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COVID-19 : Its Impact On The Telecommunications Sector In India

2020-06-02 11:19:58

By Amey Pathak, Faraz Alam Sagar, Vivek Rathore & Anand Deshpande on May 8, 2020

 

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As the global economy continues to reel from the shock and the lasting impact of the novel coronavirus (COVID-19) outbreak, “work from home” and “social distancing” have become the buzzwords in today’s business landscape, with the telecom sector being the invisible hand driving this shift. Remote working, video conferencing, and telecommunications technology have quickly emerged as key enablers for business operations during this lockdown, and streaming services such as Netflix have become the go to source for entertainment, putting the telecom sector in the spotlight today.

 

The importance of having a strong telecommunications network during this lockdown has also been acknowledged by the government in the guidelines dated March 24, 2020, issued by the Ministry of Home Affairs (MHA)[1], which provides that “telecommunications, internet services, broadcasting and cable services, IT and IT-enabled services (ITeS) only (for essential services)” are the essential services and are exempt from the lockdown. This exemption was also provided in the MHA notification dated April 15, 2020 (which extended the lockdown until May 3, 2020)[2] and in the MHA notification dated May 1, 2020 (which further extended the lockdown for a further period of two weeks).

 

According to news reports, overall traffic has jumped by 10% and streaming platforms have witnessed a 20% spike in viewership[3]. Hence, several analysts now believe that unlike the manufacturing and other sectors that have come to a near standstill, the telecom industry might emerge as the golden child of this economic slowdown. However, the increased dependency on telecom networks, and the other restrictions on account of COVID-19, has raised a different set of challenges for the telecom sector:

A. Implementation of exemptions for the telecom industry

Although the MHA had clarified that telecommunications, IT and ITeS were exempted from the lockdown, there were instances of local authorities asking personnel of telecom service providers at NOCs (network operation centres) and call centres to shut down operations. In response, the Department of Telecommunications (DoT) had written to chief secretaries of states on March 21, urging them to allow movement of field staff of telecom companies.

It is therefore essential that appropriate instructions are received at the field level so that the services can continue without interruption. The DoT had also written to chief secretaries of all states on March 24, requesting them to designate a nodal officer who can be contacted by service providers and telecom licensees in the event of any difficulty.

B. Rising demand and current infrastructure

While demand for services continues to spike, given India’s dependence on wireless traffic, there is increased pressure on cellular infrastructure.

According to reports[5], the mean mobile and broadband download speeds in India had fallen in March due to strain on the networks. Hence, the Cellular Operators Association of India (COAI) has written to the Government to request streaming service providers such as Netflix, Amazon Prime Video and Zee5 to switch to a lower definition streaming, to reduce advertisements and pop-ups, etc., in a bid to ease the strain on existing networks. Several service providers have already started working on this issue.

 

C. Impact of the lockdown restrictions

 

Admittedly, while there is increasing demand for telecom services, the telecom sector is dependent on several other industries, which have been adversely affected by the lockdown.

 

1. Impact on Manufacturing of hardware and other systems

2. Addition of new subscribers

3. Impact on tariffs

4. Subscriber Retention

5. Power tariffs

 

D. AGR and other existing issues in the telecom sector

 

The COVID-19 outbreak and the resultant lockdown has come at a time when the telecommunications sector was already grappling with the issue of payment of Adjusted Gross Revenue (AGR). The Supreme Court had recently rejected the self-assessments of AGR dues undertaken by a few Telcos and had refused to take up the Centre’s submission to allow telecom companies an extended period of 20 years to pay the AGR dues, stating that the matter will be listed in two weeks.

 

E. Outlook and way forward

 

The general outlook, globally as well as in India, considers the telecom sector to be one of the few that may escape unscathed from the pandemic and the resultant lockdown. The government and all stakeholders are also cognizant of the importance of these services, given the current scenario. We are seeing steps being taken to address short-term issues as and when they come to light. Despite the issues, the increased demand for services may help offset any dip in revenues, especially the high-end subscribers and other people who have been working from home and those who need strong and reliable network to continue functioning.



    
 
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