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India's New Broadband Rules Will Help Private CSPs – FitchBroadband World News, , 9/28/2018
SINGAPORE and SYDNEY -- India's new national digital communication policy (NDCP) could benefit the sector by making it easier to meet rapidly rising data demand and addressing tax and fee burdens on the industry, says Fitch Ratings. The NDCP's plan to expand broadband coverage funded by the universal service obligation fund and in partnership with private telcos is likely to support private telcos' growth, as it will broaden the customer base and improve Internet adoption, particularly in rural areas, according to Fitch Ratings. The NDCP lays out plans to connect 600,000 villages to the broadband network, establish 2 million WiFi hotspots in rural areas and another 1 million in urban areas. There will be implementation challenges, but the development of this infrastructure could significantly increase the country's broadband adoption rate, which is currently in the low single digits in rural areas. The policy aims to considerably expand fiber coverage and also to increase the proportion of towers connected through fiber optics to 60% from 25% to accelerate the adoption of 4G/5G technologies. Private telcos also will benefit from NDCP's plan to encourage more efficient spectrum usage, by making available harmonized and contiguous spectrum bands and further liberalizing spectrum sharing and trading. Accelerated 5G deployment, increased spectrum supply and harmonization help telcos keep up with growth in data usage -- after all, the average monthly data usage per customer rose to between 6Gbp/s and 8Gbp/s in 2018, from about 1Gbp/s only 12 months prior. However, the plan is likely to encourage companies to increase investment in 5G spectrum which, depending on the 5G spectrum asset price, could further stretch already heavily indebted balance sheets over the next two years. We believe private telcos could skip 5G spectrum auctions if prices are too high. The NDCP's plans to review and rationalize the sector's tax structure and optimize future spectrum asset pricing could reduce telcos' costs and red tape. Indian telcos face heavy and multiple taxes -- including license fees, spectrum usage charges, and universal service fees on top of expensive spectrum assets. Meanwhile, intense competition has limited telcos' pricing power. Overall, these pressures have stretched balance sheets. The sector has also been subject to frequent litigation due to high taxes, which CSPs currently dispute. We expect price competition to ease in the medium term following the emergence of three large telcos -- Bharti, Reliance Jio and the merged entity of Vodafone-Idea, which have an estimated combined revenue market share of more than 90%. Fierce price competition following Jio's entry into the market significantly hurt telcos' financial profiles, which led to rapid consolidation and the exit of smaller operators. |
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Tune in to Broadband World News Radio on February 14 at 11 a.m. ET / 8 a.m. PT / 4 p.m. UK when John Isch, Practice Director of the Network and Voice Center of Excellence at Orange Business Services, discusses use cases, ROI and misconceptions of software-defined wide-area networks, virtualization and cloud. ![]() Industry Announcements
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