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The SC Aadhar Ruling: How it affects the Telecom industry

Launched in January 2009, Aadhar is a 12-digit unique identification number (or UID) that is issued by the government-backed Unique Identification Authority of India (or UIDAI). Aimed to collect the biometric and demographic information of Indian residents, Aadhar is the largest biometric database in the world today with around 119 crore enrolments in the Aadhar card network, which accounts for 89% of the Indian population.

In September 2018, the Supreme Court of India made a landmark judgement on the constitutional validity of the Aadhar card. Some of the points that were discussed during the ruling included challenges related to the violation of the consumer’s right to privacy and how Aadhar-based system could lead to a surveillance state in India. In the final judgement, the Supreme court struck down several provisions (including Section 57) of the Aadhar Act that allowed private companies from using the biometric data for identifying its customers. The Section 57 of the 2016 Aadhar Act allows the use of the unique Aadhar ID by any state or corporate enterprise to establish and authenticate the identity of the individual for any purpose. According to the 5-member Supreme court bench headed by Chief Justice Dipak Misra, “The portion of the Section 57 of the Aadhar Act, which enables body corporate and individuals to seek authentication is held to be unconstitutional.”

By the court order, the Section 57 provisions can only be used for social welfare schemes. Other provisions that allowed business enterprises to use customer data for selling metadata or for targeted advertising were also withdrawn by the court. According to the Supreme court ruling, storage of the individual’s meta data has also been reduced from the previous 5 years to just 6 months to prevent any privacy violations.

This article evaluates the impact of the SC Aadhar ruling on the Telecom industry in India.

Enrolment of new telecom subscribers

According to Telecom industry estimates, the total number of Aadhar-linked mobile subscribers in the country is estimated to be around 500 million, with around 80% of the new subscribers enrolled through the Aadhar-based electronic Know-Your-Customer (or eKYC) process.

By industry estimates, enrolment of mobile subscribers through the eKYC process takes around 30 minutes as compared to 5-6 days for the physical KYC where the company executives have to physically verify the customer information. Due to the Supreme court ruling, telecom companies will no longer have access to eKYC thus delaying the activation of new mobile subscribers. According to digital identity specialist, CV Madhukar, “Companies doing the eKYC for onboarding customers will be impacted, and there could a temporary setback as both the costs and the time of enrolment are likely to go up.”

Increased cost of customer enrolment

Thanks to the Aadhar-based eKYC system, telecom companies were able to reduce their overall customer acquisition costs. While conducting a physical KYC costs any company an average cost on 100/- per subscriber, eKYC reduced the same cost to just 15/- per subscriber. Telecom industry officials estimate that this move is likely to escalate the costs of customer acquisition by as much as 10 times.

The Supreme court ruling on Aadhar is likely to increase the acquisition cost for telecom companies as they have to switch back to the previous model of physical verification. This would be an added cost for the ailing telecom sector in India that is already under financial distress caused by price wars and reduced profitability. According to the annual report released by the Cellular Operators Association of India (or COAI), the telecom industry has a cumulative debt of 7.7 lakh crores and revenue under 2.5 lakh crores for the 2018 financial year.

Market reach

Telecom companies are fearful of this SC ruling as they estimate that it could delay mobile penetration in India particularly in rural parts where the density of mobile phones is still just around 60% as compared to 150% in urban areas. Telecom industry experts are also sceptical of going back to the traditional way of customer verification, as it would be riskier than the Aadhar-based process. Among the risks include the misplacement of the physical copies of the customer’s identity proofs, which could a greater threat to individual privacy.

Aadhar Delinking process

Though there is no clear guideline on how to delink Aadhar card information from the subscriber’s mobile phone account, telecom companies will need to undertake a process asking their customers to delink their Aadhar information by sending them timely Email reminders.

Conclusion

While the Supreme court ruling places the ownership of personal data back on the individual, it remains to be seen how telecom companies in India will tackle the challenges of higher costs and delay in acquiring new mobile subscribers.

 

 

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https://onlineaccountopen.in/learning-center/supreme-court-judgement-on-aadhaar-card-and-its-impact-on-indian-banks/

https://onlineaccountopen.in/learning-center/how-will-the-fintech-and-payments-industry-change-after-the-aadhaar-ruling/

https://onlineaccountopen.in/learning-center/the-sc-verdict-on-aadhar-pros-and-cons/

https://onlineaccountopen.in/learning-center/let-it-go-how-to-delink-your-aadhaar-card/

 

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