The strangling’s afoot Telecom: why there's no joy in seeing a prophesy come true

Dev Baul   |  TT  | 17.11.21: The life cycle of a Strangler Fig tree provides for fascinating drama: it kills other trees to propagate and grow. It all starts when a fig seed is dropped on a host tree by a carrier bird. The seed germinates and sprouts an aerial root. Once the root reaches the ground, it grows rapidly forming a mesh of woody branches around the host tree. The roots thicken and tighten around the host tree trunk, strangling it. Meanwhile, the crown of the fig plant grows foliage at the top, blocking sunlight for the host tree.  Deprived of nutrients and sunlight, the host tree starts rotting and, eventually, dies.

The Strangler Fig phenomenon needs to be discussed in detail as we are seeing something akin developing in the Indian telecom market.

Between June-July 2020, an Indian telecom company was in the news for receiving investments worth $30 billion from multiple investors, including Google and Facebook. This helped the Indian telco to become debt-free while its principal shareholder moved up the billionaires’ list. All this happened in the midst of a severe bear market.

Analogies, as a rule, go so far and no further, but let us stretch it a bit and consider the Indian telecom market as a diversified jungle of host trees – trees being metaphors for existing telecom service providers; the said Indian telco as the carrier bird; and Google / Facebook as the Strangler Figs.

Let us now examine how the Strangler Fig syndrome is panning out. Before 2016, the Indian telecom market was the fastest growing and the second-largest market in the world with multiple competing telcos thriving and innovating to stay in the race. In 2016, a new Indian telco entered the market and offered its services free for the first one year, gaining around 35 per cent of market share even as the Indian government lost AGR income as no revenues accrued to the telco. Two players - BSNL and Vodafone - are on the verge of shutting down, one main reason being the loss of market share due to the predatory pricing war. Google and Facebook have managed to drop the proverbial fig seed. They virtually control the content and the app market. With a 7 per cent and 9 per cent stake, respectively, in the Indian telco, Google and Facebook will surely be represented on the board. 

Facebook had tried a backdoor entry into the Indian market earlier through its offering of Free Basics partnering the now-defunct RCom. TRAI banned it on grounds of breaching net neutrality. Free Basics will make a grand entry in a new avatar as an introductory free service, a practice perfected by the Indian telco when it launched its 4G/LTE services in India. Free Basics would provide free internet to a select group of apps and services from partner companies, putting non-partnering companies at a disadvantage and perhaps out of business.

 In the case of Google, the carrier telco would get a huge anti-competitive advantage. If telco A is in a position not to charge internet access fees for Google services while telco B is not, it is a no-brainer as to which telco the customers would flock to.

In the next couple of years, most incumbent telecom service providers would have been strangled by the Googles and the Facebooks — the metaphorical figs.  The market would have moved from a competitive entity to a monopolistic or, at best, a duopolistic market controlled by the Facebook-Google-Jio behemoth.

This piece was written a year ago. Today, I write this epilogue driven by the following news item — Google is in the process of investing a  few billion dollars into Airtel. Airtel is likely to use these funds for the expansion of its 4G network. Expansion of the network may become expedient to retain the new customers coming its way due to the possible closure of other telcos.

As a writer, I do not feel any joy in seeing a prophecy coming true. As a telecom consumer, I had hoped to be proven wrong.