the clout, funding and market to foray into any part of India: hills, mountains, seas or deserts. Then why have we been unable to cover the Northeast? Or why do even today we have 250,000 uncovered villages? In India, we have two things which are extraordinary. One, any important project, give it to BSNL, since it´s a government operator. When the government faced the problem of providing connectivity in left-wing extremism (LWE) areas, it gave it to BSNL. BSNL floated a tender, and for the first time in the world, 5,000 base stations were established in one year. Now most LWEs are covered as per the tender, because at that time the policymakers were able to decide on BSNL. Same thing should have happened in the case of Northeast areas. There was a policy discussion with everyone opposing BSNL and calling for an open tender to accommodate other telecom operators. At that time, we registered our protest with the government that if it were so simple, it could have been done much earlier. Therefore, we requested for the tender to be opened up to more than two existing operators. It could be a new telecom player, infrastructure provider company, tower co, telecom manufacturer or state governments. Or simply give it to BSNL. For whatever reasons, our request was not accepted. The government floated a tender through the Department of Telecom (DoT) for providing services in the Northeast areas, which was opened to only licensed GSM telecom operators. Now as it happened, not a single bid was made. So, while far riskier and sensitive LWE areas are covered, the Northeast remains uncovered. Now the so-called bogey of specification standards has been raised and that´s because there is a tendency to keep away from uncovered areas. If you look back in history, when telecom licensing opened up in India, there was a clause that operators will provide coverage to rural areas. However, hardly anyone fulfilled that target.
Then there was a Universal Service Obligation Fund (USOF) that came out with a tender that had a provision of subsidy for towers in rural areas. Only a few companies provided the same. Then the USOF came out with a scheme to provide subsidised opex and capex for rural areas, and again nobody came forward. Now there is a demand to update the latest specifications. Now if you ask for a 4G specification, what is the need? First of all, one needs bread, dal and sabzi, i.e., leaving aside 3G, 4G or 5G, I first need connectivity. And there is a delay there. So, I don´t agree with the change in specifications. If you feel they are wrong, take up the issue of specifications with the government and seek a revision. But then the problem of uncovered villages is not restricted to just India. It´s there is the US too. The specifications for villages and rural areas made by the Indian government are well-suited for local conditions.
Based on your observations, how is the Indian telecom manufacturing equipment sector contributing to the overall networking plans of the government?
The telecom manufacturing sector as such has suffered a lot because of various factors. Firstly, with our signing up on the Information Technology Agreement in 1984 or so, we started allowing imports without determining necessary specifications, import licences or any pre-approved quality standards. Under such circumstances, how can I make equipment that you will purchase? Secondly, there are countries which provide finance to their equipment manufacturers at the rate of 2 to 3 per cent. Whereas in India, if I as a manufacturer want to supply to operators and approach a bank for a loan, it will provide the same at a very steep rate of interest. This has led to import of telecom equipment on a large scale. Then there was a situation in India for the first 15 years where import of cell-phones attracted less duty than import of components. So, we suffered. Thirdly, there´s another very strange phenomenon worldwide. Under the ITA-1 we were informed that all telecom equipment, were covered in the agreement. So, we allowed import of anything and everything under telecom. At the time, not many understood the definition of IT and telecom. It was only a few years ago when there was suddenly a pressure for ITA-2 that we realised that there is a lot of equipment not covered under ITA-1.
Based on that, we found out that the Internet Protocol (IP) networks are not covered under ITA.
In fact, there are specific case histories that point out that even mobile telephony was left out of the purview of ITA-1. Why, because at that time there was nothing like mobile telephony. In the last two years, the government has come out with a list of some products that are non-ITA covered to levy import duties on them. I would like to add that there is a worldwide resistance to India becoming a manufacturing hub. The government started a policy called Preferential Market Access (PMA), under which there is some percentage earmarked for local manufacturing in government purchases that was opposed tooth and nail at several ICT forums globally. But it sustained and now stands validated. In the past few months, global players have come out with the concept of Deemed Domestic Manufacturing. Now what does that entail? If company ´X´ comes to India, and it says that it will invest $1 billion over the next five years, it will be considered a domestic manufacturer. Additionally, it will be allowed to import everything that it requires, duty free. But then what is the guarantee the company will keep its commitment? But now thanks to the present government´s new telecom policy, things are gradually improving.
What policy backlogs remain for the telecom gear manufacturing segment that need immediate correction for tangible results?
The only thing we require is access to market. We aren´t asking for any subsidy or incentive. Let us take the US example, it still has a policy called ¨Buy America¨, wherein only locally made products can be purchased by the government. The US stopped GSM for several years and allowed only CDMA technology. This helped to promote CDMA manufacturers. Same thing happened in South Korea. They didn´t allow GSM for a substantial period of time. Consequently, today we see a good number of Korean manufacturers.
In China, you have a policy where if you are a foreign player, you have set up manufacturing with a local company. Also, rather than going for 3G, China launched its own systems called TS-CDMA or TD-SCDMA. If the government wants India to become a manufacturing hub, you decide that we will deploy 6G only when it is made in India. Though we have the technical knowhow, money and resources, we will need to first finalise our specifications and requirements as China did.
- Manish Pant