Internet Shutdowns Cost India $3 Bn From 2012 To 2017: Reports

Rajan Mathews, Director General, COAI

(Photo Courtesy: Twitter)

Internet shutdowns are not only a freedom of speech issue, as a Supreme Court ruling, on making public government orders for shutdowns said, but also a huge loss of revenue for telecom companies that are already financially struggling, Rajan Mathews, the director general of the Cellular Operators Association of India (COAI), an industry association of telecom operators, told IndiaSpend in an interview.

The Indian economy lost nearly $3.04 billion (Rs 19,434.7 crore) due to internet shutdowns between 2012 and 2017, according to the Indian Council for Research on International Economic Relations (ICRIER), a New Delhi-based think-tank.

Of this, 12,615 hours of mobile internet shutdowns cost the Indian economy an estimated $2.37 billion (Rs 15,151.4 crore), and 3,700 hours of mobile and fixed-line internet shutdowns cost the economy approximately $678.4 million (Rs 4,337 crore), the study estimated.

Across India, there have been four internet shutdowns in 2020 and 382 shutdowns since 2012, according to data from the internet shutdown tracker maintained by the New Delhi-based Software Freedom Law Center (SFLC), which works to protect digital safety.

The internet shutdown in Kashmir, imposed on 4 August 2019, has been in place for over six months, making it the longest in any democratic country.

A few dozen whitelisted sites were initially allowed on 2G speeds from 25 January, 2020, but experts have called this an eyewash as most websites either did not open or the speeds were so slow that it is impossible to get any work done.

Of the 381 internet shutdowns between 2012 and 4 January, 2020, about 62% or 234 were categorised by SFLC as “preventive” restrictions were imposed in anticipation of a law and order issue. As many as 146 shutdowns were categorised as “reactive” to reign in a law and order situation.

“There has to be careful consideration of criteria by which you decide to shut it down. There has to be an appropriate review process in place before the internet shutdown takes place and ex post facto it can be reviewed and we can learn how to do things better,” Mathews said.

Mathews, an industry veteran, has worked in the Indian and US telecom sector in operations, business development and human resources over his 41-year-long career.

He also served as the president of the Afghan Wireless Communications Company – Afghanistan’s largest telecom company – from 2003 to 2005. He has a degree in business administration and economics from Rutgers University.

IndiaSpend spoke to Mathews on the state of India’s telecom industry, the cost of repeated internet shutdowns on telecom operators, and the Centre’s Digital India initiative.

Edited excerpts from the telephone conversation:

The Supreme Court has asked the government to place orders of internet shutdowns in the public domain so that the civil society can challenge the validity of these orders. How do telecom companies look at internet shutdowns and what has it done to the revenue of the companies?

We have been clear that obviously every time there is a shutdown there is a loss of revenue to our operators. That is very clear and we have quantified that. It is about Rs 2.45 crore conservatively per hour of internet shutdown.

[This estimate is based on revenue losses due to internet shutdowns in Assam, Karnataka, North East and Uttar Pradesh at the peak of the protests related to Citizenship Amendment Bill in December 2019.]

ICRIER [Indian Council for Research on International Economic Relations] which is an economic think-tank in the country, has also done its own study and has come up with the cost per hour of the internet shutdown.

I understand there is also a global company which has done a similar study. So there is no question that the costs associated with an hour of data loss are substantial.

When you consider the indirect cost, that is even greater. There is no question that internet shutdowns cost everybody.

Now the court’s ruling has also said that, look, it seems to be in conflict with the fundamental notion of the freedom of speech and therefore the government ought to use it very carefully.

So, the point that the directive makes is what we also agitated, if you will. I represented in front of the government, saying that look, it [internet shutdown] should be a last resort.

There has to be careful consideration of criteria by which you decide to shut it down.

There has to be an appropriate review process in place before the internet shutdown takes place and ex post facto it can be reviewed and we can learn how to do things better.

Those are all the things that have been upheld by the court and we are pleased with the way they have been handled by the court.

There are also reports of how lack of mobile and internet services has led to individual tragedies, mainly with respect to medical emergencies. How do telecom companies see their role in the current political environment? Would your organisation challenge the order of the shutdown as the orders are now likely to be in the public domain?

So, a couple of things. One is that in India, we operators exercise our ability to run a network under the direct license from the government. The license is very clear. If there is an order for the network to be shut down then we have to comply. If we don’t comply we have to forfeit our licenses.

There is no operator who is in a position to contest the government’s order which is clearly stated in our license.

You can’t be against the government in this regard. We will always have to abide as long as there is a legal order.

Legality here is defined as appropriate approvals from the highest areas of the government, which is either from the secretariat level or from the home department. If it does not follow that protocol then of course we don’t [follow the order].

In addition, we also have informed discussions with the government, saying, hey look, are there better ways to handle the problem you are faced with, without taking the draconian measure of shutting down the internet in the whole swathe of geography?

This government launched Digital India (2015) soon after it came to power and the telecom sector was at the crux of it. What went wrong and where, considering the sector has made massive losses in the years after that?

One thing is that when we went into revenue share, the government has changed the whole licensing structure from what was a very positive structure that saw the tremendous growth of the telecom sector in India.

Unfortunately, what happened was, in 2012, when the SC ruled that all spectrum must be auctioned, the legacy process of the revenue share [between a telecom company and the government] did not stop.

As you now have the paradigm to pay upfront for your spectrum and license, the ongoing extraction of the licensing spectrum should have stopped. Unfortunately, that continued so the industry was hit with a double whammy.

Not only were they paying a large amount of money upfront because of the constraints in the quantum of spectrum available, but they would also have to pay a large sum in revenue sharing.

It is Economics 101 – when you allow all the constraints on what you can buy and no constraint on demand then of course the price is the balancing mechanism.

The prices of spectrum went through the roof. The servicing cost became unsustainable. Then you have the continuing extraction of resources through the licensing legacy.

The final thing was of course the free fall in prices once Jio came into the picture that really sent the industry into a tailspin in terms of the financial position.

So, all of those factors have to be addressed if we have to get out of this conundrum.

Since 2016 when Jio entered the telecom market, tariffs for data and mobile services dropped and there was hyper competition. How has this affected the industry?

If you notice, three and a half years ago, we had about nine operators in play in the country, which has reduced to three + one which is a public sector unit (PSU). That is a dramatic fall.

Some very globally oriented companies have left the country as a result of the inability to play along with those profit margins. People like Telenor, MTS, which is a Russian company and Docomo have left. Etisalat has left.

So global operators have chosen to exit the country because they found the profitability inadequate. Several companies have gone bankrupt. Aircel has gone into bankruptcy.

Several others have sold their interests. Tata Communications have sold their interest. Again, Telenor has sold its interest.

A lot of companies exited till there were only three left over. Clearly, the financial picture for the operators in the country has not been very encouraging.

[Telecom companies in India have reduced from nine in 2016 to four in 2020, including Bharat Sanchar Nigam Limited (BSNL), the government-owned telecom company. This has happened even as consumption of mobile services rose 88% from 366 minutes per user per month to 691 while data consumption grew from less than 0.5 gigabytes (GB) to nearly 11 GB between 2016 and 2019, according to data from the Telecom Regulatory Authority of India (TRAI).]

What does this mean for consumers?

For consumers, it has meant a data windfall, but unfortunately the chicken has come home to roost and the quality of service has suffered – in part because of the inability (of the operators) to continue investments in our networks commensurate with the demand factors throughout the network.

Prices have fallen so steeply that demand has gone through the roof. Over the last three years we have gone from consumption of 366 minutes per user per month to 691 minutes – almost two times. If we look at data consumption, it went from half a giga byte to 11 giga byte.

All of that additional capacity requirement needs to have big networks and obviously we need to make investments in the network to keep up with that. With low tariffs, that has been impossible.

(This article has been republished in arrangement with IndiaSpend)