Sunday, May 18, 2014

Inefficiencies in Indian telecom sector - A case for change in regulations

While telecom operators world over are embracing digitization to deliver improved customer experience and make operations more efficient, their counter-parts in India are seriously handicapped by a set of stifling regulations.

Sample this (Source - Regulation on Verification of new mobile subscribers )

    1. 3 (i) - Physical Customer Acquisition form (CAF). "A passport sized photograph of the subscriber should be pasted ....The person at PoS shall get the CAF duly tiled and singed..."
    2. 3 (iv) - Manual Verification as a pre-requisite to activation - "The mobile connections shall be activated only after the requirement of filling up of customer acquisition form and copies of documentary proof as per requirement have been fulfilled by the customer and the subscriber details have been updated in the subscriber database of the licenser for this purpose, the licensee (the employee of Licensee) shall verify and record on the CAF under his name, designation and Signature that all the documentary requirement has been completed and subscriber details are updated in the database of licensee"
    3. 3 (vii) - Pre-activated SIM Card is not to be sold.
    4. 3 (xi) - Pre-paid to Post-paid change (& vice versa) - "incase of change of existing mobile connection from pre-paid to postpaid and vice versa also, the above instructions from 3(i) to .3(viii) shall apply"

Here is an estimate of inefficiencies (in Indian telecom industry) resulting from these regulations

  1. Absence of a Digital CAF - In 2013, approximately 9.1 million new subscribers available mobile connections. Assuming Rs 10 goes for handling of physical CAF/ subscriber and Rs 2 / subscriber goes for storage, retrieval, the Industry spent approx Rs 11 Crores (9.1 mil * Rs 12) on processing physical CAFs in 2013 alone. Imagine the level of efficiency, if the govt allows Digital CAFs for a certain segment of people with strong POI e.g. As of last count nearly 50% of our population has Aadhaar cards)
  2. Need for Manual Verification? - On paper, this clause places a nominal accountability on the licensee to detect and prevent fraud. But at what cost. A national player has to keep approximately 1000 to 1200 employees at various hubs to manually verify and sign the CAFs. Considering top 5 national players we are looking at 6000 full time employees dedicated to serve this regulation alone. Assuming bare minimum Rs 4 lakhs CTC, we are looking at Rs 240 Crores salary spend on this non value adding activity

Would DoT wake up from it's deep slumber and take a objective view on such archaic regulations?