Security and competition: Balancing the Telecom Act 2023

In an era defined by hyper-connectivity, digital dependence touches every facet of life and business in India. Against this backdrop, the introduction of the Telecommunications Act, 2023, marked a pivotal legislative moment, meant to modernise the legal framework that governs an industry central to India’s digital ambitions. Yet, even with a refreshed framework, certain provisions have triggered deeper conversations around how the Act addresses national security, licensing and equitable competition.

Between 2021 and 2023, India’s telecom sector experienced a surge that exposed the limitations of its legacy regulations. Gross revenue climbed from Rs 3.33 trillion in FY2022-23 to Rs 3.36 trillion in FY2023-24, while total telephone subscribers grew from 1.17 billion to 1.19 billion in the same period.

Broadband subscriptions increased by 9% to 924 million, and the Number of Internet users rose 8.3% to 954 million. Data consumption exploded by nearly 22%, driven by rapid smartphone adoption and 5G rollouts. Foreign investments and strong user growth pointed to an industry in transformation. Yet, these dynamic trends underscored the urgent need for a modern, flexible telecom law to govern emerging technologies, consumer habits and sectoral expansion.

The need for a new telecom law was clear. The previous Indian Telegraph Act (1885) and Wireless Telegraphy Act (1933) were not equipped for a landscape disrupted by data, satellite Internet, Over-the-Top (OTT) platforms and the Internet of Things. Thus came the Telecommunications Act, 2023, built on the principles of inclusion, security, growth and responsiveness to the changing technological environment.

National Security and Compliance Costs

Section 20 (2) of the Telecom Act empowers the government to suspend the transmission of messages, intercept communications and impose controls for national security and public order. Such powers are certainly not new; legacy laws also permitted similar interventions. The sector acknowledges that in a world of escalating cyber threats and borderless digital risks, proactive national security measures are vital for safeguarding citizens and critical infrastructure.

However, telecom service providers (TSPs) already comply with overlapping obligations regarding security mandates from various security agencies. Hence, there should not be any additional or avoidable compliance burden on TSPs that imposes unnecessary costs on the industry. Furthermore, it is important to envisage and implement a cost-sharing mechanism between TSPs and LEAs or user government departments to meet the security requirements.

Moreover, the Act restricts the authorisation of Internet shutdowns to the central government, thereby ensuring continued, uninterrupted and seamless telecom connectivity for all citizens. While some industry voices advocate for ongoing clarity in procedural safeguards and technical standards to preserve user trust and privacy, there is a broad recognition that robust security measures are foundational for a resilient and truly digital India.

Licensing Overhaul and AGR Uncertainties

One of the Act’s most challenging reforms is the overhaul of the licensing regime. The new service authorisations plan to replace time-tested contractual license agreements between telecom operators and the Department of Telecommunications (DoT) with a government-issued authorisation process. Sidelining this contractual stability could introduce regulatory uncertainty, undermine investor confidence, and deter long-term capital commitments. These arrangements have driven enormous investment and expansion in the sector over three decades.

Additionally, the calculation of Adjusted Gross Revenue (AGR), which is critical for determining government levies and dues, remains inadequately addressed. The industry has repeatedly advocated for revenues from licensed telecom activities to be considered as a part of AGR. This reform was unfortunately omitted even in the later TRAI recommendations tied to the Act.

Satellite Spectrum and Digital Sovereignty

The government has introduced security measures, including the mandatory localisation of key network functions within India, geo-fencing to restrict cross-border data flow, and prohibiting the decryption of Indian data outside the country, to mitigate risks.

Nonetheless, disparities in pricing and obligations between satellite and terrestrial operators, along with worries about foreign control over sensitive communications, highlight vulnerabilities in India’s security framework.

A balanced, transparent spectrum policy is essential to ensure satellite connectivity supports, rather than undermines India’s digital sovereignty and national defence.

OTT Exclusion and National Security Risks

Beyond spectrum and authorisation reforms, a pressing concern is the exclusion of app-based communication services from the regulatory framework. Despite offering similar critical services, these platforms operate outside licensing norms, unlike telecom operators who must meet stringent compliance and security obligations. This disparity creates regulatory arbitrage, undermines fair competition and raises national security concerns.

The sector is already under financial pressure from high spectrum fees and legacy dues, limiting investments in infrastructure. Meanwhile, App based communication services handle a large share of communication traffic without contributing to network upkeep, further straining operator revenues.

Additionally, the absence of oversight over app-based communication services creates security vulnerabilities. While licensed telcos adhere to strict interception and data protection rules, unregulated services can become entry points for cyber threats. Addressing this gap through balanced regulation is essential to safeguard the integrity and resilience of India’s telecom networks.

Consumer Protection and Infrastructure Reforms

Despite these concerns, the Act does introduce forward-looking features, particularly in consumer data protection and infrastructure development.

The Act introduces vital consumer protection and anti-spam measures to address the growing threat of cyberattacks such as data breaches and ransomware, which pose risks to national security and public safety. It mandates prior user consent for commercial messaging, enforces the maintenance of Do Not Disturb (DND) registers, and strengthens grievance redressal mechanisms to shield consumers from unsolicited communications and spam.

Alongside these, the Act enforces robust data localisation requirements and enhances privacy safeguards, aligning with global standards and India’s vision to set new benchmarks in data privacy. These measures ensure that user data remains secure from unauthorised access and misuse, thereby fostering greater consumer trust and confidence, critical foundations for realising Digital India’s aspirations.

Building on this momentum, the Act also simplifies Right-of-Way procedures, allowing telecom operators streamlined access to public and private lands for deploying vital infrastructure such as cables and towers. This modernisation reduces duplication of efforts and cuts costs, expediting network expansion. All that remains here is the uniform and effective implementation by local authorities to fully unlock their potential in accelerating digital infrastructure growth.

Balancing Stability with Digital Ambition

As India marches towards becoming a digitally empowered society, the Telecom Act is both an enabler and a catalyst for change. It attempts to modernise India’s telecom governance, with strong steps toward consumer protection, infrastructure ease and digital sovereignty. But as implementation unfolds, key concerns remain.

To truly deliver on its promise, the Act must retain the contractual stability that has long guided industry investment. Spectrum allocation, especially for satellite and enterprise use, must be equitable to avoid scarcity for core operators. Crucially, regulatory parity with OTT communication platforms is essential to ensure both fair competition and national security.

While the Telecommunications Act, 2023, is a critical step forward, clear, consistent policies and a level playing field are essential to align it to the digital future that the country and its people deserve.

The author, Lt Gen Dr SP Kochhar, is a decorated military veteran who retired as the Signal Officer-in-Chief, the head of the Indian Army’s ICT division. He was also the first CEO of the Telecom Sector Skill Council and is the Director General of the Cellular Operators Association of India (COAI).