Opening thoughts. The first bullish communication from Vodafone Idea, in many years, regarding a future roadmap of investment. And more to the point, an intent to not just stay around, but compete. The government’s help has, well, helped.
The company confirms a ₹45,000 crore infusion focused on capital expenditure over the next three years. Network upgrades are essential, and imperative. I had pointed out in my Tech Tonic column last year that letting Vi fail would be detrimental to consumers. I’m glad it was heard, in the corridors of power.
The Department of Telecommunications’ recent decision to defer Vi’s AGR (Adjusted Gross Revenue) dues for four years is the basis for the brighter outlook, one that the telecom company needed to compete with its rivals Reliance Jio and Bharti Airtel. That said, even before Vi can talk of competing, they first need to ensure coverage (map and quality) matches rivals across telecom sectors, and fix the 5G gaps that still exist. It is only then they can hope to attract customers—particularly the premium base—into their fold.
Editor’s Corner: The NUF Debate
I’ll lay this out clearly—a network usage fee (NUF) is never a good idea if the stated intention is to reduce the cost of accessing a service, for the customer.
Some of you may be young enough to not remember when the Telecom Regulatory Authority of India introduced the Network Capacity Fee (NCF) for direct to home (DTH) services in the country. In an instant, the mess that it created between the computation of pricing for bouquets, add-on packs and individual channels in a subscription meant that an all-channel inclusive package, which would cost anywhere between ₹500 to ₹700 per month, started to be priced upwards of ₹1,000 per month.
Which is why when the New Delhi-based technology think-tank Esya Centre sent its latest report my way, I was only too interested in this otherwise complex matter.
At the core of this conversation is that the Cellular Operators Association of India petitioned before the Department of Telecom as far back as in November 2022, suggesting that content and application services (CAPs, think of these as anything from Netflix to Spotify and YouTube) should bear part of the network infrastructure costs. For this, COAI suggested CAPs contribute through a network usage fee (NUF) computed based on the data traffic generated by them on telecom networks.
The report authored by Eysa Centre’s Director Meghna Bal, along with Adjunct Fellow Vikash Gautam, and economic researcher Kunal Tyagi, makes three things very clear.
First, charging a network usage fee to OTTs is detrimental for consumers since it will undoubtedly increase subscription costs.
Secondly, any NUF will have an impact on freedom of expression for creators and users because not only does it represent a barrier to entry for smaller platforms, but it can potentially limit any ability of larger platforms to invest in content, which directly impacts creators who wish to distribute their content.
Third, there is an understanding that NUF will not deliver any significant efficiency gains for India’s telecom and internet services. In fact, according to the report, “A compelling 79% of experts predict a moderate to extreme decline in efficiency in the CAP industry.”
For a global context, just last month, the European Union announced it will not require Big Tech to pay telecom operators for infrastructure costs, despite increasing industry pressure. This was part of its broader Digital Networks Act proposal, and in line with what was agreed as part of the tariff deal with the United States. This should be seen as a rejection of calls for any “fair share” fees, while regulators nevertheless progress with network modernisation plans.