The Telecom Roller Coaster Voyage

The telecom industry is one of the financial backbones of the indian economy and is set to be a major player in india’s ambitious five trillion dollar goal. however, it has been given a step-motherly treatment over the years and even now in the 2020-21 budget. Rajan s mathews, Director General of the Cellular Operators association of india (COAI) takes us on the roller coaster journey, even as 5G - a frequency that will revolutionise the communication world is knocking at our doors...

'India is probably the only country that has adopted blockchain in telecom. ...The first use case of blockchain in telecom regulation has been developed by the Telecom Regulatory authority of India (TRAI), which leveraged the technology for enacting the Telecom commercial communications customer Preference Regulations, 2018 on unsolicited commercial communication (UCC)'

Rajan s Mathews is the Director General of the Cellular Operators Association of India (COAI). It is the most influential telecommunications industry association in India (now the second-largest telecommunications industry in the world), comprising of seven of India’s largest mobile communications companies and several leading global equipment manufacturers and infrastructure providers.

Prior to joining COAI as DG, Rajan served as COO of US Operations and Corp., CFO and VP of Telargo Inc. (a Joint Venture of NTT DoCoMo), overseeing all of the company’s Strategic Planning, Business Development, Finance, Treasury, Accounting, Tax, Administrative and Human Resource functions. Prior to joining Telargo, Rajan was President of Afghan Wireless Communications Company, establishing it as Afghanistan’s largest and most profitable telecommunications company. Before this, Rajan served as VP and CFO of Call Sciences Inc., a premier provider of Unified Communications Services (a Soros/Chatterjee Group Company). Immediately before that, he was at AT&T Wireless, where he held a number of senior executive leadership positions, including Divisional CFO, Corporate Controller, President and CEO of one of its largest international joint ventures Birla-AT&T in India (now IDEA). Earlier in his career, Rajan was a finance executive at such companies as Beatrice International, Tri-Star/Columbia Motion Pictures and senior consultant at Pricewaterhouse Coopers. Rajan served on the boards of several for profit and non-profit organisations. He earned both his Master of Business Administration (Finance & Accounting) and Master of Arts (Economics) degrees from Rutgers University (USA) and he is a CPA from the State of New Jersey, USA.

What are the Cellular Operators association of india (COAI)’s objectives and how has it evolved over the years?

It has been a great privilege to be here, since almost a decade now. In 1994 when COAI was put together, it was one of the first-ever greenfield enterprises. We were the first industry to open in the globalisation movement. The COAI at that particular point decided to go about licenses that is, transit from public monopoly to private partnership with the government. So initially, when we started, our principal focus was to get all of the telecom players together. We had major companies involved in providing particular services. Therefore, we were looking at emerging polices. The Department of Telecommunications (DOT) was still a monopoly and was still unwinding itself. We discovered a whole ocean of regulations so we had to talk about how to come out of the regulatory environment.

Initially, we had to deal with issues with the regulator. In 1995, one of our major concerns was inter-connectivity. Here we are 25 years later, and still dealing with the issue. More recently there have been some major areas that we have been looking at. We represent the industry in terms of policy: work with the DOT, work with IT, work with finance, environment and urban development. We work with the regulator, we represent the industry in terms of forging the consensus, and we do litigation on behalf of the industry, as certain issues need to be litigated or clarified in courts. (we had to take the drop call issue to the Supreme Court). And the fourth area we deal with is international standards. Our industry is a very standard driven industry. We have to stay involved with IT, OTG, 3PP.

We are also into skills development so that our industry stays connected with the education sector. We prepare students to enter the telecom industry. Every industry has its skills vertical; we represent the skill vertical for Telecom. We recently entered into something called the Mobile Congress an annual event, held every October, that highlights the technology and how India is positioning itself to be in the forefront.

What is your role as Director General?

My first and foremost role is to see that we all stay together as a team and as an organisation. To be the true voice of the industry. So we position ourselves as the authoritative voice of the industry. Which means, we have to be concerned about our membership. No organisation, especially an industry body can be worse or better than the members it represents. We have our three core members, which is now Jio, Airtel and Vodafone Idea. In addition to these, we also have members like Microsoft, Ericsson, Nokia, ZTE, Sterlite, etc. These companies form the members and support us in terms of costs, overheads and staff.

The second major responsibility is to see that we have a well-run organisation. To have team members who are competent and who are functionally on the leading edge. Basically, who do good work and are motivated.

"Initially, we had to deal with issues with the regulator. In 1995, one of our major concerns was inter-connectivity. We represent the industry in terms of policy: work with the DoT, work with IT, work with finance, environment and urban development.We work with the regulator, we represent the industry in terms of forging the consensus and we do litigation on behalf of the industry. and the fourth area we deal with is international standards"

With the millennials and the Gen Z working in your industry, how do you deal with their perceptions which are dynamic and different?

One of the things I noticed is that the younger generation is willing to take greater risks. They have greater and better expectations from their jobs. They are more willing to be entrepreneurial. Fortunately, they come from families that are economically stable. That gives them the edge to take risks. They are exposed to a vast amount of technology than the previous generation. The types of opportunities that technology provides is awesome.

Gen Z is the most privileged generation. They are innovative and take responsibilities. They like to do multi-tasking and so are willing to look at various opportunities. Various factors have helped evolve their condition. They also believe in leading a balanced life. We motivate them to stay focused, as they sometimes tend to wander.

Can you throw some light on the evolution of mobile technology in india?

If we look at the development of mobile technology here, SMS came as a value added service. Initially, the focus was always voice, after which came in messaging technically called Outer Band Signalling, which enabled us to send short messages. Back then, we had three characters on a key, unlike the smart-phones of today. We found that people who were actually good at English were the only ones who could use that feature. It was not user-friendly for most and as a result, only 30 per cent were able to use it.

There was a fundamental change when the feature phone was launched, and then, the smartphone. All of a sudden, you had a computer in your hand as you could dynamically change the keyboard to represent multiple languages. That was one of the big breakthroughs to introduce language as an option into the keyboard. Now 70-80 per cent use is that of messaging. Normally people use WhatsApp and Twitter-these messaging platforms have varied applications, are vernacular and dynamic. In addition, you have apps to translate, so if you are not good at a language you can still use it.

How will the future of the internet and 5G transform the indian scene?

Five major aspects come out of the 5G...

1. We are moving not just in terms of connecting people to people, but also to connecting people to things and things to things. That is the fundamental change. Today you probably have about six billion people connected to people. Now when you say your appliances will start talking to each other, the number of devices that are going to be connected is just mind-blowing. That means the network has to change dramatically as the difference between 4G and 5G is densification. So clearly, we have to support more points than are possible on 4G because IoT is coming along. Even the numbering scheme has to change.

2. The types of applications that will run on 5G cannot run on 4G because of the latency. A 4G network supports a 10-millisecond latency. Now if you have an autonomous car, 12 milliseconds is far too slow. The devices need to be agile to avoid mishaps.

3. When you have this kind of dependence on a network, which can also involve life and death situations, you cannot depend on a 99.9 level accuracy. It has to have 99.999999 per cent robustness. That platform will propel the industry to provide more service, application and values to be in synch with 5g.

4. We are working on something called the Test Phase in India. There are only a few major countries which have started using and implementing 5G. So we are not, by any sense, laggards. We have to understand what 5G can do to address the nuances of our life in India. For instance, we do not need driverless cars. We are looking for employment. There are challenges in terms of waste and traffic management. We rely 60-70 per cent on agriculture. We have to worry about education sthese are some of the segments we have to focus on. We are in the test phase in terms of values and services that 5G can provide. With this network, we are looking to improve the quality of life in India and health is one of the important priorities.

"There was a fundamental change when the feature phone was launched, and then, the smartphone. all of a sudden, you had a computer in your hand as you could dynamically change the keyboard to represent multiple languages. That was one of the big breakthroughs - to introduce language as an option into the keyboard. Now 70-80 per cent use is that of messaging"

What does it take to run a telecom service in india?

You need to have a castiron stomach if you have to run a Telecom service in India. We need to understand that we are a developing country. We still have a large population in our rural areas who are unconnected. Therefore, we have challenges in our country which are constantly changing. What we would like to see is greater stability in our policymaking and regulatory environment. In addition, sometimes there are far too many changes happening over a short period of time, which means that we have to constantly deal with the dynamics and changes in the government structure. In terms of priorities, and of course, the economy. Earlier, we were the takers but now we have come to a point where we are givers. Therefore, we have to consider all those points.

In the process, we are exposed to a lot of external dynamics as well. Things happening in China, the US, Europe... those dynamics constitute a certain kind of volatility. Also, the maturity of some of our institutions. For example, our stock markets. They tend to be much more thinly traded leading to more volatility. Bankruptcy is just coming in, so there are major new initiatives like the National Company Law Tribunal (NCLT). It is the new forum where companies go to when they have debt problems. These are now the emerging issues, which other countries have already dealt with. This all leads to many changes and for which you need to have a cast-iron stomach.

ON THE 2020 BUDGET

“Even though the Economic Survey acknowledged the significance of the telecom sector for India’s economy and how it supports millions of jobs while making substantial contribution to the funding of the public sector, Budget FY21 steered clear from talking about major issues facing the sector or provided any relief geared towards the sector’s sustainability and growth.

“While the industry welcomes the umbrella theme of the Budget, which emphasises on pushing for an aspirational India, there were no announcements made regarding the rationalisation of levies and taxes currently imposed on the severely distressed telecom sector.

“The sector pays 18% goods and services tax (GST), 8% licence fee, 3-6% spectrum usage charge (SUC), which adds to the highest rate of outgo’s compared to the rest of the world. We were hopeful this Budget would introduce viable reforms that could provide relief to the sector reeling under a debt of `7.7 lakh crore. The telecom sector, which contributes 6% to the country’s gross domestic product (GDP), has been suffering from acute financial crises due to dilapidating revenues and rising debt, emanating from low tariff rates, falling average revenue per user (ARPU), immense competition and the recent AGR judgment passed by the Supreme Court, pressurising the sector even further.’’

Could you tell us something about your spat with Reliance?

When we talk about volatility and having a cast-iron stomach, you’ll notice that whenever there is a change in the operating environment, we see a disruption. When Jio came in, one of the issues that emerged was the whole issue of the amount of interconnect that would be provided by the existing operators to Jio. Certain issues emerged related to the timing of the inter-connect, trial period, customers and so on. These were all grey areas and we had asked for clarity. Unfortunately, the regulator did not come forward in a timely manner. This created friction between Jio and our existing operators. We had to try to bridge those gaps.

In COAI, we do work under the government’s principles. The majority view prevails in the position that the entity takes. Of course, we try and relate to the minority position but Jio being a very voluble company doesn’t take these things lightly. Hence, they went public. In 95 per cent of the issues we deal with, Jio is a member and we generally agree. There are probably two to three areas where we disagree. And those disagreements have been there since day one. Interconnect was always our first issue.

Certain dynamics are a part of the functioning in the telecom business. So yes, what we try to do is be fair and transparent; we don’t try to brush anything under the carpet. We both still find values in our association. I hope that it continues to be a platform based on openness that would benefit all.

With e-commerce, mobile connectivity and the advent of 5G, what does a company require to ensure that the business is profitable and connected to the consumer?

One of the key points is an enabling policy environment. When I say policy it means the one that is enshrined in our policy condition. Very clearly, you can see what an inadequate policy environment can lead to. I am referring to the Adjusted Gross Revenue (AGR) matter at the Supreme Court. It was defined in a way that was disastrous for the industry. It was going to be tragic for a couple of operators. That is an instance in which inappropriate and inadequate policy and lack of clarity led to an SC decision that lead to a disaster. We have been agitating from 15 years on that. That also led to the whole issue of financial instability of the industry.

"We are moving not just in terms of connecting people to people but also to connecting people to things and things to things. That is the fundamental change. Today, you probably have about six billion people connected to people. Now when you say your appliances will start talking to each other, the number of devices that are going to be connected is just mind-blowing"

Another issue of policy-making is the way the spectrum is allocated. In 2012, there came a ruling that all spectrum had to be allocated through an auction process. We thought it was appropriate then. But the government can’t continue with an old legacy system of revenue sharing which existed when there was no auction and you did not pay for your spectrum upfront. However, when you go forward and introduce auctions, the legacy system should have been overruled. Unfortunately, it was not. Therefore, for every rupee that we collect from the customer, 30 per cent goes back to the government and none of it comes back to the industry. That is why they are not sustainable policies. Hence, policy and stability are completely essential.

Another important factor is that the regulator’s clarity and stability are essential. At various times you must have seen the regulator making changes. Interconnect being the last one. Then what we call the ability of right way where increasingly, local governments are getting more and more involved in giving us permission to put up cell towers and fibre in the ground. We run into a whole lot of problems where they try to extract additional money at the local level. That makes it expensive for us and hence for the consumer too. These are the dynamics we’d have to deal with if we were to continue providing services to the average customer relying on our services.

What are your tips for entrepreneurs who wish to start a new company?

It depends on the size of your enterprise, but the most important thing is connectivity. It depends on how integrated you are. Right from having mobile connections, to your customers, to having an integrated approach. For example, look at Amazon at the high end. From the time the container lands at the port, they have Radio Frequency Identification (RFID) cards. Their vehicles have logistics and GPS. They can track every vehicle wherever it is. Their warehouse management, which is mobility orientated takes care of all the logistics. Till the time the package reaches the customer, thanks to the RFID cards, you can continuously track it. Amazon has a wider application base and approach in terms of mobility.

The whole point is to enhance the ease of doing business. Our networks can make things easy with automation and integration. In addition, when technology is coming in, your competitor is going to make full use of it. So, you have to be aware of how mobility can make the smallest change in your business.

Today with IoT and other technology you can easily have a device on the pump that manages the flow of water when it comes to agriculture. You can look forward to more such things in terms of even better management with the 5G network. You can see how the advent of technology can be miraculous in many ways.

What are the key emerging trends and use cases in the blockchain domain in india?

Blockchain will revolutionise the whole world and India is no exception to it. Considering the growing popularity of this technology, it certainly has a bright future. Gartner has forecasted that blockchain will generate an annual business value of more than $176 billion by 2025 and more than $3.1 trillion by 2030. Within the next five years, blockchain has the potential to create value to the tune of $5 billion in India across all sectors. Blockchain is being explored across industries to develop multiple use cases. The frontrunners among them are the retail, travel, healthcare, telecommunications, real estate and public sector industries. The major use cases are focused on international fund transfers, trade, finance, know your customer, fraud management, decentralised data storage, data immutability and distributed ownership.

What potential does blockchain hold for the telecom industry?

India is probably the only country that has adopted blockchain in telecom. We are hopeful that with the advancement in blockchain technology, tel-cos will find merit in adopting it at an increasing pace. The first use case of blockchain in telecom regulation has been developed by the Telecom Regulatory Authority of India (TRAI), which leveraged the technology for enacting the Telecom Commercial Communications Customer Preference Regulations 2018 on unsolicited commercial communication (UCC). Some other use cases of blockchain in telecom are:

• Streamlining and optimising internal processes: It can be used for stream-lining operations support system and business support system processes, enabling smart transaction processes and provisioning of SIMs.

• Identity and data management: Telcos can use blockchain to generate new revenue sources.

• Fraud management: Blockchain can help telcos verify every individual’s identity and prevent identity fraud.

• Roaming: Blockchain can address the operators’ problem of integrating high-cost systems and providing access/authentication settings for enabling roaming calls across networks and operators

• 5G enablement: Blockchain can enable a new generation of access technology selection mechanisms for implementing 5G networks

• IoT smart contracts: The internet of things (IoT) is one area where block-chain-based smart contracts can be extremely useful.

"In 2012, there came a ruling that all spectrum had to be allocated through an auction process. We thought it was appropriate then. but the government can’t continue with an old legacy system of revenue sharing which existed when there was no auction and you did not pay for your spectrum upfront. however, when you go forward and introduce auctions, the legacy system should have been overruled. Unfortunately, it was not. Therefore, for every rupee that we collect from the customer, 30 per cent goes back to the government and none of it comes back to the industry. That is why they are not sustainable policies"

Are you happy with the 2020 budget?

We have consistently been disappointed. However, we had a presentation before the Finance Minister before the last budget. We spoke about the spectrum usage and licensing charges being high. We said that that is, in essence, double taxation. We have asked for a reduction in licensing fee from eight per cent to three percent and spectrum usage charge from four to one percent.

We need relief from import duties. Unfortunately, we still have to import a whole lot of equipment. Yes, there has to be some encouragement for domestic manufacturing. But until they catch up, do not burn the industry.

The third was about access to inexpensive capital. We are a very capital intensive industry. We have to pay upfront and the revenue comes in later. Through setting up specialised banks and tax-free bonds, our industry could receive a boost.

She heard us and said the government is aware of such issues and chal-lenges. We will try our best to make things fall in place.