 | Issue: | Asia-Pacific I 2003 |
| Article no.: | 1 | |
| Topic: | Telecom Reforms and Opportunities for Small and Medium EntrepreneursTelecom Reforms and Opportunities for Small and Medium Entrepreneurs | |
| Author: | Shyamal Ghosh | |
| Title: | Administrator, Universal Service Fund | |
| Organisation: | Government of India, Department of Telecommunications | |
| PDF size: | 112KB |
About author
Mr Shyamal Ghosh, currently the Administrator of the Universal Service Obligation Fund of the Department of Telecommunications has had a distinguished career in the Indian Administrative Service. He was the Chairman of the Telecom Commission and the Secretary for India’s Department of Telecommunications when he retired from Civil Service in May of 2002. During his tenure as Chairman for the Telecom Commission, major reforms in the Telecom Sector were initiated and implemented leading to the complete opening up of the Telecom Sector in India for private sector participation. Mr Ghosh has held many senior positions in both the State Government of Gujarat and the Government of India including Municipal Commissioner, District Magistrate, District Development Officer, Director, Department of Chemicals & Petro Chemicals, Joint Secretary, Chief Secretary/Principal Secretary (Finance), Industry & Agriculture of Government of Tripura, Managing Director, Gujarat State Petrochemicals Corporation, Director General of Foreign Trade, Ministry of Commerce, and as the Secretary for the Department of Electronics, and Ministry of Textiles. Mr Ghosh has represented India at many International Conferences and served as a UNIDO Consultant. He has also published many articles for newspapers and journals on various issues relating to Telecom and Information Technology. Mr Ghosh holds a Bachelor of Arts Honours Degree in Economics from the Scottish Church College, Calcutta, securing first position in the college. In addition to his achievements he also holds a Master’s Degree in Economics from Calcutta University, securing second position in the University. He was also awarded a Parvin Fellowship by Princeton University, USA for the M.P.A. Programme at the Woodrow Wilson School (Princeton University).
Article abstract
In India relatively few have access to telecommunications; it is necessary to accelerate the transformation of the sector to create a competitive, multi-operator environment. This will attract investment to build the network infrastructure and make possible affordable basic and value-added services. In parallel, initiatives are needed to manufacture low cost computing devices and provide cost-effective access technologies. In this way, small and medium enterprises can be given effective access to the advantages of the communication and information technology revolution.
Full Article
A popular adage to emphasise the need to reform the telecom sector in India for promoting usage of information technology was that if information technology was the ‘body’, then telecom infrastructure was the ‘soul’. This was also to encourage new investment in telecom networks not only to meet perceived demand based on waiting lists but also to precede anticipated demand. A number of small and medium entrepreneur associations, particularly in the software sector, coined the slogan ‘Food, Clothing and Bandwidth’. The monopoly incumbent did not respond promptly to requests for bandwidth; the lease line tariffs were high and continuous connectivity, twenty-four hours, seven days a week was not assured. These problems were felt more by the export oriented small and medium software units, since they had to face global competition; it also came to impact the domestic sector. The process of opening up the telecom sector to competition and private sector participation started in India in the 1990s. It was felt that there was urgent need for accelerated growth in the telecom sector to facilitate connectivity and networking. Interestingly, the year 2003 marked 150 years of Indian telecommunications. Telegraph services came to India in 1853: only nine years after Samuel Morse invented the telegraph transmitter. Telecom services followed soon after Alexander Bell’s invention in 1876. However, the progress in building up the network was extremely slow and there were hardly 80,000 telephone subscribers by the time India became independent in 1947. The telecom sector was not recognised as a priority sector even till the 1970s. In 1981 there were barely two million telephone lines in India; the population in India, at that time, was 683 million people. For a civil servant in India, a change of assignment could lead to a seat where one had to find solutions to the issues posed in an earlier assignment. Thus lack of bandwidth and reliable connectivity proved to be major problem areas, and as Secretary of the Department of Electronics, he had to be addressed. He tried to resolve the problems after taking charge of the Department of Telecom. Knowing the urgency and importance of these issues, one could assist in accelerating the reform process. The initial steps reforming the telecom sector had started with the opening of value-added services, including cellular mobile services in 1992 and subsequently of basic services in 1994 for private sector participation. However, the reforms process had been stalled by litigation, lower than expected revenues and a lack of clarity in the regulatory regime. For allowing market-based reforms, a New Telecom Policy was formulated in 1999 (NTP – 99), laying down a clear roadmap for future reforms, contemplating the opening up of all the segments of the telecom sector for private sector participation, streamlining the regulatory regime and rationalising the licence fee system. Accordingly, steps were taken to open up various segments such as national and international long distance and Internet telephony and to introduce additional cellular and basic service providers. The Universal Services Obligation Fund was also set up to provide financial support for connectivity in commercially non-viable areas. The underlying philosophy behind NTP – 99 was to allow free play of market forces by not restricting – subject to certain prescribed entry conditions – the number of operators in almost all segments. This ensured that only serious players with financial strength would make an entry and not rent seekers in a restricted licensing regime, primarily interested in trading of licences. The entry conditions were also reasonable and rational and did not pose any undue initial financial burden. This encouraged the free play of competitive market forces, rapid network growth, lower tariffs, rapid facility build out and accelerated subscriber base growth. Table 1 indicates the rapid growth of the telecom sector over the past four years, a phenomenon experienced by most countries opening up the telecom sector to competition. While basic telephone lines have nearly doubled, the mobile subscriber base has increased ten times. Incidentally, most of the mobile telephone lines are provided by the private sector. Tele-density has increased from 1.44 per cent on 31 March 1999 to 5.14 per cent on 31 March 2003. What is more important from the perspective of small and medium enterprises (SMEs) is the coverage provided alone by the public sector incumbent’s optical fibre backbone; this has increased more than six fold. In addition the new players providing infrastructure for long distance services have covered another 100,000 route kilometers. It is currently estimated that there is hardly any place in the country which is more than 25 Km away from optical fibre access. This has provided the small and medium entrepreneurs an opportunity to get broadband access. In fact, ‘online’ portals have been set up by consumer goods manufacturers to make it possible for small entrepreneurs in villages to request products on-line and use just-in-time inventory management. Individual enterprises have set up on-line sites where individuals can buy a whole range of goods thereby reducing costs and making the products more competitive. “While basic telephone lines have nearly doubled, the mobile subscriber base has increased ten times.” The most significant impact has been the progressive reduction of tariffs catalysed by the competitive multi-operator environment, since almost all of the sectors have three or more service providers, many of them providing integrated services with end-to-end solutions. Both domestic and international long distance tariffs have come down substantially by about 50 per cent to 60%. More reductions are expected. The cellular mobile tariff has come down from more than 30 cents a minute in 1999 to about four cents a minute now. The Calling-Party-Pays regime is being implemented by the cellular sector; this should further accelerate its growth. Apart from broadband access through optical fibre, innovative steps are being taken to provide affordable broadband wireless services by use of low cost technologies like the indigenously developed CORDECT, using Digital Enhanced Cordless Technology (DECT) on a modular system in the local loop, CDMA (Code Division Multiple Access)-based wireless in local loop and WiFi (Wireless Fidelity) technologies. Media-Lab Asia is conducting experiments using indoor WiFi technology in an outdoor environment to provide bandwidth in megabytes in rural clusters that would be conducive to wide-ranging applications in such areas. Use of Voice-Over-Internet Protocol (VoIP), to replace circuit switches in the network combined with wireless in local loop, may provide a variety of affordable solutions for small and medium entrepreneurs, particularly in rural areas. “Apart from broadband access through optical fibre, innovative steps are being taken to provide affordable broadband wireless services by use of low cost technologies …” The export sector, essentially in software services, had been clamouring for unshackling the telecom sector, particularly in the matter of providing broadband connectivity for data transmission. The rates for leased circuit lines both international and domestic have come down drastically, thereby making the software service export sector more competitive. In India, more than 80 per cent of the software exports are by SMEs. They have all benefited from competitive data circuit rates as reflected in the growth of software export. This is shown in Table 2. It is also reported that sales of IT applications to domestic SMEs grew by more than 20 per cent in the year 2002-03. Use of Internet has also significantly grown; the subscriber base increased from 0.28 million in March of 1999 to 3.8 million by March 2003. The increased use of Internet is seen through significant increases in cyber cafes and Public Access Kiosks. Call centres are another growth area. At present more than 500 call centres have been approved using roughly 1 GBPS (gigabytes per second) of bandwidth and providing employment to more than 100,000 people. A large number of these call centres are small and medium enterprises. There are three essential factors to create conditions for individuals and businesses to bridge the digital divide. These are: (i) affordable equipment and systems (ii) easy availability (iii)access to the communication network. These three factors must exist simultaneously. What is available may neither be affordable nor accessible. In a multi-operator environment, driven by market forces, it has been demonstrated that operators have to be competitive to be affordable and, also, not primarily dependent on poaching or churning of customers. There is pressure to spread the network to uncovered or under-serviced areas and seek new customers. This makes the network accessible to an increasingly broad range of users. It has been seen that as soon as mobile service tariffs decreased, a whole new range of entrepreneurs particularly in the service sector – electricians, plumbers and other technical support services – started accessing the network because it reduced costs and improved productivity. For example, small entrepreneurs dependent on high-sea fishing used the mobile network to finalise sales while the catch was still offshore and market prices are at the optimum level. Internet access is used by self-employed persons to take advantage of a variety of services ranging from very simple applications for tele-medicine, agricultural information or e-governance services among others. As the availability of reliable access grows, tele-working from home or even clusters of workstations will become a reality for a growing number of people. In India, the telecommunications reform process started with the recognition that telecom is essential infrastructure that should be accessible throughout the country. It would not be possible for government alone to provide such infrastructure nation-wide. Therefore, there was need to create a competitive multi-operator environment which would facilitate substantial private sector investment. Private sector telecom players in India have invested approximately five billion dollars. The incumbent public sector operator became more responsive to needs of users and a regulatory regime was created to ensure a level playing field. While there were hiccups along the line, the growth registered post NTP-99 augurs well for the future; the telecom sector seems ready to take off on a sustained growth curve. This would ensure conditions making reliable access widely available. The improvement and growth of the networks have also encouraged small and medium entrepreneurs to find and provide solutions using new technologies. There is a growing realisation that to bridge the digital divide in a developing country the technology used has to be not only affordable but also scalable, robust and user-friendly. This is true for both hardware and software. If access to information is made ubiquitous, then the first step is taken to bridge the digital divide, particularly in a country like India with low telephone penetration. The biggest challenge is to provide access in rural India where 70 per cent of more than one billion people live and where the tele-density is as low as 1.4 per cent. The Centre for Development of Telematics (C-DOT) in India was successful in developing small, rugged digital electronic exchanges, which did not require air-conditioning or a dust-free environment. As many as 28,000 of the 36,000 exchanges in India fall into these developed and manufactured rural exchanges. To improve affordability there is also need to develop low-cost computing and technology solutions. In rural India the use of Personal Digital Assistants (PDAs) is emerging as a key area of interest and various initiatives have been reported for lowering the cost of such devices. In 2001 a simple, inexpensive, multi-layered computer, called the Simputer was launched; it provides audio and text processing facilities for several Indian languages. The Simputer is designed to be user friendly and rugged enough to operate in hostile environments where power supplies may not be reliable. Technology and competition are helping to lower network costs and reducing access tariffs. With this and better, more affordable technology for subscriber end equipments and innovative multi-media facilities, the platform for bridging the digital divide will be established. What is needed though, is to sensitise all users, including the SMEs, to the advantages of using these opportunities. This is a task that has to be prioritised in the national agenda of any developing country with a large rural base because technology alone cannot ensure success. We recognise that in a developing country like India, where massive investments are required for rapidly spreading the communication network to provide universal access, reforming the telecom sector to provide a competitive environment is essential. Ubiquitous broadband access is of critical significance for the development of the small and medium enterprises, enabling them to adopt information technology-based applications and services to reduce costs and improve productivity. This is all the more imperative in the sectors where small and medium enterprises face structural reforms and global competition. Affordable and reliable universal broadband access, complete with user-friendly computing devices and applications, will go a long way towards ensuring that small and medium enterprises, including the self-employed, are able to reap the benefits of the information and communication technology revolution.
