|Topic:||Vision and opportunities in the Indian Telecom sector|
|Organisation:||National Advisory Council, India-Tech Foundation’s TELECOMM India 2004|
Mr Prithipal Singh is currently the Convenor of the National Advisory Council of India-Tech Foundation’s TELECOMM India 2004. Prithipal Singh previously served as the CMD of BSNL, India’s largest telecom company. Mr Singh was founder Director, Operations of BSNL Board. Before, Mr Prithipal worked as Chief General Manager, Rajasthan Telecom Circle, PGM, Chandigarh and in different posts in the Department of Telecommunications. Mr Singh is a graduate in Electrical Engineering from Punjab Engineering College.
Although telecommunications in India began in 1853, it was only in the last decade that market-based reforms of the telecom sector began to provide service for the vast majority of the county’s people. Since then, tele-density has increased five-fold and service tariffs have gone down substantially. Nevertheless, although urban tele-density is close to the global average, rural tele-density is considerably lower, and sharp regional variations exist. Bringing universal access and universal services to India will require heavy funding and massive efforts.
Introduction In a progressively converging Information, Communication and Entertainment environment, the imperative is to provide universal access. The Maitland Report of 1984 entitled “Missing Links” put forward the objective that by early part of the next century virtually the whole of mankind should be brought within easy reach of a telephone. One of the most quoted statistics from that report was that “Tokyo has more telephones than the whole of the African continent.” The term ‘Missing Link’ essentially refers to the lack of telecom infrastructure in developing countries. The report highlighted the growing inequalities in telecom resources between developed and developing countries. It observed that there is a direct correlation between the availability of, and access to telecom infrastructure and a country’s economic growth. Of course, according to some, it is economic growth that fosters telecom growth. Perhaps there are elements of truth in both the propositions; they interact with each other, leading to the growth of telecom and economy in a country. Indian scenario In India, the year 2003 was celebrated as the 150th year of Indian Telecommunication/Telegraphy. Telegraph services commenced in India with a link established in 1853, which is nine years after Samuel Morse invented the telegraph transmitter. Telephone came to India soon after Alexander Bell invented it in 1876. However, at the time of independence, there were only 80,000 telephone subscribers and that too, mostly government oriented. In fact, governmental monopoly pervaded the entire sector from manufacturing to providing services. The Mission for Better Communication, which ushered in the PCO (Public Call Office) revolution in the eighties, could be considered as a starting point for reforms in the telecom sector. This was followed by the National Telecom Policy of 1994 definition of Value Added Services; the opening up of Basic Services and the constitution of a statutory regulator. However, reforms progress was bogged down in litigation and difficulties faced by the operators in paying the licence fee determined through the bidding process. Consequently, the New Telecom Policy of 1999 and the migration of the existing operators to a revenue sharing licence fee regime significantly accelerated the growth of this sector. The hallmark of NTP 1999 was market-based reform with unrestricted entry in all sectors except the cellular mobile services where availability of spectrum was a limiting factor. Since NTP 99, the growth of the telecom sector has been significant. Tele-density increased from 1.44 per cent to 7 per cent, and rural tele-density increased from 0.4 per cent to 1.5 per cent. Cellular Mobile has grown from 1.2 million to 40 million subscribers. Fixed lines have doubled to 45 million. Public Call Offices have tripled to 1.5 million. Optical Fibre increased from 64,000 to 450,000 route kilometres, and no place is 25 kilometres away from Optical Fibre access. Village Public Telephones are now found in 85 per cent of the 600,000 villages. Tariffs have been reduced for all types of service. Cellular tariff has been reduced from Rs.16 per minute to about Rs.2 per minute. National Long Distance tariffs have been reduced by 62 per cent, International Long Distance by nearly 50 per cent, and Internet telephony will reduce them further still. A Universal Service Fund Administration has been set up to provide financial support for voice and data telecommunication access in non-viable areas. In spite of the significant growth in tele-density, there is still a divide between what may be called ‘Bharat’ and ‘India’. While urban tele-density exceeds 15 per cent, rural penetration is only 1.5 per cent. In the Southern states, tele-density averages 7 per cent, but the East has barely 2.3 per cent. More alarmingly, some large states like, UP, MP, Orissa and Bihar have tele-densities of only one per cent to two per cent. Although India has a TV penetration of nearly eight per cent, the PC penetration is only 0.54 per cent. The total Internet subscriber base is less than four million. Urban tele-density is close to the global average, but there is a wide variation between urban and rural tele-densities, and sharp regional variations as well. Globally, the North is more developed than the South, but in India, it is the other way round. Universal access and Universal Services will require large funds and massive efforts by all the states. In the USA, where universal services consists of support to high cost areas, low-income subscribers, rural health care, schools, and libraries, household penetration is more than 90 per cent. Even in such a situation, in 2002, the USA’s funding for Universal Services was $5.9 billion. In India, the total funds available until the end of the 10th Five-Year Universal Services Plan are projected to be in the region of $2 billion. While reforms and competition in the telecom sector has led to a rapid growth of the network and sharp reduction in tariff, they have also squeezed Average Revenue Per User (ARPU). However, the growth in subscriber base and consequently the increase in traffic will lead to enhanced revenue volumes and thereby protect profitability. An innovative approach will be needed to attract the new subscribers. The myth that cellular services will be offered only in metropolitan and urban areas has been exploded. The incumbent has already provided access to Mofossil areas and increased the subscriber base substantially to achieve critical mass. With a tele-density of only six per cent, there is a huge potential market. With the telecom and information technology industry in doldrums in the developed countries, India–with rates of growth second only to China–should be a major destination for new investments. Since tariffs have already gone down, further commoditisation of services may not be significant. However, building brand image through improved and innovative value added services in a converged environment, improved customer care, and content development will become increasingly dominant. The ongoing vertical and horizontal integration of the sector will consolidate the sector. Accordingly, four or five major players will provide most of the services countrywide. The proposed unified licence regime will facilitate the convergence of services and the synergetic consolidation of the sector. In the urban areas, broadband services will become increasingly available through new wireless technologies and through up grading of the existing wire-line network. In a technologically neutral regime, robustness, scalability, and affordability will be the key factors driving down costs. This may well encourage “competitive cooperation” and sharing of the infrastructure in the best interest of the users. With the telecom sector poised for higher growth rates, it should be possible to exceed the 10th Five-year Plan 11.5 per cent tele-density target. In fact, the NTP 99 target of 7 per cent tele-density by 2005 and 15 per cent by 2010 will be more than exceeded. However, one of the prime concerns is to ensure accessibility and availability of telecom services in areas that would not otherwise be commercially viable. In a vast country like India, with low penetration of communication facilities, opportunities will arise continuously to promote the telecom sector and create an environment for facilitating growth in other sectors. In short, India: √ Has the fifth largest telecom network in the world; √ Is the second largest telecom market in the world, next to China; √ Has over 80 million telephones and more than 46 millions cell phones; √ Adds 2 million new phones per month; √ Requires an investment of US$ 70 billion to meet its 15 per 100 tele-density target by 2010.