There is a ring of truth to tariff hike

India's telecom companies, among the fiercest price warriors, have finally seen the light. They are raising tariffs, hoping Indians hooked on to prodigious amounts of data at dirt cheap rates won't be able to kick their browsing habit. It is a calculated gamble by Reliance Jio, Bharti Airtel and Vodafone Idea to raise revenue per subscriber to fund network expansion. The industry has it slightly easier after a GoI lifeline that allowed the purchase of spectrum in instalments. Yet, spectrum prices remain high while its telecom tariffs are among the lowest in the world. Hyper competition has squeezed telecom companies to a point where Vodafone Idea had to bring on GoI as a shareholder to pay its dues.

The concerted price hikes are a sign the industry is gaining health. The competitive intensity earlier was difficult to sustain and was acting perversely to push telecom services towards a duopoly. The industry and GoI agree that India is a market for three telecom companies if not four. Plans to revive state-owned BSNL will put the industry on a firmer footing. And it will better serve GoI's agenda of a digital India. The recent price increases are calibrated to maintain the tempo of subscriber transition from 2G to 4G networks. The sticker shock is not that intense for data-hungry 5G subscribers.

India's development relies extensively on rapid telecom network upgradation. With population-level cellphone usage, GoI and businesses are building impressive digital stacks on the telecom backbone. The industry faces heavy investments in terrestrial and satellite networks. It needs to find a way to finance these investments from internal resources. The price revisions suggest that the frenzy for subscriber addition has abated, and telecom companies are looking at the game-changing model 5G represents, where machine-to-machine communication ushers in a new industrial revolution.