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Become A Startup Insider With Inc42 Plus
Join our exclusive community of business leaders &makers for in-depth tech stories and intelligence on India’s tech economy you won’t find elsewhere.
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Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.
Inc42 and Ikigai Law recently held a roundtable titled Draft Telecom Bill 2022: Decoding The Impact On Indian Tech & Startups. The session explored many critical areas such as:
- The Bill’s applicability to startups and its implications for innovation and investor sentiment
- How should startups deal with being regulated under the same framework as telcos
- Will a licensing framework for telecom foster innovation and competition
Moderated by Nehaa Chaudhari, partner at Ikigai Law, the discussion included Sameer Chugh, chief legal officer and general counsel at Games24x7; Amal Sivaji, public policy director at Swiggy; Sakina Arsiwala, cofounder of Taki, a token-based social networking startup; Awais Ahmed, founder and CEO of spacetech startup Pixxel, and Shawrya Mehrotra, founder and CEO of the networking and mentoring platform Metvy.
Decoding The Impact On Innovation And Indian Tech And Startups
“Regulatory uncertainty causes a chain reaction where it first kills innovation, then growth and then the future economy,” said a concerned Sameer Chugh of Games24x7, when asked about the draft Indian Telecommunication Bill, 2022. A stark statement, one would think, but he was not alone.
The Ministry of Communications released the draft on September 21, 2022, inviting industry thoughts and consultation on the same. The Bill is an attempt to overhaul three outdated legislations (Indian Telegraph Act, 1885; the Indian Wireless Telegraphy Act, 1933; and the Telegraph Wires (Unlawful) Possession Act, 1950) currently regulating the Indian telecom space.
Repealing these legislations is of critical importance, as India must restructure the legal and regulatory framework for the telecommunications sector in sync with the rapid and overarching developments. Understandably, the proposed legislation will impact not only the TSPs but the technology and the startup sectors coming under the broad spectrum.
Although it is a well-meaning initiative, industry stakeholders think that the Bill leaves much to be desired in terms of clarity and certainty.
To begin with, it aims to bring startups, especially those operating in the digital space and the internet industry, under the purview of the Department of Telecommunications (DoT).
Startups operating in ecommerce, OTT communications, foodtech, mobility or even spacetech may be subjected to the same regulation as telecom companies. This may lead to a compliance overload, including licences and fees and KYC requirements, failing which harsh fines will be imposed along with possible jail time.
After scrutinising the Bill, startups feel concerned as terms like ‘telecommunication services’ and the ‘sandbox ecosystem’ have been broadly and ambiguously defined and, in some cases, not at all. Moreover, there are chances of regulatory overlaps.
Specific clauses also provide the government with unfettered surveillance powers. For instance, there are provisions to suspend all telecom services and demand interception and disclosure of data, which are much broader in scope than the current internet shutdowns. All these may create operational hurdles and raise costs significantly for startups.
“The Government needs to understand that the Bill will not only impact the players which are directly using telecommunication services but also the startups leveraging the services as a supportive product (read feature),” said Mehrotra of Metvy.
Additionally, startups are worried about how this will impact investor sentiment.
Investors love to make money, but they hate losing money even more. Regulatory uncertainty will make them question their investments in something that may soon run into trouble with the law of the land. With the Indian startup ecosystem already reeling under a harsh funding winter, any cause for investor concern may have dire consequences for some startups, especially the early stage ones.
“Because we are in pre-product-market fit, there is no revenue. If there is no clarity, investments will dry up, and smaller players like us can be wiped out,” cautioned Arsiwala of Taki.
Innovation is the core tenet of the startup ecosystem. Of course, there need to be boundaries within which one must operate so that there is no impingement on privacy, the economy and, most importantly, national security.
Startups have played a critical role in driving India to the fifth spot among global economies. The country is home to the third-largest startup ecosystem, with more than 57K digital-first companies present here, an Inc42 report states. But to take it forward and reach more milestones, industry stakeholders want the growth process to be more collaborative and consultative.
“Telecommunication is the backbone of any country. If you are not communicating, there is no way you can turn around and increase your trade and commerce,” said Chugh of Games24x7.
