How the “2G Scam” and Jio ruined India’s Telecom Industry

Source: Reddit | How the “2G Scam” and Jio ruined India’s Telecom Industry | /u/apuw

India’s telecom industry flourished in 2008 when many new players were allowed to operate in the mobile telephony space. The market opened and the stranglehold by a few companies, like Airtel and Reliance, seemed to be coming to an end.

Sometime around next year, it was accused that the new players which have been allowed to operate have been given licenses in an illegal manner. Cases were filed against the telecom minister among other private companies/persons.

What was shocking and confusing was a report by the Comptroller and Auditor General of India which claimed a loss of ₹1.76 trillion to the exchequer. The number seemed absurd (not to mention that there might not even have been any loss in the first place).

The Supreme Court in 2012 took the decision to quash all licenses that were given out to mobile operators in 2008. All the new players being forced out. And thus began the fall of the telecom space.

It should be noted that corruption charges were not filed against the telecom minister A. Raja and his party until 2014 when the elections were to take place. Before that, the charges against the minister only included irregularities and improper conduct of his duties.

Free for now. India’s former telecommunications minister Andimuthu Raja (C) comes out of the airport in New Delhi | Reuters/Adnan Abidi

An auction was held for the telecom spectrum of the canceled licenses and of course, it didn’t fetch even close to what the govt. was expecting. Only the major players which had a stranglehold on the market earlier participated.

You see the fact many new players were able to enter the market was due to a first come first serve policy put in place by the telecom minister A. Raja. It was on this that losses were being claimed by the exchequer but in reality, it had freed the telecom market.

Now the telecom space was back in an oligopolistic state with only a few companies controlling the market but the situation still wasn’t that bad until the introduction of Jio.

Reliance Chairman Mr. Mukesh Ambani announcing the roll out of Reliance Jio 4G network to public at the Annual General Meet of Reliance Industries Limited.

Jio’s* history is quite interesting. The 4G licenses on which it now operates were actually given to Infotel Broadband Services Limited. The fact that Reliance outright bought Infotel and no anti-competitive rules were brought up against it makes something feel not quite right.

Jio’s introduction made the telecom industry scramble and brought many consolidations with only a few players left and no competitors (Vodafone Idea are already merging and the only other major company left is Airtel).

Jio’s pricing was predatory. It shouldn’t have been allowed to put services for free but was even after the regulated 3 months period which definitely screamed bias. IUC (interconnect usage charges) were also reduced by TRAI again showing a clear bias towards Jio.

Now only a few players are left with few choices for consumers. It is a sad time for the telecom space indeed.

To give you an idea here is a list of mobile operators in the 2008 era vs now:

2008: Airtel, Vodafone, Reliance Communications, Idea, BSNL, Tata DoCoMo/Tata Indicom, Virgin Mobile, Aircel, Uninor/Telenor, Videocon Telecom, MTNL, Loop Mobile, MTS, S Tel, Ping Mobile, Cheers Mobile

Present (2018): Vodafone-Idea, Airtel, Jio, BSNL, MTNL, Aircel

*To better put Jio into perspective here is a comment by /u/n_end

Other mobile network companies were looting customers is a fact. Jio bringing them to senses is also true. But in a long run (5-10 years) Jio will be remembered as a very big mistake from India. It should not be given permission to offer free data/calling for six months or more. It is a straight favour from the government to Jio.

4 thoughts on “How the “2G Scam” and Jio ruined India’s Telecom Industry”

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