Context: Vodafone Idea is facing various issues to remain afloat creating circumstances for emergence of Duo Poly (Reliance Jio and Bharti Airtel).
Issues with Telecom sector
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Declining Average Revenue per User (ARPU): ARPU decline is sharp and steady which is combined with falling profits due to predatory pricing.
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Limited spectrum availability: Available spectrum is less than 40% as compared to European Union and 50% as compared to China.
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Low Broadband penetration : According to International Telecommunication Union (ITU), broadband penetration in India is only 7%
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Competition from over The Top Applications: Applications such as Whatsapp providing free chatting platform is affecting the revenues of telecom service providers
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Duties on telecom equipment: Nearly 85% of Indian Telecom equipment are imported, thus duties on such products affect expansion and investment.
Suggestions
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Insolvency and Bankruptcy Code ‘s provisions can be used to save Vodafone Idea.
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Change in perspective: Telecom firms should not be viewed as just source of revenue. They are critical for empowering millions with better digital tools and ensuring easier access to public services
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Government of India should play a facilitating role in fostering competition. The goal of Digital India requires competition to be sustained.
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Government of India should lower at least some of the levies that are raised from telecom companies, finding a solution to lay down 5G technology without causing much pain to the providers and promise regulatory stability.
Way Forward
Emergence of a duopoly will hamper public interest. Competition is necessary in such a critical sector. Markets with a regulatory structure that encourages competition have at least three to four large telecom service providers.