Spectrum Costs and Fees are a Barrier to Faster, More Widespread Internet Access in India

All costs in the telecom value chain ultimately are paid by users. So if the objective is getting all citizens and people connected to the Internet, it makes sense to reduce the prices of all other inputs in the value chain.

That rarely is a popular option, since “costs” for others in the value chain are “revenues” for each participant. Sometimes it is helpful to keep that in mind, as difficult as it might be to make the point.

To make the matter as clear as possible, the best possible outcome for users of the Internet is for spectrum costs to remain low (observers will argue about whether “free” or “low cost” is better, in terms of sustainability), infrastructure costs to remain low, taxes and fees, marketing and operating costs as efficient as possible.

The problem always is that an argument for “lower costs” across the value chain directly implies less revenue for governments, less revenue for infrastructure suppliers, ISPs and employees of most firms in most segments.

The only segments where end users do not pay is the application provider segment, where advertisers and sponsors essentially defray costs on behalf of Internet users.

In India, “total outflow to the government in the form of all fees (spectrum, license, upfront, deferred) is an astounding between 25 percent to 35 percent every year,” says Parag Kar, Qualcomm VP, government affairs, India and South Asia. “This will impact operator’s ability to invest in networks and electronics.”

That provides an example of the dilemma. Assuming everybody wants “Internet access for everyone,” when ability to pay is an issue, the best way to do so is to control all other costs in the ecosystem. All that is revenue for somebody in the ecosystem.

And that will remain an issue to be grappled with.

source: Parag Kar