Enabling the next wave of telecom growth in India

Transcription

Enabling the next wave of
telecom growth in India
Industry inputs for
National Telecom Policy 2011
2
Foreword
The Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young
have collaborated on this deep review of the telecoms sector in India.
The National Telecom Policy 1999 (NTP 1999) has served the sector in India for well
over a decade, in which time we have witnessed significant changes in the socioeconomic
environment, technological advancements and business dynamics. The telecom industry
in India is ready to take the next leap forward with new developments such as launch of
third generation (3G) services by private operators, 3G and broadband wireless access
(BWA) auctions, launch of mobile number portability (MNP), and the emergence of mobile
commerce (m-commerce). In the future, rural and semi-rural markets are expected to
drive growth, especially in the wireless segment.
The Ministry of Communications & Information Technology has released the
100-day agenda for the Indian telecom sector, and announced formulation of a
new and comprehensive National Telecom Policy 2011 (NTP’11). Therefore, the
time is ripe for a comprehensive review to build a forward looking and transparent policy
that will be the backbone to achieve the ”India telecom vision 2020.”
This report focuses on specific areas where the Government of India (GoI) needs to
intervene and move the policy to the next generation of reforms. It aims to capture
developments witnessed in the telecom sector in the last decade and analyze historical
performance to estimate growth over the next ten years. It includes inputs from
stakeholders in the telecom industry, encompassing operators, telecom equipment
manufacturers, infrastructure providers, industry associations and industry practitioners.
We would like to extend our gratitude to the industry leaders who participated in the
report and helped us to present the industry’s perspective.
Amit Mitra
Secretary General
FICCI, India
Virat Bhatia
Chairman
FICCI Committee on
Communications and
Digital Economy
Prashant Singhal
Telecom Industry Leader
Ernst & Young, India
iii
Executive
summary
The liberalization of the domestic economy and increasing
integration with the global economy has positioned India
as the second fastest expanding economy of the world.
After embracing a closed, centralized economic model for
four decades, India shifted to a market-oriented model.
Liberalization initiatives, especially in the 1990s, resulted
in an improved business climate and in an increase in
investment across the country, boosting the industrial
growth over the past decade. Indian telecom is an
economic miracle in the making. Connecting such a vibrant
economy of more than a billion people together and with
the rest of the globe is an extraordinary achievement in
terms of a nation’s socioeconomic development.
new model. It aimed at making available “telephone
on demand,” the provision of leading class services at
reasonable prices, promoting India’s emergence as a
major manufacturing and export base of telecom
equipment and universal availability of basic telecom
services to all villages. In 1999, Government, recognizing
the need to overhaul its policy framework, issued the
NTP 1999, which had played a key role in shaping the
sector. India has reached the goals set in NTP 1999 far
ahead of time, with the market evolving into the world’s
second largest in terms of subscribers. Presently, there
are more than 700 million subscribers in India, and the
overall teledensity has reached more than 60%.
India has faced challenges in liberalizing its telecom
industry from a monopoly to a decentralized competitive
model. The announcement of the National Telecom
Policy (NTP) in 1994 marked the first steps toward the
With plenty of strong potential value remaining, the sector
requires much attention and a robust policy framework to
address the challenges that exist in the present scenario
as well as help to capture the opportunities that the sector
holds for the country.
iv
The present challenges include the spectrum and licensing framework, Universal Service
Obligation Fund (USOF) structure, broadband, equipment manufacturing, infrastructure
segment, mergers and acquisitions scenario, taxation and aspects of foreign direct
investment (FDI). The opportunities around which the policy initiatives need to be
designed include financial inclusion, m-commerce and convergence.
The major recommendations for the policy framework for the Indian telecom industry
are as follows:
Focus areas
Recommendations
Licensing
Need to have a single universal license for all telecom services
There should be a uniform fee structure across all telecom circles
Pure internet service providers should continue to be allowed
without payment of any license fees
Provide a clear license renewal regime that includes legislation,
renewal procedures, reasons for refusal to renew and appeals to
regulatory decisions
v
Focus areas
Recommendations
Spectrum
Need to re-farm available spectrum
Spectrum up to contracted limit should be ensured as initial
spectrum to the existing players
Spectrum usage charge should be identified upfront at the time
of spectrum allocation
USOF
The USOF should be utilized for the following in rural and remote
areas:
• P
 rovision of public telecom and information services
• Provision of household telephones
• Creation of infrastructure for provision of mobile services
• Provision of broadband connectivity to villages in a phased
manner
• Creation of general infrastructure for development of
telecommunication facilities
• Induction of new technological developments in the telecom
sector
Subsidies should be distributed through transparent marketoriented allocation strategy
Broadband
Backhaul connectivity and optic fiber communication (OFC)
should be provided to all telecom towers, base station controllers
(BSCs) and base transceiver stations (BTS) from nearest block
headquarters
Make available more spectrum for wireless broadband
Make broadband connectivity mandatory for all buildings to
get completion certificate on the lines of water and power
connectivity
Create content and applications in regional languages to promote
rural broadband
Mergers and acquisition
M
 erger should not result in less than six operators in a circle
The share of a merged entity should not be greater than 30% in
terms of sub-base or adjusted gross revenue (AGR)
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Focus areas
Recommendations
Taxation
The upcoming goods and service tax (GST) regime should aim to
simplify the tax structure for the industry, with all services and
goods being taxed at a standard rate
Special consideration needs to be given on certain areas in the
backdrop of the peculiarities of the telecom sector such as “place
of supply rules” i.e., the state where GST will be paid for different
kind of telecom services; ease in state-wise compliances
Equipment manufacturing
There is a need to set up hardware manufacturing cluster parks
(HMCP) across the country and upgrade localized infrastructure
to support large volume contract manufacturing
R&D should be the key focus
Telecom infrastructure
Need to lay down a National Telecom Critical Infrastructure Policy
on the lines of NTP 1999 elaborating uniform procedures for land
acquisition, a uniform system of taxation and subsidies and other
incentives designed to create an environment that encourages
the build-out of the national telecom infrastructure and the
increased participation of all stakeholders
There is a need for a national right of way (ROW) policy for the
rollout of backhaul network
Enterprise data
Upgrading encryption levels in international long distance
(ILD) and national long distance (NLD) licenses to allow strong
encryption of up to 256 bits to protect confidential information in
accordance with international best practices
Telecom Regulatory Authority of India (TRAI) and Department
of Telecommunications (DOT) should eliminate the cumulative
assessment of licensing fees on the purchase of inputs, which
imposes double taxation on ILD and NLD license holders
FDI
Given the importance of foreign investment, the policy should
consider raising the upper limit on foreign investment to
encourage more foreign players to invest in the capex-intensive
telecom sector
Policies should also cover areas like financial inclusion, m-commerce, convergence, security
concerns and consumer affordability. However, there is no unique, perfect model accepted
globally which can be implemented in India and leading practices across the globe should be
adopted for transforming the Indian telecom sector into the greatest possible success story.
vii
Methodology
In 2010, Ernst & Young conducted a research study on the Indian
telecom sector in collaboration with one of the leading business
organizations in India — FICCI. The study gives a detailed perspective
on the telecom sector in India, outlining the phenomenal growth
witnessed by the sector and recommendations for the existing policy
framework that will enable the next level of growth. It examines the NTP
1999, which is used by the Government of India (GoI) as a decisionmaking guide for the Indian telecom sector. This report reflects the key
conclusions of that wider study.
The research program studies in detail all the key segments of the
telecom landscape — wireless, wireline, broadband, infrastructure,
NLD, ILD, value-added services (VAS), equipment manufacturing,
infrastructure and convergence. It identifies and evaluates the critical
success factors that are applicable across all telecom segments such
as spectrum, USOF, licensing framework, FDI, security, consumer
affordability and the role of the regulator.
As a part of the research program, Ernst & Young conducted
comprehensive interviews with senior executives in the Indian
telecom sector. These interviews provided a firsthand perspective
on the opportunities and challenges faced by various stakeholders
in the sector. These findings have been combined with secondary
research, analysis and insights provided by Ernst & Young.
viii
Syed Safawi
President
Reliance
Communications Ltd.
List of
participants
P Balaji
Head of Communications,
Corporate Affairs & Business
Development, India
Ericsson India
Vsevolod Rozanov
President and
Chief Executive Officer
Sistema Shyam
TeleServices Ltd.
Virat Bhatia
President,
External Affairs, South Asia
AT&T Communication
Services India Pvt. Ltd.
Mahendra Nahata
Managing Director
Himachal Futuristic
Communication
Shamik Das
S Tel Pvt. Ltd.
TV Ramachandran
Resident Director
Vodafone Essar
Rajan S. Mathews
Director General
Cellular Operators
Association of India
Rajat Mukarji
Chief Corporate
Affairs Officer
Idea Cellular Ltd.
Anil Sardana
Managing Director
Tata Teleservices Ltd.
Sanjay Kapoor
Bharti Airtel
(India & South Asia)
Mahesh Uppal
Director
Com First (India) Pvt. Ltd.
B S Shantharaju
Indus Towers Ltd.
Ashok Sharma
National Head — Regulatory
Aircel Ltd.
SC Khanna
Secretary General
Association of Unified
Telecom Service Providers
of India
Brijendra K Syngal
Senior Principal
Dua Consulting Pvt. Ltd.
Himanshu Kapania
Deputy Managing Director
Idea Cellular
Parag Kar
Senior Director —
Government Affairs
Qualcomm India Pvt. Ltd.
CS Rao
Head of Corporate Affairs
and Regulatory Division
Reliance Communications
Lt. Col. HS Bedi, VSM
Chairman and
Managing Director
Tulip Telecom Ltd.
Rajiv Mehrotra
Vihaan Networks Ltd.
Naresh Ajwani
Chief Regulatory &
Corporate Affairs
Viom Networks Ltd.
ix
Industry associations
Federation of Indian Chambers of Commerce and
Industry (FICCI): established in 1927, FICCI is one of
the largest and oldest apex business organizations
in India. It plays a leading role in policy debates that
are at the forefront of Indian social, economic and
political change. FICCI is active in 39 sectors of the
economy, and its stand on policy issues is sought
after by think tanks, governments and academia. The
organizations’ publications are widely read for their
in-depth research and policy prescriptions. Home to
400 professionals, it has joint business councils with
79 countries across the world.
Cellular Operators Association of India (COAI):
established in 1995, COAI is a registered, nonprofit, non-governmental society dedicated to the
advancement of modern communication through the
establishment of a world-class cellular infrastructure.
Over the years, COAI has emerged as the official
voice for the Indian GSM industry and interacts
directly with ministries, policy-makers, regulators,
financial institutions and technical bodies. It provides
a forum for discussion and exchange of the ideas
between these bodies and service providers, who
share a common interest in the development of
cellular mobile telephony.
Association of Unified Telecom Service Providers
of India (AUSPI): constituted in 1997, AUSPI is
a registered society that works as a non-profit
organization with the aim of delivering improved
access, coverage and teledensity in India. AUSPI
is the representative industry body of unified
access service licensees providing CDMA and GSM
mobile services, fixed–line services and VAS across
the country. Association of Competitive Telecom Operators
(ACTO): established in 2008, ACTO is an industry
body that focuses on policies that enhance enterprise
telecommunications in India. The association
was formed by several leading non-integrated
long-distance carriers that provide service to
the enterprise market segment, which includes
IT-enabled services, business process outsourcing
and multinational company segments.
Telecom Equipment Manufacturers Association
(TEMA): established in 1990, TEMA is an industry
association for telecom equipment manufacturers
as well as component and cable manufacturers.
It plays an active role in the dissemination and
exchange of information among the GoI,
foreign agencies, embassies, trade missions,
Indian missions abroad and leading national and
international trade associations.
Internet & Mobile Association of India (IAMAI):
founded in January 2004, IAMAI is an industry
body representing the interests of online and
mobile VAS industry. The association’s activities
include promoting the digital economy, evaluating
and recommending industry standards and
practices, conducting research, creating platforms
for its members, communicating on behalf of the
industry and helping to create a favorable business
environment for the industry.
Internet Service Providers Association of India
(ISPAI): founded in 1998, ISPAI acts as a collective
voice of the ISP community, with the mission of
promoting internet for the benefit of all. It has helped
in shaping telecom policies for ISPs and internet
entrepreneurs to grow their services in a supportive
and enabling environment.
Other Service Providers Association of India
(OSPAI): established in 2008, OSPAI is the
representative industry body, functioning as an
association of companies operating in areas such
as domestic and international call centers, business
process outsourcing, knowledge process outsourcing,
information technology (IT), medical transcription,
financial services, tele-medicine, tele-education,
tele-trading, billing services and network operating
centers. It acts as an interface with government
bodies for the growth of all services covered under
the registration of other service providers.
Contents
1.Indian telecom sector
1.1.Overview
3
1.2. Importance of telecom
5
2.Evolution of the telecom sector in India
10
2.2. Regulatory framework
12
2.3. Overview of the Indian telecom industry
14
2.4.Wireless
15
2.5. Wireline
16
2.6. Internet and broadband subscribers
17
2.7. National long distance and international long distance 19
2.8. Telecom equipment manufacturing in India
21
2.9.Infrastructure
22
2.10.Value-added services
27
2.11. Outlook
28
31
3.1. Key achievements of NTP 1999
34
3.2. Key challenges of NTP 1999
41
4 Key enablers
45
4.1. Connected India: telecom vision 2020
46
4.2. Connected Indian: telecom mission 2020
47
4.3. Key enablers under existing scenario
48
4.3.1
Licensing
4.3.2Spectrum
1
9
2.1. History of the Indian telecom industry
3.Achievements and setbacks of NTP 1999
3
48
50
4.3.3
Universal Service Obligation Fund (USOF)
53
4.3.4Broadband
55
4.3.5
57
Mergers and acquisition
4.3.6Taxation
58
4.3.7
Foreign direct investment (FDI)
60
4.3.8
Consumer affordability and rural penetration
61
4.3.9
Human resource
63
4.3.10 Equipment manufacturing
64
4.3.11 Telecom infrastructure
66
4.3.12 Enterprise data
69
4.3.13Convergence
70
4.3.14Security
71
4.4. Key enablers for potential opportunities
72
4.4.1m-commerce
72
4.4.2
73
M2M communication
4.4.3 Mobile money
73
4.4.4 M-health
73
4.4.5M-education
74
4.4.6
Financial inclusion
74
4.4.7
MNREGA and UID
74
5.Global practices
75
Conclusion
87
Glossary
89
2
1
Indian telecom
sector
1.1. Overview
Over the past two decades, India has grown rapidly from a “command
and control” economy to a market-based economy. India is now closely
integrated with the global economy and is considered one of the pillars
of global economic growth. The process of liberalization started in the
mid-1980s and gathered momentum in the 1990s, with the further
opening of the economy and the creation of regulatory institutions to
march toward fully competitive markets. As a result of liberalization,
India’s GDP has been rising by more than 7%1 annually in the past
decade, compared with 3.5%2 annually from 1950 to 1980. The Indian
economy maintained a growth rate of more than 5% even during the
global recession.
In FY10 (financial year ended 31 March 2010), India’s service sector
was estimated to account for 56.9%3 of GDP, while the industrial sector
and agriculture sector contributed 28.5% and 14.6%, respectively, to
GDP. Within the services sector, the telecom sector has been the major
contributor to India’s growth, accounting for nearly 3.6%4 of total GDP
in FY10. In less than a decade, the mobile phone has been transformed
from being a luxury that few could own into one of the essentials of an
average Indian’s existence. The easy access to mobile services is the
outcome of positive regulatory changes, intense competition among
multiple operators, low-priced handsets, low tariffs and significant
investments in telecom infrastructure and networks.
1
2
3
4
3
India: Rising growth potential, DBS Group Research, 13 October 2010.
“Redefining The Hindu Rate Of Growth,” The Financial Express,12 April 2004, http://www.financialexpress.com/news/redefining-the-hindu-rate-ofgrowth/104268/0, accessed 19 October 2010.
“India’s Macroeconomic Indicators,” Export-Import Bank of India website, 26 August 2010, http://www.eximbankindia.com/ind-eco.pdf, accessed
10 October 2010.
India 2012: telecom growth continues, Ernst & Young report, November 2008, page 8.
Indian telecom model
Outsourcing non-core
activities like IT, network
Paradigm shift
from average
revenue per user
(ARPU) to revenue
per min
Economies of scale
Focus on
prepaid
Infrastructure sharing
Low cost
distribution,
e-Charge
Low acquisition cost
(no handset subsidy)
Source: “How can carriers make 40% EBIDTA margin at 2 cents/min
tariff?,” http://www.telecomcircle.com/2009/02/carriers-ebidta/,
accessed 25 October 2010.
4
1.2. Importance of telecom
Telecommunication is pivotal to a country’s socioeconomic
growth. It is one of the main architects of the accelerated
growth and progress of different segments of the
economy. Narrowing access gaps and removing barriers
to information dissemination are prerequisites for
promoting equitable and sustainable development as well
as political and social cohesion. Increasing connectivity
is highly instrumental in improving governance, business
communication, security, response to emergencies
and in the overall strengthening of the sociocultural
ethos of the country. The advantages of the advent of
telecommunications are manifold and explicitly verifiable
from the phenomenal success of the sector.
1.2.1 Economic growth
Indian telecom has emerged as one of the greatest
economic success stories, registering a consistent
overall growth rate of more than 35% over the past decade
in terms of subscribers. According to a World Bank study,
a 10%5 increase in teledensity is known to boost GDP
growth by 0.6% points. In other words, a 1% increase in
mobile subscribers is estimated to increase per capita
GDP by about US$200. According to a study by the Indian
Council for Research on International Economic Relations
(ICRIER), states with a higher teledensity have grown faster
than those with lower teledensity. States with 10%6 higher
teledensity have grown 1.2% faster; for instance, Bihar
could have witnessed 4% faster growth if it had enjoyed the
same teledensity as Punjab. The well-distributed network
of telecommunication services results in widening markets,
creates efficient information flows, lowers transaction
costs and is an effective substitute for infeasible
physical transport.
There is a substantial relationship between increase in teledensity and the economic
development of a region. Mobile telephony had a profound impact on the fishing
community in the southern state of Kerala. By virtue of being a carrier and disseminator of
information, mobile telephony has made the rural and underdeveloped markets much more
efficient. The MS Swaminathan Research Foundation (MSSRF), a government organization,
has partnered with a leading telecom equipment and service provider to provide “Fisher
friend,” through which fishermen are provided free mobile handsets, shared on a rotating
basis, along with free access to information service.
The usage of mobile phones has enabled fishermen to respond quickly to market demand
and prevent wastage. Mobiles have helped to co–ordinate demand and supply, and have
helped those who catch the fish communicate with merchants and transporters in an
efficient and effective manner. It has helped to reduce the time spent by agents and owners
waiting for boats, reduced business risk and made those involved with fishing feel much
safer at sea.
5
6
5
Unfinished Business: Mobilizing new efforts to achieve the 2015 millennium development goals, World Bank, September 2010, page 17.
Samar Srivastava, “High-teledensity states grew faster, says study,” LiveMint, 19 January 2009,http://www.livemint.com/2009/01/19224316/
Highteledensity-states-grew-f.html, accessed 10 October 2010.
1.2.2 Job creation
Besides being one of the largest revenue generators,
telecom is also a major creator of jobs. The telecom
sector has led to the growth of a range of communication
technology-enabled activities and services. Operations
such as data entry, revenue accounting, processing
of insurance claims, human resource services, call
center operations, customer support centers, software
development, systems engineering and systems design and
integration are popular examples. Further, the spread of
telecom and information services to rural areas is enabling
the setup of rural business process outsourcing (BPO).
1.2.3 Social development
Connectivity fosters social development, including
improved education, health and increased citizen
participation in civil society. Telecommunication helps
provide access to health care and allied services. It
helps combat epidemics such as HIV/AIDS and malaria
by supplying information on treatment and control,
generating awareness, improving access to and
connectivity with health centers, and establishing the
mobile testing of diseases. The current synergy between
health reform initiatives and advantages in technologies
has resulted in the proliferation of e-medicine projects.
This represents an innovative approach in providing quality
health care whenever and wherever needed.
1.2.4 Rural development
According to FICCI and Nielsen study, Indian villages
account for 70%7 of the country’s total population, 56% of
the country’s income, 64% of consumption expenditure and
33% of national savings. The provision of telecom services
in rural areas and the obscure hinterland has made
previously abandoned areas highly accessible. With more
untapped territories being connected through telecom, the
hitherto dormant economic potential is being increasingly
tapped. Communication facilities in rural areas are critical
for the development of rural India, providing the
following advantages:
7
RuralShores: bringing jobs to
rural India
Over the years, the lack of employment
opportunities in rural India has forced people
belonging to villages to move to the cities.
However, RuralShores is an initiative that aims
to reverse the trend. It aims to introduce rural
youth to BPO and to provide employment in
their village.
In return, corporations benefit through
cost-effectiveness due to the lower costs
associated with a rural ecosystem, low
employee attrition and the potential for
scalability. Participation in the initiative is
an act of corporate social responsibility.
Moreover, it ensures complete information
protection, guaranteed service levels, a
committed workforce and business continuity.
• Helping to stem urban migration by generating greater
income and employment potential in rural areas
• Facilitating emergency response and access to health
care and allied services
• Facilitating m–commerce and e-commerce through
trade along the agriculture supply chain, resulting in
the organized aggregation of supply and demand
• Providing enhancement of microfinancing, technology
transfer and entrepreneurship
• Facilitating national and regional integration,
creating an atmosphere of economic diversification,
employment and a strong socio-cultural ethos
• Open rural areas to foreign investment,
leading to the inclusion of rural India in the
global economic milieu and reducing the
rural-urban divide. As a result, the quality of
life in rural area improves, thus reducing the
pressure of urban migration
Challenges Before An Integrated India: Bridging The Urban - Rural Divide, Nielsen, August 2010, page 13.
6
1.2.5E-governance
E-governance that helps exploit the power of
information and communication technology to
transform accessibility, quality and the cost-effectiveness
of public services has been made possible by the telecom
revolution. Since the advent of IT and communication
technology, Indian ministries and government departments
are working to computerize their operations to make them
simpler and increasingly accessible for Indian citizens.
Most relevant information about these entities is now
available on their websites, making it easily accessible and
increasing transparency. Significant progress has been
made in the computerization of railway bookings, allocation
of the Permanent Account Number (PAN) to income
tax payers, processing of passport application, conduct of
public examination and customs clearance, among others.
The four main types of e-governance services provided are
as follows:
• Government to citizen (G2C): this comprises
information dissemination to the public, as well
as basic citizen services such as license renewals,
ordering of birth/death/marriage certificates and
filing of income taxes, as well as citizen assistance for
basic services such as education, health care, hospital
information and libraries.
• Government to business (G2B): this entails
services between government and the business
community, including the dissemination of policies,
memos, rules and regulations. Business services
offered include obtaining current business information,
downloading application forms, renewing licenses,
registering businesses, obtaining permits and the
payment of taxes. The services offered through G2B
transactions also assist in business development,
specifically the development of small and medium
enterprises (SMEs). Simplifying the application and
approval procedures process for SME requests would
encourage business development.
• Government to employee (G2E): this includes
G2C services as well as specialized services that cover
only government employees, such as the provision of
human resource training and development that could
improve the day-to-day functions of the bureaucracy
and dealings with citizens.
• Government to government (G2G): these services take
place at two levels — the local or domestic level and
the international level. G2G services are transactions
between the central/national and local governments,
and between the departments and their agencies
and bureaus. On a global footing, G2G services are
transactions between governments, and can be used
as an instrument of international relations
and diplomacy.
1.2.6 Strengthening investments
Attractive trade and investment policies have transformed
the Indian telecom sector into one of the most investorfriendly markets. Between FY00 and FY10, the inflow
of FDI into India’s telecom sector was approximately
INR407.1 billion (US$8.9 billion),8 accounting for more
than 8% of approved FDI.
1.2.7 Gender equality
The advent of communications technology has helped
overcome institutional and social barriers of mobility,
high illiteracy and negative social norms. It is facilitating
women’s participation in the political and economic
processes of the country. Achieving gender equality and
empowering women is crucial because of its cross-cutting
influence. It is an irreplaceable component for achieving
most developmental goals, including the “Millennium
Development Goals.” Mobile telephones and the internet
can advance gender equality by:
• Empowering women and surmounting gender
inequality: this is being achieved by promoting
the awareness among women about their social
and political status, and creating new economic
opportunities for women through digital
empowerment.
• Delivering literacy and education to women wherever
they live or work: this opens up new avenues and
allows for flexible learning times. One prime success
story of communication technology promoting
women’s education is India’s “Distance education for
women’s development and empowerment” jointly run
by the Department of Women and Child Development
8 “Fact Sheet on Foreign Direct Investment (FDI) from August 1991 to March 2010,” Department of Industrial Policy & Promotion, http://dipp.nic.in/,
7
and the Indira Gandhi National Open University.
This program provides a multimedia training
package to make women’s self-help groups
sustainable by developing their decision-making ability
and resource management skills in 150 low-literacy
districts. This is one of the most befitting instances of
the telecom and internet revolution, taking relevant
education that is well aligned to the needs of the
communities to their doorstep, thus overcoming
cultural and language barriers.
• Helping lower child mortality and improve maternal
health: this is done by providing information on
nutrition, strengthening health networks, monitoring
health trends and provisioning primary health care.
1.2.8 m–commerce
This is the next revolution that is expected to emerge
through the use of mobile phones, as these become a
tool for commerce. Mobile phones provide consumers
an opportunity to transact anytime and anywhere.
m-commerce finds its applications across various end
markets such as banking and financial institutions, paying
bills for utilities such as power and gas, booking tickets
for transportation services such as trains and taxis and
online shopping. Mobile banking enables customers of
banks and other financial institutions to access their
account information, transfer funds, trade stocks and
purchase financial products such as insurance. According
to Cybermedia India Online Limited, the value of mobile
payment transactions in India is expected to reach
approximately US$1.3 billion by 2013.9
1.2.9 Facilitating research and
development
The growth in high-speed communication and advances
in internet technology are making India a major R&D
hub. Efforts are constantly being made to devise more
affordable technology for the masses. In India, there is
a significant focus on technology with the potential to
improve rural connectivity. NTP 1999, formulated by the
GoI, places great emphasis on research and development
9
(R&D). In pursuance of the NTP 1999’s objective toward
R&D, organizations such as Telecom Centers of Excellence
(TCOE), the Center of Excellence in Wireless Technology
(CEWIT) and the Broadband Wireless Consortium of India
(BWCI) have been established. These organizations have
helped to create synergy among academia, the telecom
industry and the Government for the creation of new
services and applications, the generation of intellectual
property right (IPR), the development of manufacturing
capability, focus on global telecom standardization
activities and the promotion of entrepreneurship. For
instance, the TCOEs have focused on the technological
and management challenges that Indian operators face in
reaching all sections of society while offering affordable
solutions, leading class services and a global presence.
1.2.10 Provide impetus to initiatives such
as MNREGA and Aadhaar
The GoI has undertaken programs such as the
Mahatma Gandhi National Rural Employment
Guarantee Act (MNREGA) and AadhaaR — Unique
Identification Authority of India (UIDAI), which aim to
provide inclusive growth. The challenges surrounding these
programs include job cards for those demanding work, the
elimination of ghost workers, the introduction of electronic
muster rolls, wage payments and the authorization of
wages electronically. Furthermore, the introduction of
GPS-enabled biometric systems at the grass-roots level
continues to remain a challenge. The integration of such
programs with mobile telephony is expected to benefit
such programs of national importance. For instance,
an integrated system for taking biometric attendance
through handheld devices and transmitting it through
mobile phones for authentication is expected to solve the
challenge of attendance. Once a worker has logged in, this
data could be transmitted to MNREGA, making sure the
worker is paid for the day.
“Nokia to rollout mobile banking in India,” CyberMedia India Online Ltd., 14 April 2010, http://www.ciol.com/News/News/News-Reports/Nokia-to-rollout-mobile-banking-in-India/134910/0/, accessed 12 October 2010.
8
Evolution of the
telecom sector
in India
2
9
2.1. History of the Indian
telecom industry
The Indian telecom sector has evolved from the bygone days of “telephone on
demand” to the advent of 3G telephony. Its history begins with the laying down of the
first experimental electric telegraph line in Kolkata. In 1881, telephone services were
introduced, with exchanges being opened in Kolkata, Mumbai, Chennai, Karachi and
Ahmedabad. Following independence, all foreign telecommunication companies in India
were nationalized to constitute the Posts, Telephone and Telegraph (PTT), and were under
government control.
In the early 1980s, the sector underwent its first wave of change. DoT was established in
1985 to provide domestic and long-distance services in India. Further, in 1986, two wholly
government-owned companies — Videsh Sanchar Nigam Limited (VSNL), which is now
known as Tata Communications, and Mahanagar Telephone Nigam Limited (MTNL) were
formed. VSNL and MTNL aimed at providing services to international and metropolitan
areas, respectively.
The introduction of the New Industrial Policy 1991 initiated the liberalization process in
India. Telecom equipment manufacturing was also de–licensed in 1991, and the NTP was
announced in 1994. The formulation of NTP 1994 was followed by the launch of mobile
telephony in India in 1995. However, growth in the initial years was very slow due to
high mobile handset prices as well as the high tariff structure of service providers. The
introduction of NTP 1999 heralded pro-consumer policies. NTP 1999 enabled the telecom
sector to reach an average subscriber growth rate of more than 35%, primarily due to
initiatives taken by the regulator and service providers. The liberalization of the sector
resulted in the need for a regulator, and the TRAI was established in 1997. In January
2000, the Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) was
established to take over the adjudicatory and disputes functions from TRAI.
Brief history of the Indian telecom sector
• 1947: Nationalization
of all foreign
telecommunication
companies to
constitute the posts
and telegraph
• 1950: Telephone
exchanges taken over
from the princely
states
• 1981: Contracts with a
French company to
merge with the
state-owned ITI, to set
up 5 million lines per
year
• 1985: Establishment
of DoT
of VSNL and MTNL
• 1991: Telecom
equipment manufacturing completely
deregulated
• 1992: VAS opened to
private sector
participation
• 1994: NTP 1994
of TRAI
• 1999: NTP 1999
of TDSAT
• 2003: Unified Access
Service License
(UASL); Interconnect
Usage Charges (IUC);
and calling party pays
(CPP)
• 2004: Broadband
policy; universal
licensing regime; and
guidelines for
intra-circle M&A
• 2006: DoT announces
criteria for additional
spectrum
• 2007: Cap on number
of players in a circle
removed
• 2008: New licenses
granted by DoT
• 2010: 3G and BWA
spectrum auction
• 2011: MNP launched
Pan-India
2005–11
2000–05
1990–2000
1980–90
1947–80
10
In 2002, the Universal Service Support Policy came into
effect, providing statutory status to the USOF in December
2003. The fund was introduced to provide access to
telegraph services to people in rural and remote areas
at affordable prices. In May 2003, the calling party pays
(CPP) regime was introduced, through which all local
incoming calls were made free. During the same year, the
GoI introduced the Unified Access Service (UAS) licensing
regime, which permitted an access service provider to offer
both fixed and/or mobile services under the same license,
using any technology. The GoI subsequently issued licenses
in November 2003, January 2004, December 2006,
March 2007 and January 2008.
The GoI also introduced the Broadband Policy 2004,
which recognized the ubiquitous potential of broadband
services and their contribution toward the GDP growth
and improved quality of life through e–governance,
e–commerce, entertainment, education and medicine,
among others. The Broadband Policy 2004 specified
targets in terms of subscribers. In 2004, mobile services
had outpaced fixed-line services with nearly 45 million
mobile subscribers. Further, in February 2004, the DoT
issued guidelines for the intra-circle merger of cellular
mobile telephone service (CMTS)/UAS licenses.
In November 2005, new UASL guidelines were issued. The
licenses were to be issued on continuous basis without
any restriction on the number of entrants in a circle and
applications were to be processed within 30 days of
submission. Allocation of spectrum and grant of wireless
license was subject to availability and, in case UASL was
not allocated spectrum due to non-availability, the licensee
was required to endeavor to rollout services using wireline
technology. FDI limit in the telecom sector was increased
from 49% to 74%. In February 2008, the DoT approved
11
the sharing of infrastructure among mobile operators.
Operators were allowed to share infrastructure in their
tower installations. In March 2008, the TRAI abolished the
access deficit charge (ADC), which covered the levy paid by
mobile operators to the state–run operator, BSNL. ADC was
the fee paid by private mobile operators to the state-owned
BSNL, which mainly used the proceeds of ADC to develop
rural telephony services. In July 2010, telecom towers
were accorded “Infrastructure Status” by the Reserve Bank
of India (RBI), as these constitute an essential and possibly
the most expensive component in the entire telecom
service delivery infrastructure.
The GoI commenced the auction for 2x5MHz in the
2100MHz band for 3G services in April 2010, which
witnessed fierce bidding for spectrum. The reserve price
for 3G services was categorized on the basis of circles —
INR3.2 billion for the more populated A and Metro circles;
INR1.2 billion for the B circles; and INR300 million for the
rural C circles. The auction aimed at allotting three
to four 3G licenses for each of the 22 regional circles.
The bidding process continued for 34 days, reaching
the final stage in May 2010. The seven winners were
required to pay INR509.7 billion to the GoI. Additionally,
the amount payable by BSNL and MTNL for 3G services
pushed the total auction revenue to INR677.2 billion
(US$14.6 billion). Following the auction of 3G mobile
services, the Government concluded the auction of BWA
services across India. The GoI offered two 20MHz blocks in
the 2.3GHz range in each of the country’s 22 circles. The
bidding process continued for a period of 16 days, raising
INR385.4 billion (US$8.2 billion) in auction revenues. Thus,
the GoI raised in excess of INR1 trillion from the auction of
3G and BWA services.
2.2. Regulatory framework
A number of positive regulatory changes have driven growth in the sector. The key feature
of India’s regulatory regime is transparency in industry information, an open approach and
encouragement of consultation with stakeholders. The key stakeholders as a part of the
regulatory environment in the telecom ecosystem include the Ministry of Communications
& Information Technology (MICT), Department of Telecommunications (DoT), the Telecom
Commission, the Telecom Regulatory Authority of India (TRAI) and the Telecom Dispute
Settlement & Appellate Tribunal (TDSAT).
MICT
•
The MICT is part of the Indian Government. The key departments of the ministry include the Department of
Telecommunications, the Department of Information Technology, and the Department of Posts
•
•
The MICT formulates policies with respect to telecom, post, telegraph and other means of communication
The laws governing the telecom sector include the Indian Telegraph Act, 1885; the Indian Wireless Telegraphy Act, 1933; and
the Telecom Regulatory Authority of India Act, 1997
DoT
•
The DoT is a part of the MICT. Its key responsibilities include:
•
Policy, licensing and coordination matters relating to telegraphs, telephones, wireless, data, facsimile and telematic
services and other like forms of communications
•
•
•
International cooperation
Promotion of standardization and R&D
Promotion of private investment
Telecom Commission
•
•
The Telecom Commission was set up in 1989 by the GoI to deal with various aspects of telecommunications
•
The Telecom Commission is responsible for policy formulation, licensing, wireless spectrum management, administrative
monitoring of public sector undertakings (PSUs), R&D and standardization and validation of equipment, among other matters
The commission consist of four full-time members that are ex-officio Secretary to the GoI in the DoT, and four part-time
members that are secretaries to the GoI of the concerned departments
12
TRAI
•
TRAI was established as an independent statutory regulatory authority under the TRAI Act in 1997. The key powers and
functions of the authority include:
•
•
•
•
•
•
•
•
•
•
•
•
Recommending the need for a new service provider, and the terms and conditions of license to a service provider
•
•
•
Levying fees and other charges
Ensuring technical compatibility and effective inter-connection between different service providers
Regulating revenue-sharing arrangements among service providers
Ensuring compliance with the terms and conditions of license
Setting and enforcing the time frames for providing local and long-distance telecommunication circuits
Recommending revocation of licenses for non-compliance of their terms and conditions
Facilitating competition and promoting efficiency in the operation of telecommunication services
Protecting the interests of the consumers
Monitoring the quality of service and conducting periodical surveys
Inspecting the equipment used in the network and recommending the type of equipment to be used by service providers
Settling disputes between service providers
Advising the central government in matters related to the development of telecommunication technology and the
telecom industry
Ensuring compliance with universal service obligations
Performing other functions, such as administrative and financial functions, that may be entrusted to TRAI by the central
government, or as may be necessary to carry out the provisions of the TRAI act
TDSAT
•
In April 2000, the GoI established the Telecom Dispute Settlement & Appellate Tribunal (TDSAT), as an authority separate
from the TRAI to handle disputes in the telecom sector
•
The functions of TDSAT are to adjudicate any dispute between a licensor and licensee, between two or more service providers,
and between a service provider and a group of consumers; and to hear and dispose of appeals against any decision or order
of TRAI
•
The appellate tribunal consists of a chairperson and two other members
13
2.3. Overview of the Indian
telecom industry
India is the world’s second-largest telecom market. The total subscriber base (including
wireline and wireless) reached 723.3 million10 in September 2010. The wireless segment
has been registering monthly mobile additions of about 15 to 2011 million subscribers.
Subscriber base and teledensity (wireless and wireline)
61.0%
700
52.7%
600
50%
500
26.2%
300
200
0
723.3
37.0%
400
100
70%
60%
2.9%
28.5
FY00
3.6%
36.3%
FY01
9.0%
12.9%
4.3%
45.0
5.1%
7.0%
54.6
76.5
98.4
140.3
FY02
FY03
FY04
FY05
FY06
18.2%
205.9
FY07
Total subscribers
300.5
FY08
621.3
Teledensity (%)
Total subscribers (million)
800
40%
30%
20%
429.7
10%
FY09
FY10 Sep-10
0%
Teledensity
Source: TRAI
According to TRAI, the total subscriber base grew from
FY00 through FY10 at a compound annual growth rate
(CAGR) of 36.1% to reach 621.3 million subscribers. In
the past decade, the total teledensity has risen above
50%, with the mobile segment leading this growth. Such
phenomenal growth can be attributed primarily to the
country’s large population, high economic growth, hypercompetition in the sector, affordable handsets, reduced
tariffs, infrastructure sharing and the introduction of
positive and enabling regulatory reforms. The telecom
revolution in the country has impacted both the urban
and rural population. However, urban subscribers account
for more than 65% of the overall subscriber base, leading
toward a huge urban–rural digital divide.
As of September 2010, wireless subscribers constitute
the majority of the total subscriber base, accounting for
95.1%,12 whereas wireline subscribers account for 4.9%.
The capital cost to provide mobile service varies in the
range of US$50–US$90 per subscriber,13 in comparison
with US$200–US$350 per subscriber for wireline.
Lower costs and the additional benefit of mobility that
is associated with wireless subscribers have led to the
stagnation of the wireline subscriber base.
Urban and rural subscriber base, September 2010
100%= 723.3 million
Rural
Urban
32.3%
67.7%
Source: TRAI
10 “TRAI Press Release No. 63 /2010,”TRAI website, http://www.trai.gov.in/Default.asp, accessed 10 December 2010.
11 Shauvik Ghosh, “Telcos to recoup 3G bid money in 5-6 years: Analysys Mason,” LiveMint, 30 May 2010, http://www.livemint.
com/2010/05/30230743/Telcos-to-recoup-3G-bid-money.html, accessed 12 October 2010.
12 Ernst & Young analysis.
13 “Position paper on the Telecom sector in India,” Department of Economic Affairs – Ministry of Finance, December 2009, page 4, http://pppinindia.com/
pdf/ppp_position_paper_telecom_122k9.pdf, accessed 10 October 2010.
14
2.4. Wireless
India has emerged as one of the world’s fastest-growing
telecom markets, and this growth is primarily attributed to
the growth in wireless services. India’s mobile market is the
second largest in terms of subscribers in the world after
China. The wireless subscriber base in India grew from
FY00 through FY10 at a compound annual growth rate
(CAGR) of 77.5%14 to reach 584.3 million15 subscribers in
FY10. Mobile services were commercially launched in
India in 1995. In the initial years of mobile telephony,
the growth in the number of subscribers was very low,
with average monthly subscriber additions in the range
of 0.05–0.1 million16 subscribers. The advent of NTP
1999 paved the way for aggressive growth in the wireless
subscriber base.
Wireless subscribers in India
800
70%
58.0%
49.6%
600
500
40%
687.7
22.8%
300
14.6%
200
100
0
50%
33.7%
400
1.9
0.4%
3.6
0.6% 1.2% 3.2%
6.5
13.0 33.7
4.8%
52.2
9.0%
98.8
165.1
60%
584.3
391.8
261.1
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Sep-10
30%
20%
Teledensity (%)
Wireless subscribers (millions)
700
10%
0%
Source: TRAI
Wireless subscribers
Wireless subscribers: GSM vs. CDMA, September 2010
100% = 687.7 million
CDMA
15.9%
GSM
Teledensity
GSM subscribers constitute about 84.1% of the total
wireless subscriber base. Over an extended period, the
gap between GSM and CDMA has widened as the GSM
subscriber base has grown more rapidly. The road ahead
for the Indian telecom sector is expected to be more
eventful, primarily due to the advent of new services such
as 3G, VAS, mobile number portability (MNP) and the
growth of manufacturing.
84.1%
Source: TRAI
15 “TRAI: The Indian Telecom Services Performance Indicators (January - March 2010),” TRAI website, July 2010, http://www.trai.gov.in/Default.asp,
16 “Penetration of Mobile Telephony in India & Value added services in Indian Mobile Telephony market,” Zinnov Research and Consulting, October 2006,
http://www.zinnov.com/presentation/Mobile_VAS.pdf, page 2, accessed 15 October 2010.
15
2.5. Wireline
The Indian wireline market grew at a CAGR of 3.3%17 during
the period between FY00 and FY10. In the recent past, the
wireline subscriber base has declined due to lower mobile
tariffs, cheaper handsets, improved mobile coverage,
the advantage of mobility among wireless networks
and inadequate infrastructure of the wireline network.
Furthermore, the major wireline operators in India also
operate mobile networks, where they see higher revenue
growth and continue to invest extensively. Although
wireline infrastructure in India is not as extensive as
wireless infrastructure, there is a significant opportunity
for future growth, driven by the immense potential for
data growth.
In FY10, the wireline subscriber base was 37 million,18
with a teledensity of 3.1%. Over the years, the urban
market has dominated the wireline subscriber base,
accounting for 73.1% of the subscribers in FY10. As of
September 2010, there were 3.5 million19 public call
offices (PCOs) and 0.6 million village public telephones
(VPTs) in India.
Wireline subscribers
Wire line subscribers (million)
45
40
38.3%
32.7
35
30
25%
22.7%
18.9%
17.1%
26.7
41.3
40.1
41.4
41.5
40.8
39.4
38.0
37.0
7.9%
20%
35.6
10%
25
20
-3.0%
3.3%
0.3%
15
5%
-1.9%
10
-3.3%
-3.7%
-2.6%
0%
-5%
5
0
15%
Growth rate (%)
50
FY00
FY01
FY02
FY03
FY04
FY05
Wire line subscribers
FY06
FY07
FY08
FY09
FY10
Sep-10
-10%
Growth rate
Source: TRAI
Change in the composition of subscribers
100%
5.9%
80%
60%
93.4%
40%
94.1%
20%
0%
Source: TRAI; DoT
6.6%
FY00
Wireless
FY10
Wireline
In FY00, the wireline market accounted for 93.4% of
the subscribers; in FY10, it accounted for 5.9%. The
wireline market is dominated by the governmentcontrolled incumbent players. Apart from these two
players, additional private players have also ventured into
the fixed-line market. Although fixed-line operators are
trying to offer VAS such as high-speed internet access,
video on demand and videoconferencing, besides other
new technologies, wireline service continues to face stiff
competition from wireless services. In the future, the
emergence of new technologies such as fiber to the home
is expected to drive the growth of the wireline market
in India.
18 “TRAI: The Indian Telecom Services Performance Indicators (January - March 2010),” TRAI website, July 2010, http://www.trai.gov.in/Default.asp,
19 “TRAI: The Indian Telecom Services Performance Indicators (July - September 2010),” TRAI website, January 2010, http://www.trai.gov.in/Default.asp,
accessed 15 January 2011.
16
2.6. Internet and broadband
The internet has revolutionized the lifestyle of many
Indians by creating a new means of communication,
knowledge sharing, governance, employment and the
delivery of services. Although the internet is a function
of various factors such as literacy, access to personal
computers and electricity, it has made significant
inroads in the urban market. Further, the evolution of
technology and increase in bandwidth has given rise to
internet connections at speeds faster than traditional
dial–up connections. The minimum threshold speed for a
broadband connection is 256 kilobits per second (kbps)
or more, whereas traditional internet connections have a
speed of less than 256 kbps.
broadband subscribers has increased at a CAGR of
23.9%20 and 117.5% to reach 16.2 million and 8.8 million,
respectively in FY10. This falls short of a Broadband
Policy’s goals of 40 million internet subscribers and
20 million broadband subscribers by the end of 2010.
The DoT formulated the Broadband Policy 2004, which
envisions the creation of a framework through various
access technologies such as optical fiber, digital subscriber
lines (DSL) on copper loop, cable television networks,
satellite media, terrestrial wireless and future technologies.
From FY05 through FY10, the number of internet and
Broadband infrastructure plays a vital role in a country’s
achievement across domains such as social progress and
economic development. According to Booz & Company, it is
estimated that a 10%21 increase in broadband penetration
translates to a 1.5% increase in labor productivity in a
country. Also, a 10%22 increase in broadband penetration
leads to a 1.3% increase in GDP. Broadband brings a
number of benefits, such as opportunities for education,
governance, entrepreneurship and services. The
opportunities hold a much larger promise for India’s large
low-income population and a growing economy.
Internet and broadband subscribers (million)
17.9
20
16.2
13.5
15
11.1
9.3
10
5.6
5
0.2
0
8.8
6.9
FY05
10.3
6.3
1.4
2.3
FY06
FY07
Internet subscribers
3.9
FY08
FY09
Broadband subscribers
FY10
Sep 10
Source: TRAI
20 Ernst &Young analysis.
21 Bringing Mass Broadband to India: Roles for Government and Industry, Booz & Company, June 2010.
22 “Broadband Commission Presents Report to United Nations,” International Telecommunications Users Group website, September 2010, http://intug.
org/2010/10/09/international-insights-%E2%80%93-september/, accessed 25 October 2010.
17
Market share by subscribers of technologies in internet
access, September 2010
3.6%
Market share by subscribers of technologies in
broadband, September 2010
0.5%
1.6% 0.8%
DSL
Dial-up
Wireless
Cable modem
Ethernet
Others
4.0%
10.3%
4.5%
DSL
Cable modem
Ethernet
Wireless
Others
6.5%
50.5%
31.0%
86.6%
Source: TRAI
Digital subscriber line (DSL) is the preferred technology
among service providers for both internet access and
broadband services. As of September 2010, DSL
constituted 50.5% of the market share in internet access,
and 86.9% of the market share in broadband access. The
share of wireless technology continues to be negligible
and remains to be fully exploited, especially in the case of
broadband services.
Broadband penetration continues to be very low in India,
despite a structured framework that included ambitious
goals to be met in 2010. Currently, broadband users are
concentrated in urban areas, primarily in business districts
or high–end residential areas of the larger cities. The
key factors responsible for the widespread adoption of
broadband include affordability and availability.
Source: TRAI
2.7. National long distance and
international long distance
The Indian enterprise data connectivity market is growing
at 10% annually and annual revenue is expected to near
the US$10 billion mark in the next five years. The growing
demand for connectivity is coming primarily from the
IT and IT-enabled services sectors (ITeS), the financial
services sector and the government. Most large global
players have set up operations in India to cater to the
connectivity needs of their customers. With telecom and
IT converging, managed services and network security
services are provided by global operators in partnership
with Indian IT companies.
Voice over Internet Protocol (VoIP) is considered a key
enterprise application for lowering operating costs. It has
spurred the demand for IP-based virtual private network
(IP-VPN) services in India. The other services relevant
to this segment are international private leased circuits,
internet connectivity, multiprotocol label switching (MPLS)
based IP-VPN services, and national and international data
connectivity. A majority of global operators in this space
are also offering VAS such as network security, network
integration, network management, network storage and
enterprise voice solutions.
Enterprise segment revenues23
Activity
FY08
FY09
FY10
FY11E
Private line
829
930
1,064
1,200
VPN
423
480
495
510
Ethernet
40
70
92
130
Managed business VoIP
92
110
125
150
Managed IP telephony
51
65
75
80
Hosting services
161
210
260
350
Application services
170
250
370
600
Security
110
130
150
180
Continuity and recovery
20
30
45
52
Managed storage
40
56
61
72
Outsource task
1,600
1,900
2,251
2,800
Contact center
20
31
39
45
3,556
4,262
5,027
6,169
Total (US$ million)
23 Industry estimates.
19
NTP 1999 opened up the NLD service for private
operators, without any restriction on the number of
operators. As of December 2009, the GoI had issued 29
NLD24 service licenses. In FY10, the Indian market for NLD
grew by 13.7% to reach total revenues of INR164 billion.25
However, the market slowed in FY10, primarily due to a
decline in ARPU across all operators.
180
160
140
120
100
80
60
40
20
0
60%
48.3%
35.3%
25.0%
50%
164.0
30%
144.3
20%
97.3
71.9
13.7%
FY07
FY08
FY09
Market size (INR billion)
40%
FY10
Growth (%)
Market size of NLD
10%
0%
Growth (%)
Source: Voice and Data
In 2002, India’s ILD services were opened up for private
players, with the sale of the strategic stake in VSNL to
the Tata Group. ILD has witnessed steady growth, with
its revenues reaching INR176 billion26 in FY10. As of
December 2009, the GoI had issued 24 ILD27 service
licenses, with the annual license fee being reduced to 6% of
the AGR.
200
30.0%
150
17.3%
100
50
0
115.1
1.0%
115.3
0.2%
150.0
FY07
FY08
FY09
176.0
35%
30%
25%
20%
15%
10%
10%
0%
Growth (%)
Market size of ILD
FY10
Growth (%)
Source: Voice and Data
24 DoT Annual Report 2009–10,Department of Telecommunications, FY10.
25 “India’s NLD market has grown by 13.6% in FY 2009-10,” Voice & Data, http://voicendata.ciol.com/content/vnd100_2010vol-II/110070520.asp,
26 “India among the Top Few Fastest Growing Telecom Markets,” Voice & Data, http://voicendata.ciol.com/content/vnd100_2010vol-II/110070519.asp,
27 DoT Annual Report 2009–10,Department of Telecommunications, FY10.
20
2.8. Telecom equipment manufacturing
Telecom equipment manufacturing and exports
600
500
412.7
400
178.3
200 140.0 160.9
15.0
100
4.0
2.5
0
110.0 120
81.3
300
FY04
FY05 FY06
Production
236.6
100
80
60
40
19.0
FY07
Exports (INR billion)
Production (INR billion)
518.0 140
20
FY08 FY09
Exports
0
Note: Includes both indigenous and offshore production
Source: DoT; “Indian telecom firms may get DoT boost,” LiveMint,
http://www.livemint.com/2010/04/01215017/Indian-telecomfirms-may-get-D.html, accessed 02 August 2010; “Policy recommendations to increase domestic telecom growth and exports of telecom
equipment and service,” “Telecom Equipment & Services Export Promotion
Council (TEPC), Ministry of Communications and IT, GOI.”
According to industry estimates, the demand for
telecom equipment is expected to be worth US$70–100
billion28 in 2015. From 2005-09, the manufacturing and
exports of telecom equipment grew at a CAGR of 33.9%
and 112.1%,29 respectively. Furthermore, according to
a leading telecom equipment manufacturer, the market
for wireless infrastructure equipment is estimated to be
US$8–10 billion,30 and equipment worth INR190 billion
was imported in 2009. Despite the growth of a localized
manufacturing environment in India, only 40% of the
requirement for equipment is met through local sourcing,
with the remainder coming from global companies
manufacturing in India. The majority of telecom segments
are highly dependent on imports, with the exception of
telecom towers and cables.
Value of telecom equipment imports to India
10
Imports (US$ billion)
The telecom equipment industry comprises products
such as cell phones, chipsets, wireless and landline
infrastructure equipment, DSL and cable modems and
networking devices, including routers and switches. India is
a strong market for global telecom equipment vendors.
8.9
8
6
3.7
4
1.3
1.7
2005
2006
2
0
1.2
2007
2008
2009
Source: International Trade Centre
Share of imports by country of origin, 2009
100%=US$8.9 billion
China
19.4%
South Korea
3.3%
3.4%
3.9%
4.5%
6.4%
59.1%
Sweden
US
Singapore
Hong Kong
Others
Source: International Trade Centre
Although a few Indian mobile operators have a significant
presence globally, companies in the manufacturing
segment are yet to feature in the global telecom
landscape. Manufacturers in India face challenges such
as high logistics costs, an unreliable power supply,
inadequate tax benefits and competition from low-cost
Chinese equipment.
28 “Telecom equipment manufacturing in India needs help urgently,” India Climate Portal, 21 July 2010, http://www.climatechallengeindia.org/telecomequipment-manufacturing-in-india-needs-help-urgently-21-july-2010-t, accessed 12 October 2010.
30 “Time to go local in telecom equipment purchase,” CyberMedia India Online, 02 September 2010, http://www.ciol.com/News/News/News-Reports/
Time-to-go-local-in-telecom-equipment-purchase/140758/0/, accessed 10 October 2020.
21
2.9. Infrastructure
The Indian telecom success story is built around the
wireless segment. The wireless sector has charted an
impressive growth trajectory, growing at a CAGR of
more than 75%31 in the past decade in terms of the number
of subscribers. Infrastructure development plays a crucial
role in the development of the wireless sector. The high
level of growth in the Indian wireless telecommunications
market will continue to drive huge investment in
infrastructure as well as a speedy rollout of networks
into new areas. As of March 2010, there were 425,45532
telecom towers in the country.
The development of the telecom infrastructure depends
on four key factors: rollout, competition, price, and
safety and aesthetic concerns. The rollout of services by
operators takes place only on the back of robust telecom
infrastructure. Competition will give further impetus
to the development of infrastructure. Falling prices of
telecom services will help to increase their affordability,
and the demand for more services will translate into the
development of more telecom infrastructure. Finally, as the
safety and aesthetic issues related to the setup of towers
are addressed, the rollout of infrastructure will become
easier. The National Telecom Critical Infrastructure Policy
is expected to address these concerns as well as the issues
affecting telecom providers on the state level, including
ROW related issues, hurdles to the erection of cellular
towers and value added tax (VAT) levies on broadband
services delivered through fiber media. The policy should
clearly define the role of the Central Government and the
states to help catalyze telecom sector growth.
2.9.1 Mobile network
Typically, a mobile network in a circle consists of mobile
switching centers (MSCs), each of which is connected
to base station controllers (BSCs), with each BSC being
connected to a base transceiver station (BTS). The BTSs
are installed in a contiguous manner, so as to facilitate the
handing over of signals from one BTS to another like a
chain. The radius of each BTS varies from 500 meters to
as much as 8-10 km,33 depending upon subscriber usage,
topography, frequency band of operation and spectrum
availability. The components of mobile networks include
the electronic infrastructure, the civil infrastructure
and backhaul. Typically, civil infrastructure forms about
60% of the cost of setting up a network, while electronic
infrastructure forms the remaining 40%.34
Electronic infrastructure consists of the electronics
needed to run a wireless network such as a BTS or cell site,
radio antennas, feeders, radio access network, cables,
node B, core network and other transmission equipment.
Civil infrastructure includes the complementary elements
of a cellular network that ensure that the electronic
components are operational. However, it does not play
any role in carrying wireless signals. Civil infrastructure
includes components such as tower site, steel tower,
shelter room, power regulation equipment, battery backup,
a
 ir conditioner, fire extinguisher, diesel generator set
and security cabin. It is not influenced by the type of the
communication technology being used, whether it is GSM,
CDMA, 3G or BWA. However, the number of operators
providing their services from a particular site influences the
extent of civil infrastructure installed at the site. Backhaul
consists of the intermediate links between the core of the
network and the various sub-networks. It connects the
electronic infrastructure at the tower site with the BSC
and MSC.
Infrastructure Provider-I (IP-I) can provide assets
such as dark fiber, ROW, duct space and tower through
simple registration without paying any license
fee. It can also create active infrastructure, on behalf
of the licensee.
2.9.2 Towers and in-building solutions
Telecom towers are broadly classified as ground-based
and rooftop towers. Ground-based towers (GBT) are
200 to 40035 feet high and are mostly used in rural and
semi-urban areas because of the easy availability of real
estate. GBTs involve a capital expenditure in the range of
INR2.4 to 2.8 million, depending on the height of the
tower. GBTs can accommodate up to six tenants. Rooftop
towers (RTTs) are placed on the roofs of high-rise buildings,
31Ernst & Young analysis.
32 “Growth of Telecom Sector,” Lok Sabha, http://loksabha.nic.in/, accessed 28 October 2010.
33 Telecom towers and allied infrastructure, Crisil Research, December 2008, page 9.
34 Telecom infrastructure industry in India, ICRA Rating Feature, March 2009, page 5.
35 Telecom infrastructure industry in India, ICRA Rating Feature, March 2009, page 6.
22
are shorter than GBTs and are common in urban and highly
populated areas, where there is paucity of real-estate
space. Typically, these involve a capital expenditure of
INR1.5-2 million. RTTs can accommodate two to three
tenants. Over the past couple of years, telecom operators
have hived off their telecom towers into separate entities.
As a result, there are three types of tower companies —
pure-play tower companies, operators with towers and
operator-owned tower companies.
2.9.3 Telecom infrastructure in India
In recent years, the growth of mobile communications
has made the provision of radio coverage within airports,
mass transit systems, shopping malls, stadiums and office
buildings an essential requirement. Coverage is required to
meet the needs of both the general public, which expects
its mobile phones to work at all times, and emergency
services, which need reliable communications for efficient
incident management and personal safety. In-building
solutions are designed to improve the reception of radio
frequency signals indoors to meet the increasing demand
for high-quality mobile services.
In July 2010, telecom towers were accorded Infrastructure
Status37 by the RBI. This constitutes an essential and
possibly the most expensive component in the entire
telecom service delivery infrastructure. The GoI provides
certain benefits specifically to infrastructure companies.
The tax benefit encourages the participation of private
sector through investment. Extending Infrastructure
Status to telecom towers and the resultant income tax
benefits should certainly encourage tower companies to
expeditiously set up more towers in underserved areas.
Initially, operators used their tower infrastructure for
competitive advantage. However, over the past few
years, the leading operators have opted to share their
infrastructure. Today, there are an estimated 425,455
telecom towers in India, implying a subscriber-per-tower
ratio of 1,460. Currently, tenancy level for the industry
stands at 1.55.36
State-wise number of towers
States
Public sector
Private sector
Towers
Rajasthan
2,028
23,322
25,350
Gujarat, Daman and Diu
2,271
26,121
28,392
Maharashtra and Goa
3,608
41,494
45,102
Karnataka
2,154
24,766
26,920
Madhya Pradesh and Chhattisgarh
1,854
21,323
23,177
West Bengal, Orissa, Sikkim, Andaman and Nicobar
3,337
38,371
41,708
720
8,275
8,995
Assam and Arunachal Pradesh
Delhi, Haryana and Chandigarh
2,008
23,090
25,098
Uttar Pradesh and Uttarakhand
4,577
52,630
57,207
Andhra Pradesh
2,752
31,644
34,396
Punjab and Himachal Pradesh
1,512
17,387
18,899
488
5,614
6,102
Jammu and Kashmir
Tamil Nadu and Pondicherry
3,071
35,321
38,392
Bihar and Jharkhand
1,794
20,634
22,428
369
4,242
4,611
Nagaland, Meghalaya, Manipur, Mizoram and Tripura
Kerala and Lakshadweep
Total
1,494
17,184
18,678
34,037
391,418
425,455
Source: “Growth of Telecom Sector,” Lok Sabha, http://loksabha.nic.in/, accessed 28 October 2010.
36 “TRAI: Consultaion paper on issues related to telecommunication infrastructure policy,” TRAI website January 2011, http://www.trai.gov.in/Default.
asp, accessed 01 February 2011.
37 “Master Circular - Exposure norms,” Reserve Bank of India, http://www.rbi.org.in/scripts/BS_ViewMasterCirculardetails.aspx, accessed
20 September 2010.
23
2.9.4 Energy requirements
Currently, telecom towers consume an average of about
5-6 kilo watt of energy coupled with an average of 8 hours
of diesel generator running time due to power outages.
On average, 27 million units of electricity are consumed
per day. Average diesel consumption per site per hour is
about 2.5 liters, translating to 6 million liters of diesel per
day. This translates to consumption of more than 2 billion
liters of diesel per year for cell sites, which is subsidized
by GoI. The dependence on diesel could be reduced if the
Government utilized that subsidy to support a move toward
renewable energy options such as solar, fuel cells or wind
power by treating these toward renewal effort as a part
of the overall effort to reduce greenhouse gases and the
country’s carbon footprint.
2.9.5 Future growth potential,
investments required and emerging trends
The industry faces low profitability, and has a pre-tax
margin of 7%–8%. Overall, the industry has pumped in
INR1 trillion and another INR400–500 billion is expected
to be invested in the next two years. It is estimated that
tenancy levels will rise to between 2–2.5x in the course of
this decade.38
2.9.6 Goals of infrastructure sharing
The key beneficiary of infrastructure sharing is
the subscriber. Infrastructure sharing serves the
following goals:
Optimal use of scarce resources: infrastructure sharing in
its simpler forms will lead to better use of scarce national
resources, such as land and energy. In its more complex
forms, it will allow a better use of spectrum.
Rollouts in rural and semi-urban areas: as wireless service
providers penetrate rural and semi-urban areas, significant
investments will be required, and infrastructure sharing
will act as an important tool to achieve faster rollouts and
save operating and capital expenditure in these areas.
Due to higher costs of land development, additional
security, insurance costs, power shortages, a higher
proportion of ground-based towers, unclear land ownership
and expensive backhaul connectivity costs in the rural
areas, service providers have strong incentives to share
infrastructure.
Spectrum constraints and network quality: for operators
in urban areas, superior network quality is a sustainable
differentiating factor that helps to reduce customer churn
and command premium prices. Tower sharing could help
operators maintain quality network coverage throughout
the city.
Capital expenditure (capex) and operating expenditure
(opex) savings: the setting up of a countrywide cellular
network requires substantial capex. A significant part of
the network rollout is likely to come in the untapped rural
areas, where mobile teledensity is barely in the double
digits. Since many rural areas are far-flung, more groundbased towers will be needed, further increasing capex
requirements. With sharing, massive amounts of funds
can be saved, and newer operators can build an assetlight model. It is estimated that infrastructure sharing in
its current form has helped achieve savings of INR557.6
billion resulting from savings in infrastructure provisioning
fee (IPF), energy, capital and interest costs.
Estimated cost savings resulting from
infrastructure sharing39
Component
Savings
(INR billion)
Capex (including interest)
476.0
Opex saving as a result of infrastructure
provisioning fee savings
71.4
Opex saving as a result of shared energy
costs
10.2
Total opex savings
Total savings (capex and opex)
81.6
557.6
Reduction in execution risks: erecting towers carries
with it significant execution risks and requires as many
as 40 clearances from separate authorities such as
the Standing Advisory Committee on Radio Frequency
Allocation (SACFA), state electricity boards, land owners
and so on before the tower and electronic infrastructure
can be completed. Against this background, the concept of
infrastructure sharing assumes special importance. Such
an arrangement works well for both partners, as the tenant
paying a higher rent to the tower company accelerates
the time-to-market process, while the tower company
earns revenues.
24
Revenue stream for incumbents: sharing enables
incumbents to earn revenues from a new source,
apart from improving capex and opex efficiencies,
freeing up significant resources and management time
to focus on their core business. The tower business can
become a profit center by itself, rather than just leading to
cost savings.
Expeditious time-to-market for new players: sharing
significantly speeds up the time-to-market, as operators
can dramatically reduce site acquisition times and load
their electronics and electronic network elements onto
the civil infrastructure of incumbent operators in a civil
sharing model.
Government initiatives on infrastructure sharing:
regulators favor faster deployment and investment
optimization in the telecom sector. Infrastructure
sharing limits duplication and gears investment toward
underserved areas, product innovation and improved
customer service. There are many government initiatives
that support infrastructure sharing. These provide
incentives for companies to participate in infrastructure
sharing, thus contributing to the growth of the industry
as a whole.
Local restrictions and environmental benefits: as
local authorities become more concerned about the
environmental and aesthetic effects of the number and
location of antennas in an area, zoning regulations may
start to play an important role in driving service providers
to share civil infrastructure.
Less negative environmental impact: although
environmentalists show limited support for telecom
network deployment, infrastructure sharing typically
receives the backing of many conservation groups
because less network buildup means fewer negative
environmental impacts.
Thus, infrastructure sharing reduces operating costs and
provides additional capacity in congested areas where
space for sites and towers is limited. It also provides an
additional source of revenue but may be limited by differing
strategic objectives. It helps to expand coverage into
previously unserved geographic areas. For operators who
have been awarded 3G licenses and will be launching 3G
operations, it provides an opportunity to reduce capital and
operational expenditure by sharing infrastructure from the
start of the build-out.
40 “Mobile infrastructure sharing,” GSMA, page 12.
25
2.9.7 Models of infrastructure sharing
As India’s mobile networks have expanded over the past
few years, coverage is no longer a source of competitive
advantage. Operators have realized that the industry needs
significant capital expenditure, which can be reduced by
sharing their networks. What started off as arrangements
between two telecom operators has evolved into the
creation of tower companies. Commercial considerations
appear to be driving the increasing trend to adopt a
variety of infrastructure models. The level of sharing
among wireless service providers varies depending on the
complexity of the arrangements and the interdependence
of the wireless service providers. Infrastructure sharing can
take the following forms40:
Civil infrastructure sharing: this refers to the sharing of
physical sites, buildings, shelters, towers, masts, power
supply and battery backup. This is by far the most common
form of infrastructure sharing in India now.
Electronic infrastructure sharing: this refers to the sharing
of electronic elements such as antennas, feeders, radio
access network (RAN), cables, node B and transmission
equipment.
RAN sharing: this is the simplest type of electronic
infrastructure sharing. It involves all the access
network elements to the point of connection with the
core network, including radio equipment, mast and site.
An extended version of RAN can be in the form of
intra-circle roaming. Service providers can agree to
provide mobile services to each other’s subscribers to
ensure converage wherever their own network signal is
not available or weak. This can increase the coverage area
and improve the quality of service. Usually, operators
either establish a joint venture company to operate the
shared network or establish an agreement on the use of
each other’s networks.
Node B sharing: in the Node B sharing model, one physical
unit is shared by two distinct nodes B. The radio network
controller (RNC) and core network are not shared in this
model, so that each service provider can maintain control
of its equipment and spectrum use. The separation of the
core network also allows each service provider to offer
differentiated services to its subscribers.
Core network: the most complex form of network sharing
involves both radio and core network elements, permitting
one or more partner service providers to access some or
all of the mobile network, including electronic components
such as optic and feeder fiber cables, radio links, network
elements, backhaul, antenna and transmission equipment.
This can be implemented to various levels depending on
which platforms operators wish to share.
Radio and core sharing: all electronic components in the
access and core network as well as civil infrastructure are
shared. In Sweden, there are five operators, four of whom
have formed two consortiums of two operators each. Each
consortium has built out a joint network. The regulator
permitted this level of sharing, but required each operator
to maintain 30% of its network separately.
Backhaul sharing: common backhaul sharing will be very
useful in rural environments where traffic from BTS to
BSC is very low. A common RF or optical fiber medium can
be utilized, reducing cost and maintenance efforts. Exits
from such sharing arrangements can easily be provided if
warranted due to an increase of traffic or other reasons.
National roaming: mandatory national roaming is a form
of infrastructure sharing that allows new operators, who
have yet to complete their network deployment to provide
national service coverage through sharing incumbents’
networks in specific areas. National roaming accelerates
competition by allowing new players to launch their
services within a shorter time frame.
Distributed antennae sharing (DAS): over the past few
years, DAS has emerged as a powerful tool for wireless
carriers to bolster their coverage and boost their capacity,
especially with the advent of smartphones and 3G.
Essentially, DAS is a collection of small antennas spread
over a specific geographic area and connected by fiber to
a central location or power source, usually a base station,
to provide wireless service within a geographic area or
structure. DAS technology can be used to boost signal
coverage in large buildings, stadiums and shopping malls
as well as for outdoor purposes. The benefits of DAS are
twofold — the technology allows carriers to fill in coverage
gaps and dead spots in their macro network and, by
breaking down the macro cell site into smaller pieces, it
helps add much-needed capacity to operators’ networks.
Mobile virtual network operators (MVNOs): these typically
do not have their own network and have no rights to
spectrum. They typically rely on operator network sharing
to get access to subscribers and offer services.
26
2.10. Value-added services (VAS)
According to the Internet and Mobile Association of India
(IAMAI), the mobile VAS in India was estimated to be
worth INR145.0 billion41 in 2010, growing at a CAGR
of more than 50% during 2006–10. The rollout of 3G
services is expected to drive the mobile VAS market in the
future, creating opportunities for both telecom operators
and companies engaged in VAS. Entertainment mobile
VAS constitutes 57% of the overall revenues followed by
information mobile VAS (39%) and m-commerce (4%).42
The key mobile VAS include person-to-person (P2P) SMS,
monotones, polytones and truetones as well as caller
ring-back tones (CRBT), person-to-application (P2A) SMS,
application-to-person (A2P) SMS, games and services
such as m–commerce and m–radio. The key participants in
the mobile VAS market include content owners, content
aggregators or developers, media companies, technology
enablers, short-code providers, handset manufacturers and
content converters.
In terms of revenue distribution among various market
participants, out of the total amount paid by end users
(excluding P2P SMS), approximately 60%–80%43 is captured
by mobile operators, followed by technology enablers
The demand for mobile VAS is mostly driven by the youth,
with India being one of the leading mobile markets for the
young. The mobile VAS revenues in the country are driven
by the P2P SMS service, followed by music. The growth
of m–commerce, which provides services such as mobile
banking, mobile payments and money transfer, is also
expected to drive the market for mobile VAS.
100
145.0
140
15
120
100
80
75.1
60
40
20
0
10
15
93.0
Growth (%)
160
45.6
60
28.5
2006
2007
2008
2009
2010F
Source: Mobile VAS in India: 2010, IAMAI, July 2010
27
The demand for mobile VAS is driven by the increase in the
mobile subscriber base, which has exceeded the
700 million44 mark, as well as aggressive marketing efforts
by telecom operators to spread awareness about their
services such as updates and alerts. Moreover, the decline
in ARPU has compelled mobile operators to focus on
mobile VAS to generate additional revenues. The rollout
of 3G services in the near future is expected to provide
consumers with new and improved services such as highspeed data transfer.
Revenue distribution of VAS services (%)
Market size of VAS
41
42
43
44
(10%–20%) and content aggregators (10%–15%). Content
owners end up getting approximately 5%–10% of the
overall revenues.
Operator
revenue
Technology
enabler
Content
aggregator
Source: Mobile VAS in India: 2010, IAMAI, July 2010
Mobile VAS in India: 2010, IAMAI, July 2010.
“TRAI Press Release No. 63 /2010,” TRAI website, http://www.trai.gov.in/Default.asp, accessed 10 October 2010.
Content
owner
Total
2.11. Outlook
2.11.1 Wireless
At the end of December 2010, there were 752.2 million45 mobile subscribers, with a
significant number of multiple and inactive Subscriber Identity Module (SIM) owners.
According to Ovum, during the period 2010–15, the number of wireless subscribers in
India is expected to increase at a CAGR of 10.1%,46 to reach 1,217.1 million47 subscribers
in 2015. Further, the country’s wireless teledensity is expected reach 97.2% and 110% in
2015 and 2020, respectively. Future subscriber growth is likely to hinge upon rural and
low-income users. Although the telecom sector is witnessing strong customer additions
every month, the ARPU continues to shrink, leading to falling profit margins of mobile
operators. The presence of as many as 14 mobile operators in certain parts of the country
and rising financial pressures are expected to drive consolidation in the sector.
1,600
1,400
1,200
1,000
800
600
400
200
0
77.7%
87.1%
92.9%
95.9%
97.2%
109.9%
120%
100%
80%
63.2%
44.7%
525.1
2009
752.2
2010
923.8
1,049.1
1,134.5
1,185.3
1,217.1
60%
1,516.8
40%
Teledensity (%)
Wireless subscribers (million)
Wireless subscribers in India
20%
2011F
2012F
2013F
2014F
Wireless subscribers
2015F
0%
2020F
Teledensity
Source: TRAI; DoT; Ovum; Ernst & Young analysis
2.11.2 3G subscribers
350
20.0%
300
20%
250
200
150
100
50
0
25%
6.9%
3.8%
35.0
72.0
8.9%
101.0
10.0%
118.0
15%
11.7%
303.4 10%
142.0
2011F 2012F 2013F 2014F 2015F 2020F
3G subscribers
3G subscribers as a % of
wireless subscribers
5%
0%
Source: Ovum; Ernst & Young analysis
45 “TRAI: The Indian Telecom Services Performance Indicators (January - March 2010),” TRAI website, July 2010,
http://www.trai.gov.in/Default.asp, accessed 10 October 2010.
47 Ovum: Mobile regional and country forecast pack: 2010–15, Ovum website, http://www.ovumkc.com/, accessed 16 October 2010.
28
3G subscribers as a percentage of
wirless subscribers (%)
3G subscribers forecast
3G subscribers (million)
3G is the next generation mobile technology which is
capable of delivering broadband content, including a host
of rich multimedia services such as video calling, video
on demand, location based services and remote access/
VPN applications. 3G services will drive the expansion of
wireless services in future. 3G subscribers are expected
to reach 142 million by 2015, accounting for 12% of the
total wireless subscriber base. Further, 3G subscribers are
expected to be more than 300 million by 2020, accounting
for 20% of the total wireless subscriber base.
2.11.3 Wireline
There were 35.1 million48 wireline subscribers at the end of December 2010. The wireline
market is in decline, a trend that is expected to continue. According to Ovum, during the
period 2010–15, the number of wireline subscribers in India is expected to decrease at a
CAGR of nearly 4%,49 to reach 29.1 million50 by 2015. Further, the wireline subscribers are
forecasted to reach 26.3 million in 2020. The growth in the mobile market is seen as the
cause of the decline.
Wire line subscribers (million)
Wireline subscribers in India
40
35
30
25
20
37.1
35.1
34.9
33.5
32.1
30.5
29.1
2013F
2014F
2015F
15
26.3
10
5
0
2009
2010
2011F
2012F
2020F
Source: TRAI; DoT; Ovum; Ernst & Young analysis
2.11.4 Broadband
As of September 2010, there were 10.3 million broadband subscribers in India. The
growth of broadband is expected to increase with uptake of 3G and BWA services.
Considering increasing broadband demand, the broadband connections are estimated to
reach 150 million by 2020.
Broadband subscribers forecastc
Year
Number of
households
% of households to be
covered for broadband
Number of broadband
connections (million)
2010
236
5%
11.5
2012
241
20%
48
2014
250
40%
100
2020
275
55%
150
Source: “TRAI: Consultation Paper on National Broadband Plan,” TRAI website, June 2010,
http://www.trai.gov.in/Default.asp, page 16, accessed 10 October 2010; Ernst & Young analysis
48 “TRAI: The Indian Telecom Services Performance Indicators (January - March 2010),” TRAI website, July 2010,
http://www.trai.gov.in/Default.asp, accessed 10 October 2010.
50 Ovum: Fixed voice connections forecast pack: 2008–15, Ovum website, http://www.ovumkc.com/, accessed 16 October 2010.
29
2.11.5 Revenue and capex
Over the years, the Indian telecom sector has witnessed an increase in revenues and
contribution toward GDP. The growth in revenues is driven by cheaper mobile handsets,
lower tariffs, the increase in mobile penetration in both urban and rural areas, and the
adoption of VAS. According to Ovum, during the period 2009–15, industry revenues and
capital expenditure are expected to increase at CAGR of 8.1%51and 7.0%, respectively,
to reach US$51.0452 billion and US$14.97 billion by 2015. Further, industry revenues
and capex are expected to increase to US$57.2 billion and US$ 13.9 billion, respectively
by 2020. The future revenue growth and increase in capex is expected to be driven by
the rollout of 3G services and the increase in broadband penetration across the country,
including BWA penetration. Other services such as ILD, NLD and VAS are also expected
to drive revenue growth.
Revenue and capex (US$ billion)
Revenue and capex forecast
70
60
50
40
30
20
10
0
32.0 10.0
2009
34.5
7.3
2010F
38.7 11.8
43.1 13.8
45.9 15.1
2011F
2012F
2013F
Revenues
48.4
14.8
2014F
51.0
57.2
15.0
2015F
13.9
2020F
Capex
Source: Ovum; Ernst & Young analysis
Over the years, with the introduction of 3G and BWA services, the contribution of
non-voice services towards the industry revenues is expected to reach 38% by 2020.
Revenue break-up: voice and non-voice
10%
90%
2011F
17%
22%
27%
32%
38%
83%
78%
73%
68%
62%
2012F
2013F
Voice
2014F
2015F
Non-voice
2020F
Source: Pyramid Research; Ernst & Young analysis
52 Ovum: Forecast of service provider revenue and capex, 2009-2014, Ovum website, http://www.ovumkc.com/, accessed 16 October 2010.
30
Achievements
and setbacks of
NTP 1999
3
31
The NTP 1999 aims at making India competitive in the global telecom market through
growth in exports, FDI and domestic investment. The key objectives of the policy include
telecommunication for all and within the reach of all, achieving universal service across
all villages, global standards in the quality of service, the emergence of India as a major
manufacturing base and a major exporter of telecom equipment, and protection of the
country’s security interests. The policy includes specific targets:
• Make available telephone on demand by 2002 and sustain it thereafter so as to
achieve a teledensity of 7% by 2005 and 15% by 2010
• Encourage the development of telecom in rural areas, making it more affordable by
fixing a suitable tariff structure and making rural communication mandatory for all
fixed service providers
• Increase rural teledensity from 0.4% to 4% by 2010, and provide reliable transmission
media in all rural areas
• Achieve telecom coverage of all villages in the country and provide reliable media to
all exchanges by 2002
• Provide internet access to all district headquarters by 2000
• Provide high-speed data and multimedia capability, using technologies including
international services digital network (ISDN), for all cities with a population greater
than 200,000 by 2002
32
NTP 1999 has been a catalyst for the telecom sector:
• Growth in the subscriber base (723.3 million) and in
teledensity (61.0%)
• Contribution of telecom to overall GDP of almost 3%, up
from 1.5% in 2000
• Creation of jobs across sales and marketing, technology,
R&D and customer care, among others
• Among the lowest tariffs in the world, and the adoption of
per-second billing by various operators
• Robust growth in revenues — industry revenues recorded
at US$35 billion
• Increased FDI in the telecom sector — accounts for more
than 8% of cumulative FDI inflows in the past decade
• The promotion of manufacturing of telecom equipment in
India and the growth of telecom exports
• Growth of the telecom industry has led to the development
of new business ecosystems, e.g., mobile value-added
services (MVAS) encompass mobile operators, content
creators, providers, aggregators and technology enablers
Sector still faces challenges for growth:
• Spectrum re-farming and effective management of
spectrum in a transparent manner
• Creation of an effective licensing framework where
amendments are carried out in consultation with
service providers
• “Critical” Infrastructure Status along with uniform policy
and single window clearance
• Energy requirements, especially reliability, resulting in
huge operating expenditure
• Effective utilization of USOF to increase rural penetration
• Increasing broadband penetration and rural connectivity
• Overcoming security concerns over the use of mobile
handsets and telecom equipment
• Limited availability of talent, especially telecom specialists
• Fixed mobile convergence (FMC)
33
3.1. Key achievements of NTP 1999
3.1.1 Teledensity
poses a critical challenge due to low population density,
geographical spread, low per capita income and the cost
of maintaining phones in rural areas. As a result, there is
an uneven distribution of teledensity among Indian states
resulting in slow economic development of the states and
their surrounding regions.
Reforms in the telecom sector have been encouraged by
the active participation of the public and private sector.
Following independence, the teledensity level in the
country was 0.02%53; by 1998, the level had increased
to only 1.9%. NTP 1999 has been instrumental in the
growth of telecom in both urban and rural areas, and its
targets have been achieved well in advance. The overall
teledensity target of 15% by 2010 was achieved in FY07.
Furthermore, the overall teledensity as of September 2010
stood at 61.0%.54 Urban teledensity and rural teledensity
at the end of September 2010 were 137.3%55 and 28.4%,
respectively, with rural teledensity being far ahead of the
NTP 1999 target, which was set at 4% by 2010.
Currently, about 70% of the population in India lives in
rural areas, and mobile penetration stands at a meager
28.4% in rural India. There is a significant opportunity for
service providers to increase penetration in rural areas
and generate revenues. The impact of mobile telephony
on rural areas has been profound. It has helped reduce the
cost and time of transactions and has visibly compensated
for the poor infrastructure. According to a study by Robert
Jensen, a Harvard University economist, the introduction
of mobile telephony in Kerala increased the fishing
community’s profits by 8%,56 decreased fish prices by 4%
and consumption of fish increased by 6%.
Although India has witnessed a steep rise in teledensity
over the past few years, the disparity between urban and
rural areas in terms of mobile penetration has increased
significantly. The improvement in rural teledensity
Urban and rural teledensity
140%
137.3%
119.7%
120%
Teledensity (%)
100%
89.4%
80%
60%
0%
52.7%
47.3%
38.0%
40%
20%
61.0%
65.9%
8.2%
2.3% 0.7%
10.4%
2.9%
0.9%
FY00
FY01
14.3%
4.3%
3.6% 1.2% 1.5%
12.2%
FY02
FY03
Urban teledensity
20.8%
26.2%
5.1%
1.6%
9.1%
1.8%
FY04
FY05
18.2%
12.9%
4.0%
5.8%
FY06
FY07
Rural teledensity
37.0%
26.2%
9.2%
FY08
24.3%
28.4%
14.9%
FY09
FY10 Sept 10
Total teledensity
Source: TRAI
53 “Rural Telecom and IT,” Indian Institute of Kanpur website, http://www.iitk.ac.in/3inetwork/html/reports/IIR2007/04-Rural Telecom.pdf, page 76.
54 “TRAI Press Release No. 63 /2010,” TRAI website, http://www.trai.gov.in/Default.asp, accessed 10 December 2010.
55 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010),” TRAI website, January 2010,
http://www.trai.gov.in/Default.asp, accessed 15 January 2011.
56 Jensen, R., “The Digital Provide: Information (Technology), Market Performance and Welfare in the South Indian Fisheries Sector,” The Quarterly Journal
of Economics, 2007.
34
Total teledensity by state in India, FY10
The Indian telecom industry employs more than 430,00057
direct employees, with the majority of these employees
being a part of the public sector undertakings (PSU). The
ratio of the number of subscribers per employee is very
high in the case of private operators in India.
Mix of private and PSU operators, by subscriber base
100%=
million
98.4
52.9%
47.1%
FY05
Low teledensity: 0%–50%
Medium teledensity: 50%–100%
High teledensity: 100% and above
140.3
205.9
34.7%
43.5%
65.3%
56.5%
FY06
FY07
Private operators
300.5
429.7
26.5%
20.8%
73.5%
79.2%
FY08
FY09
PSU operators
Source: TRAI; Dun & Bradstreet
Source: TRAI
3.1.2 Teledensity and employment
Over the past decade, private telecom players have
considerably expanded their operations, which has
resulted in an increase in employment opportunities
in the telecom sector. The sector has created direct
employment across various business areas such as sales
and marketing, technology, R&D and customer care, as well
as indirect employment. The expansion of the Indian BPO
industry is a classic example of indirect employment.
Employees of private and PSU operators
100%=
436,891
429,400
432,771
9.7%
11.0%
14.7%
90.3%
89.0%
85.3%
FY05
FY06
FY07
Private operators
PSU operators
Subscribers per employee ratio in India
FY05
FY06
FY07
PSU operators
132
158
193
Private operators
1,089
1,678
2,110
The development of telephony in India has played an
important role in altering the structure of the economy. It
has paved the way for a knowledge- and information-based
economy, which augurs well for sectors such as IT/ITES,
media, technology, education, R&D and financial services.
57 Overview of Telecom Industry, Dun & Bradstreet website, December 2009.
35
3.1.3 Size of the telecom sector and
contribution to GDP
The revenues of the Indian telecom sector have
increased by almost fivefold from US$7 billion in FY00
to US$35 billion58 in FY09. The growth in revenues has
been driven by favorable factors such as the availability
of cheaper mobile handsets, lower tariffs, the increase in
mobile penetration in both urban and rural areas and the
adoption of VAS. In addition, infrastructure sharing has
enabled operators to improve margins by bringing down
costs significantly.
India’s telecom sector is a voice-centric market
characterized by high MoU and ARPU. A sharp decline in
call charges and the cost of services has enabled the rise of
mobile subscribers and revenues.
The contribution of the telecom sector to India’s GDP
is estimated to increase from 1.5% in 2006 to 2.8%59 in
2010. The Indian economy is expected to sustain an 8%
or a higher growth rate in the future. As the country aims
to achieve higher teledensity, the contribution of the
telecom sector in GDP is expected to increase. According
to an ICRIER study, a 10%60 increase in mobile penetration
results in a 1.2% increase in GDP.
Contribution of telecom to GDP
3.0%
2.2% 2.2% 2.3% 2.3%
2.5%
2.0%
1.5%
2.6% 2.8% 2.4%
1.7% 1.6% 1.6%
1.5%
Indian telecom sector gross revenues
1.0%
25
25
20
15
8
8
9
FY03
7
FY02
15
10
17
20
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY00
Source: TRAI; Ernst & Young analysis
FY10
FY09
FY08
FY07
FY06
FY05
FY04
Source: TRAI; Ernst & Young estimates
5
0
0.0%
FY03
33
FY02
30
FY01
Revenue (US$ billion)
31
FY01
35
35
FY00
0.5%
40
The contribution of the telecom sector also has a
multiplier effect on growth, due to associated individuals
and businesses. Further, the GoI’s aim to reach rural
teledensity of 40%61 by 2014 from the current levels
and achieve broadband coverage of all 250,000 village
panchayats under the Bharat Nirman Program is
expected to enhance the contribution of the telecom
sector to India’s GDP.
58 Transfer Pricing Report — Telecom (general), Ernst & Young, 2010.
60 “High-teledensity states grew faster, says study,” LiveMint, http://www.livemint.com/2009/01/19224316/Highteledensity-states-grew-f.html, accessed
10 October 2010.
61 “Bharat Nirman: A business plan for rural infrastructure,” Bharat Nirman website, http://www.bharatnirman.gov.in/page2.html, accessed
20 October 2010.
36
3.1.4 FDI in the Indian telecom sector
In the past decade, India has witnessed a considerable rise
in FDI. During the last decade, FDI in India increased at a
CAGR of 28.0%62 to reach US$37.2 billion63 in FY10. The
telecom sector is among the leading sectors attracting FDI,
accounting for 8.1% of the cumulative FDI equity inflows
from FY00 to FY10. Over the past few years, a number of
foreign ownership and equity regulation reforms have been
introduced in the telecom sector. These reforms have led to
an increase in FDI inflow in the sector.
FDI limits in telecom64
• 100% FDI is permissible in the case of infrastructure
providers that offer dark fiber, ROW, duct space, tower, email,
and voice mail:
• FDI of up to 49% can be done on the Automatic Route
(without prior government approval); beyond that, prior
approval is required
From FY08 through FY10, FDI equity inflows in the
telecom sector increased at a CAGR of 42.3%65 to reach
US$2.6 billion. Higher levels of FDI in the telecom sector
have intensified competition and strengthened market
penetration. They have also opened up opportunities for
telecom manufacturing and related business areas in
the sector.
3.1.5 Restructuring mobile tariffs
The decline in tariffs has enabled the industry to reach a
phenomenal size in terms of subscribers, while at the same
time diluting the ARPU. In the early days, mobile tariffs
were targeted toward both the calling and receiving party,
with the regime popularly known as “receiving party pays.”
In January 2003, TRAI announced the implementation of
the “calling party pays” regime, with incoming calls being
free of charge for the receiving party.
• 74% FDI is permissible in the case of basic, cellular, unified
access services, NLD/ILD, V-Sat, public mobile radio trunked
services (PMRTS), global mobile personal communications
services (GMPCS) and other VAS
• 74% FDI is permissible in the case of ISPs with gateways,
ISPs not providing gateways, radio paging and end-to-end
bandwidth
Cumulative FDI equity inflow in India, FY00-10
Services sector
21.4%
Computer hardware and software
Telecommunications
9.0%
FDI equity inflow in the telecom sector
(US$ billion)
Housing and real estate
Construction activities
38.3%
8.1%
7.6%
7.3%
4.1%
4.2%
Power
Automobile
2.6
2.6
FY09
FY10
1.3
Others
FY08
Source: Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry
63 “Fact Sheet on Foreign Direct Investment from August 1999 to July 2010,” Department of Industrial Policy & Promotion, http://dipp.nic.in/, accessed
10 October 2010.
64 Department of Industrial Policy & Promotion: Consolidated FDI policy effective from April 2010, Department of Industrial Policy & Promotion,
April 2010, page 58.
37
3.1.6 Handset prices
The Indian mobile handset market is estimated to be
worth INR500 billion.68 The market has witnessed the
entry of a number of mobile manufacturers, raising
the total number of manufacturers to about 30 from
approximately 5 in 2008.
The Indian mobile handset market is dominated by
established global brands. The market is characterized
by the presence of both high–end and low–end mobile
phones, with a wide gap between handset prices. The
market is also inundated with unbranded and cheap
imported mobile phones, which are primarily Chinese in
origin. The growing mobile subscriber base in India has led
to the entry into the market of a number of “homegrown”
mobile handset manufacturers.
600
471
500
493
484
410
395
ARPU (INR)
400
300
298
200
264
200
205
100
131
FY06
500
400
366
300
0
423
MoU (minutes)
600
FY07
FY08
ARPU
FY09
FY10
164
Sep10
100
0
MOU
Source: TRAI
CDMA operators: ARPU and MoU
600
600
500
550
471
400
300
400
364
256
202
200
352
159
100
FY06
FY07
ARPU
FY08
307
308
76
78
300
200
99
0
MoU (minutes)
500
ARPU (INR)
The intense competition in the telecom sector
has led to declining ARPU among mobile operators.
From FY06 through FY10, the ARPU of GSM and
CDMA operators decreased by 64.2% and 70.3%,
respectively. The average annual decrease for GSM and
CDMA operators was 22.1% and 25.8%, respectively.
ARPU levels are estimated to continue declining over
the next few years, though the rate of decline is expected
to be slow. Following the introduction of the NTP 1999,
the MoU among telecom service providers have also
witnessed an increase. Although India has recorded one of
the highest MoU globally in the past few years, the sector
has also experienced a decline in MoU, especially in the
case of CDMA operators. In addition, the rate per minute
(RPM) has declined due to the increase in competition in
the sector.
GSM operators: ARPU and MoU
FY09
FY10
Sep10
100
0
MOU
Source: TRAI
GSM and CDMA operators: RPM
1.0
0.9
0.9
0.8
0.7
INR
The effective price per minute for an outgoing mobile
call has declined from approximately INR16.4066 in 1995
to almost INR0.30 today. Since the formulation of NTP
1999, the industry has experienced a decline of about
95% in mobile tariffs. The entry of new service providers
has resulted in a tariff war, as the market entrants have
used pricing to grab market share. Per-second billing has
emerged as an industry norm, thereby creating a win-win
situation for subscribers.
0.6
0.6
0.5
0.4
0.5
0.4
0.5
0.4
0.3
0.3
0.4
0.3
0.3
0.2
0.2
0.1
0.0
0.4
FY06
FY07
FY08
GSM
FY09
FY10
Sep10
CDMA
Source: TRAI
66 “One Minute at a Time,” Outlook India, http://business.outlookindia.com/printarticle.aspx?266748, accessed 21 October 2010.
68 “Small handset makers making big strides,” Business Standard, 15 April 2010, http://www.business-standard.com/india/news/small-handset-makersmaking-big-strides/391912/, accessed 5 October 2010.
38
Average selling price (ASP) of mobile handsets
Average selling price (US$)
200
180
160
140
120
100
80
60
40
20
0
1Q08
2Q08
Nokia
3Q08
4Q08
Motorola
1Q09
Samsung
2Q09
Sony Ericsson
2Q09E
4Q09E
1Q10E
2Q10E
Others
Source: Company data; Macquarie Capital
In the past decade, mobile handsets have evolved
rapidly, adding numerous features ranging from
monochrome screens to touch screens, monotone
ringtones to MP3 ringtones, Video Graphics Array
(VGA) to 8-to-12-megapixel cameras, enhanced memory,
Global Positioning System (GPS), email, 3G and an
improved user interface. Globally, the average selling price
(ASP) of both feature phones and smartphones has been
on the decline. However, the price of feature phones is
declining at a faster rate than smartphones. Over the next
few years, the ASP of feature phones is expected to be
US$50, and the ASP of smartphones is expected to drop
below US$200.
Indian mobile handset market
5.4
100
Volume (million units)
7
6.0
5.6
4.7
5
80
60
20
0
4
3.2
95.6
40
101.5
108
71.8
3
2
1
33.4
FY06
6
FY07
FY08
FY09
FY10
0
Value (US$ billion)
120
3.1.7 Global outreach of Indian telecom
companies
In the early 1990s, greenfield investments were a
popular mode of overseas investment among Indian
firms, and foreign affiliations were formed through joint
ventures, usually with a minority ownership. Over the
period, India has witnessed prominent diversification in
the industry composition of overseas activities of Indian
firms. Over the past decade, FDI by firms belonging to
developing countries has gained momentum and has
become an integral part of globalization. Indian companies
have reached overseas destinations to tap new markets
and have acquired technologies. The market has witnessed
investment in the form of greenfield projects, and the
majority of this capital value has been used to acquire
companies. M&A provide benefits such as expansion of
global footprint, access to niche technologies, new product
mix, a wider customer base and growth momentum. In
line with the change in the pattern of investments, the
structure of ownership has also shifted toward majority and
full ownership.
According to the National Council of Applied
Economic Research (NCAER), India’s FDI outflows (debit)
have grown at a CAGR of 47.5% to reach a projected
US$18.6 billion69 in FY09, from US$0.8 billion in FY01.
The share of manufacturing in the investment activity has
Source: Voice & Data
69 “NCAER: FDI in India and its growth linkages,” Department of Industrial Policy & Promotion, August 2009, http://dipp.nic.in/, page 13, accessed
10 October 2010.
39
declined considerably, whereas the share of services has
increased. The Indian telecom sector has actively been a
part of the global M&A activity, leading to the emergence
of telecom giants from India.
Key overseas M&A by Indian firms
Year
Target company
Acquirer company
Deal value
(US$ million)
2010
Zain Africa BV
Bharti Airtel Ltd
10,700.0
2010
Warid Telecom, Bangladesh
Bharti Airtel Ltd
300.0
2003
FLAG Telecom Group Ltd
Reliance Gateway Net Pvt Ltd
194.8
2005
Teleglobe International Holdings Ltd.
TCL
177.0
2010
Telecom Seychelles
Bharti Airtel Ltd
62.0
2000
Astratel Nusantara PT
CDC Capital Partners
30.0
Source: Thomson ONE Banker
40
3.2. Key challenges of NTP 1999
NTP 1999 envisaged the affordability and availability of
telecommunication services for the common populace,
along with the benefit of VAS such as internet for the
urban and rural population and the abolition of the digital
divide. However, the telecom sector continues to face
various issues that act as impediments to its growth.
3.2.1 Growth of wireline
The wireline segment has added just 10 million users since
the introduction of the NTP 1999, and the number of
wireline subscribers has fallen from 41.5 million in FY06
to 37 million in FY10. Although wireline infrastructure
in India has been in place for an extended period, the
growth of wireline phones is not in sync with the rise in
the number of wireless subscribers. The decline has been
due to lower mobile tariffs, cheaper handsets, improved
mobile coverage, the advantage of mobility among wireless
networks and the inadequate infrastructure of the wireline
network. However, wireline and wireless complement
each other. The stagnancy in the growth of wireline
networks has an impact on the overall growth of the
telecom sector and other services such as internet and
broadband services.
3.2.2 Growth of broadband
As of September 2010, there were 17.9 million70
internet subscribers and 10.3 million broadband
subscribers in India; the Broadband Policy 2004 had
anticipated 40 million71 internet subscribers and
20 million broadband subscribers by 2010. The sluggish
growth in broadband services is attributable to the absence
of low-cost devices, inadequate content and applications
in regional languages, the affordability and availability of
broadband services and inadequate infrastructure.
Globally, broadband penetration is accepted as a measure
of a country’s ability to compete as an economic power.
Despite India’s status as an IT superpower, broadband
penetration levels in India are far below other emerging
countries such as Brazil, Russia and China. According to
Boston Consulting Group, India has an internet penetration
of 7%,72 in comparison with 33% in Brazil, 31% in Russia
and 28% in China. The Broadband Policy 2004 has failed to
keep pace with advances in technology and failed to boost
the telecom sector.
3.2.3 Spectrum challenges
The Indian telecom industry has witnessed phenomenal
growth in the number of subscribers, with a CAGR of 77.5%
during the period FY00–10. Furthermore, according to
TRAI, the Indian telecom industry is expected to reach
1 billion73 wireless subscribers by March 2014. In line
with the growth of subscribers, the need for spectrum to
service these subscribers has also increased. According to
TRAI, the bandwidth required by 2014 may be as high as
800MHz.74 Spectrum bands such as the 900MHz band are
of great value to mobile operators due to the longer ranges
these can support, therefore requiring lesser BTSs density
and lower capital and operating expenditure.
Currently, in the absence of a long-term plan to meet
future requirements, the advent of new technologies is
expected to create conflicts for spectrum. The availability
of spectrum for commercial services in India is below the
required levels. Despite being the second-largest market in
terms of the subscriber base, India lags behind in terms of
availability of spectrum for commercial use.
70 “TRAI: The Indian Telecom Services Performance Indicators (July - September 2010),” TRAI website, January 2010, http://www.trai.gov.in/Default.asp,
71 “Broadband Policy 2004,” DoT website, http://www.dot.gov.in/ntp/broadbandpolicy2004.htm, accessed 10 October 2010.
72 The Internet’s New Billion, Boston Consulting Group, September 2010, page 7.
73 “TRAI: Spectrum Management and Licensing Framework,” TRAI website, page 339, May 2010, http://www.trai.gov.in/Default.asp, accessed
10 October 2010.
74 “TRAI: Spectrum Management and Licensing Framework,” TRAI website, May 2010, page 18, http://www.trai.gov.in/Default.asp, accessed 10 October 2010.
41
Spectrum and license allocation timeline in India
First stage: 1995–2003
Auctioning scarce spectrum
•
•
In 1995, the GoI auctioned 2x4.4MHz of start–up spectrum for GSM-based services
•
In 2001, the fourth operator license was issued using a three-stage auction
procedure. Start-up spectrum of 2x4.4MHz in 1,800MHz was given to the
winning bidder:
Two operators were selected for each License Service Area (LSA). Subsequently,
in 2001, the third operator license was awarded, along with 2x4.4MHz of start-up
spectrum in the 900MHz band, to the government operator on a pro bono basis
•
Second stage: 2003–06
Unified Access Service (UAS)
licenses
Third stage: 2006–08
Criterion for allocation of
spectrum
Fourth stage: 2008–10
Policy on 3G and 3G auctions
In addition to the entry fees, licensees were required to pay a percentage of
annual revenue as spectrum charges
•
In 2002, subscriber based norms (SBN) was introduced. It laid down a roadmap for
the allotment of 2x12.5MHz of spectrum per operator in each LSA
•
In November 2003, GoI announced UASL that allowed basic service license holders
to provide full mobility-based services with a stipulated entry fee based on the bid
price paid by the fourth operator in 2001
•
The fixed fee-based license allowed any number of mobile licenses to be provided and
implicitly de-linked spectrum allocation from licensing. Although firms were awarded
licenses after paying the required entry fee, they were given start-up spectrum only
as and when available
•
Following the entry of two or three CDMA-based mobile operators in each LSA, one
or two new firms also paid the stipulated entry fee and obtained a license to operate
GSM services in certain LSAs
•
3G services were treated as a separate service from 2G, and TRAI continued to
maintain that there was a shortage of 2G spectrum
•
A new SBN policy was defined, and incumbents were kept out of fresh allocations.
The GoI allocated spectrum to new telecom players in service areas across India
•
The defense services agreed to vacate 2x20MHz in the 1,800MHz band, in addition
to 25MHz in the 2.1GHz UMTS band
•
The DoT proposed new 2G spectrum usage charges for all operators. All operators
were expected to pay higher spectrum usage charges, irrespective of the quantity
they held. This differed from the earlier strategy of increasing spectrum charges only
for those operators who held more than 6.2MHz per circle in case of GSM players
and above 5MHz for CDMA
•
In August 2008, the GoI announced the policy for 3G mobile services, in line with
TRAI’s recommendations, and opted for the auction of a start–up spectrum of
2x5MHz in the 2.1GHz band with reserve prices for different categories of LSAs
•
In May 2010, the e–auction of 3G mobile services was concluded after 183 rounds
of bidding across all service areas. All of the 71 blocks up for auction across the 22
service areas were sold:
•
All the winners of the auction were required to pay INR509.7 billion to the GoI
within 10 days of the closing of the auction. Including the amount paid by
state-owned BSNL and MTNL, it totalled to INR677.2 billion
•
Following the completion of the 3G auctions, the bandwidth for broadband
services (WiMAX) was auctioned by the GoI. It auctioned two 20MHz blocks
in the 2.3GHz range in each of the country’s 22 service areas. The GoI raised
INR385.4 billion from the broadband wireless auction
Source: “A peep into RF spectrum allocation process in India,” Integrated Defense Staff http://ids.nic.in/tnl_jces_Sep_2009/Spectrum%20allocation%20
procedure.pdf accessed 02 August 2010
42
3.2.4 Licensing challenges
3.2.6 Infrastructure
NTP 1999 permitted Cellular Mobile Service Providers
(CMSPs) to provide all types of mobile services, including
voice and non-voice messages, data services and PCOs, in
their service area of operations, using any type of network
equipment that met the International Telecommunication
Union (ITU) or Telecommunication Engineering Center
(TEC) standards. Prior to this, licensees were required
to use GSM technology. The policy made the cellular
license technology neutral, and also allowed licensees to
migrate from a fixed license regime to a revenue-sharing
arrangement starting in August 1999. In November 2003,
the GoI introduced the UAS licensing regime, permitting
an access service provider to offer either fixed or mobile
services or both. Since the introduction of the UAS
licensing regime, the total number of licenses in a circle
ranges from 12 to 14.75
Telecommunications infrastructure, despite being a
“key infrastructure,” is far from ubiquitous. There are
huge gaps in low-income or sparsely populated areas,
especially away from cities and towns, where telecom
companies see poor returns on the expensive investment
required in setting up the infrastructure. Completing the
important task of connecting the remaining areas therefore
requires an all-round effort by improving the economics
of rolling out networks and addressing any other
stakeholders’ concerns that act as a barrier.
Globally, the allocation of spectrum is separate from the
grant of license to provide service. However, in India,
licenses are bundled with the allotment of a certain amount
of spectrum.
3.2.5 Equipment manufacturing
The Indian telecom sector has witnessed rapid growth.
However, telecom manufacturing in India has not been
able to keep pace. Currently, there is a limited number
of telecom equipment manufacturers and providers tend
to be highly dependent on imported equipment during
the setup of mobile networks. Moreover, the country lags
behind in terms of telecom R&D and continues to be reliant
on imports.
Telecom infrastructure service providers face several
challenges, which are highlighted below:
Role played by multiple state agencies: there is no
uniform approval process across the states, and the
biggest barrier to setting up telecom towers and other
infrastructure is the wide variation in the approval
process adopted by local bodies. Several demand
prohibitive fees; others require dealing with multiple
agencies; some treat infrastructure business in the same
way they treat petty commercial undertakings; and some
look at infrastructure companies as a means to finance
deficits. Tower companies, therefore, incur huge costs
and delays because several state agencies are involved in
granting approval for setting up towers.
Inadequate utilization of towers: towers are not fully
utilized as no law ensures that no new tower is built in an
area where an existing tower is under utilized.
Civic issues: there is a need to address civic issues
such as zoning regulation, single window clearance,
preferential treatment for sharing and incentives in a
timely manner.
75 “TRAI: Spectrum Management and Licensing Framework,” TRAI website, May 2010, page 59, http://www.trai.gov.in/Default.asp, page 59, accessed
10 October 2010.
43
Taxation on towers: multiple levies and high taxes are
imposed for setting up mobile towers. For instance, the
Municipal Corporation of Delhi (MCD) charges INR100,000
per tower and the New Delhi Municipal Council (NDMC)
charges INR200,000 per tower as a one-off registration
fee in Delhi.
Delays and cumbersome processes for the SACFA
clearances: the SACFA gives siting clearance of all wireless
installations in the country. The site clearance basically
requires examination from the point of safety for flight
navigation and interference with existing wireless systems.
Utilization of USOF and incentives: since the next level
of growth is expected to come from rural areas, there
is a need to accelerate the pace of setting up the tower
infrastructure in these areas. Although the USOF was
created with the sole aim of promoting rural telephony,
the fund rules are too cumbersome and lack focus. They
do not reflect the fact that USOF subsidies are perhaps
most urgently required to defray the cost of infrastructure
creation in rural areas.
Grievance redressal: there is no clear grievance escalation/
redressal mechanism that infrastructure companies can
seek when a conflict arises.
Safety: the construction of telecom towers is still a
self-regulated activity throughout India. Currently all the
telecom operators are following IS codes, namely IS:800,
IS:802 and IS:875, for the design of towers. The above IS
codes are primarily meant for electric/power transmission
line tower design, and the load criteria for telecom towers
and transmission line towers are different.
Power consumption: one of the major problems faced is
the lack of reliable grid power. Without it, service providers
are forced to use diesel generator sets at tower sites most
of the time. Secondly, the power connection to telecom
towers is treated as one to a “commercial establishment,”
and thus, the highest tariff is applied to the telecom site.
In large parts of India, the power is either unavailable or
erratic. This increases the dependence on diesel, which
is not only more expensive but also polluting. Further,
there is no clarity on the rates to be paid by infrastructure
companies. Some agencies charge them “industry” rates,
while others charge “commercial” rates, and there are
other options as well. This adds avoidable uncertainity in
an already tough business.
Energy consumption: cell sites account for most of the
energy consumed by mobile networks, as these are
dependent on diesel generators to keep running. Diesel
fuel is subsidized, and it is estimated that India as a country
consumes more than 2 billion liters of diesel per year for
cell sites.
Environmental issues: diesel consumed by towers results
in about 17,000 tonnes of CO2 and 24,000 tonnes of
carbon equivalent. The cumulative carbon footprint of
telecom towers due to diesel consumption in a year is more
than 5.5 million tonnes.76 The thrust in increasing rural
telephony will further aggravate the diesel dependence by
telecom towers.
Misplaced apprehensions on health hazards of
electromagnetic radiation from mobile antennas:
many state governments and municipalities have barred
towers in residential areas, citing concerns over alleged
health hazards relating to BTS.
44
4
Key enablers
As we enter the second decade of the 21st century, India’s telecom industry
is at a crossroad. This is the appropriate time to look again at the NTP 1999
and customize it to meet current and future needs. The NTP 1999 has
served the sector well for more than a decade, which witnessed significant
changes in the socioeconomic environment, technological advancements
and business dynamics of telecommunications. Therefore, the time is
ripe for a comprehensive review to build a forward-looking, strong and
transparent policy framework that will be the backbone to achieving the
India Telecom Vision 2020. India needs a principle and objective-based,
transparent, efficient, independent and competitively neutral policy that will
accelerate the pace of growth in telecom services and manufacturing.
• A principle- and objective-based policy that provides a clear roadmap of
the telecom sector and is reviewed regularly to keep abreast with rapid
technological developments in the sector
• A transparent approach to policy formulation, providing interested
parties with concrete opportunities to navigate the growth of the
telecom sector
• The creation of an efficient mechanism to implement regulatory
decisions. It needs to identify and address barriers to growth
• The functioning of the regulator in an unbiased manner, and the
formulation of a competitively neutral policy that is not discriminatory
toward any of the stakeholders
45
4.1. Connected India:
telecom vision 2020
The policy initiatives should focus on achieving the vision for connected
Indian Telecom 2020: India should have a convergence services enabled
network with voice, data, video, media, broadband and internet services
delivery to subscribers with high quality of experience. It should be
supported by different metrics of quality of services at affordable tariffs
meeting the needs of different segments of society, with inclusive
participation from rural India to ensure telecom coverage for all.
46
4.2. Connected India: telecom mission 2020
Connected India: telecom mission 2020 should aim to achieve the
following objectives:
• To recognize and treat telecom infrastructure as critical
infrastructure to accelerate the pace of growth of the sector and
increase its contribution to the Indian economy
• To connect the unconnected at affordable prices to ensure 100%
telecom coverage of the country; achieve rural penetration of 100%
and reach overall wireless penetration of 110%
• To strengthen broadband penetration to reduce the digital divide;
achieve total broadband connections of 150 million
• To earn revenues of around US$60 billion
A two-pronged strategy is needed to achieve connected India
Telecom Mission 2020. First, the existing challenges faced by various
stakeholders need to be addressed. This involves key enablers such as
licensing framework, spectrum, USOF, broadband penetration, M&As,
equipment manufacturing and infrastructure development. Second,
the policy should be able to meet future opportunities. This will, among
other things, include the unique identification number (UID) scheme,
financial inclusion and m-commerce.
47
4.3. Key enablers under existing scenario
4.3.1Licensing77
The telecom sector has evolved from a monopolistic regime in the early 1990s to 12–14
licensees in a circle now. In November 2003, the GoI introduced the UAS licensing regime,
which let the provider offer fixed, mobile or both services under the same license, using
any technology. The GoI has issued many new UAS licenses since the introduction of the
UAS regime. Globally, the number of incumbent telecom service providers varies from
four to six, with the allocation of spectrum separate from the allocation of a license.
However, in India, under the UAS regime, a licensee is entitled to obtain a certain amount
of spectrum, subject to its availability and efficient usage.
Parameters
Recommendations
Spectrum and license
Need to have a single universal license for all telecom services.
The policy must preserve competition and ensure that no service is
given a price arbitrage over others.
Fee
There should be a uniform license fee across all telecom circles.
Multiple levies, including service tax and license fees (such as universal
service obligation fees and spectrum charges), are currently imposed
on the industry. Moreover, states levy additional taxes such as octroi,
VAT, stamp duty, entry tax and levies on towers, which aggregate to
30% of the revenues earned by telecom companies. A uniform revenue
share license fee of 1%, excluding the USOF, should be fixed. Since
there is a significant cash reserve lying unutilized in the USOF, DoT
should consider lowering the contribution from 5% of AGR to 1%
of AGR.
Pure internet service providers should continue to be free of any
license fees.
77 See 5.1. for global practices.
48
License renewal
Ensure regulatory certainty and ease investor concerns:
• Provide a clear license renewal regime that includes legislation,
renewal procedures, reasons for refusal to renew and appeals to
regulatory decisions
• Provide details along with the license, if the legislative framework is
not comprehensive
• Create a balance between certainties in the renewal process
• Regulatory discretion to clear parameters of license renewal with
appropriate checks and balances
Procedures for license renewal:
• Initiate renewal process well in advance of expiry
• Perform periodic forward review of market and needs
• Disclose and publish reasons for non-renewal of licenses
• Adopt a public consultation process
• Guarantee a right to appeal
In the event of non-renewal:
• Provide minimum notice period
• Delay vacancy of spectrum to give enough time for operators
to adapt strategies
• Ensure exit strategies for operators and continuity of service
to consumers
Change in license conditions and obligations:
• Renewal process is a good occasion to review license conditions
• Ineffective mandatory service obligations create an anti-competitive
impact, if the burden is not kept at a manageable level
Amendments
49
Currently, amendments to license agreements are carried out
unilaterally. Service providers should be consulted before provisions in
license agreements are amended.
4.3.2 Spectrum78
Spectrum, being a scarce natural resource, plays a critical role in the provision of mobile
telecom services. In India, the National Frequency Allocation Plan (NFAP) is the basis
for spectrum utilization and development and the manufacturing of wireless equipment.
The next five years are going to see the spread of telecom services enabling subscribers
to benefit from voice, data and other application services. An increasing availability of
smart-phones with significant processing capacity and a wide array of applications are
resulting in higher requirements of spectrum. It is estimated that the total requirement of
spectrum in the next five years would be of the order of 500-800MHz including 275MHz
for voice services alone. In line with estimated demand of approximately 500-800MHz
spectrum across various bands out of a total 1,161MHz79 of identified spectrum by TRAI,
a minimum of 287MHz and a maximum of 454MHz is currently available. A mechanism to
ensure transparent and non-discriminatory spectrum management is needed.
Spectrum available for telecom operators in different frequency bands80
Frequency band
(in MHz)
Spectrum available in the
band (in MHz)
Spectrum available
for telecom sector
450-470
20
-
698-806
108
-
806-824
18
-
824-844
20
20
869-889
20
20
890-915
25
18.6-21.8
935-960
25
18.6-21.8
1,710-1,785
75
35-75
1,785-1,805
20
-
1,805-1,880
75
35-75
1,880-1,900
20
0-20
(after coordination)
1,900-1,910
10
-
1,920-1,980
60
0-60
2,010-2,025
15
-
2,110-2,170
60
60
2,300-2,400
100
40
2,500-2,690
190
40
3,300-3,400
100
100 (ISPs)
3,400-3,600
Total
200
-
1,161
287.2-453.6
79 “TRAI: Spectrum Management and Licensing Framework,” TRAI website, May 2010, page 22, http://www.trai.gov.in/Default.asp,
80 “TRAI: Spectrum Management and Licensing Framework,” TRAI website, May 2010, page 22, http://www.trai.gov.in/Default.asp,
50
Country-wise spectrum availability
Country
Total licensed
spectrum for mobile
services, MHz (2008)
Wireless subscribers,
2008 (million)
Subscriber/MHz
(million/MHz)
Argentina
170
46.5
0.27
Brazil
200
150.6
0.75
Canada
265
150.6
0.57
Chile
140
14.8
0.11
Colombia
120
41.4
0.35
Mexico
120
75.3
0.63
Spain
358
49.6
0.14
UK
353
77.4
0.22
US
294
270.3
0.92
Source: “Digital Dividend Pavilion - Latin America Wireless Roadmap,” 3g Americas website, February 2009,
http://www.3gamericas.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20
Erasmo%20Rojas.pdf, accessed 14 January 2011; ITU - ICT Statistics 2008; Ernst & Young analysis.
Circle-wise spectrum allocated in India81
Circle
Allocated spectrum (MHz)
No. of operators
Subscriber
(million)
Subscriber/MHz
(million)
GSM
CDMA
Total
GSM
CDMA
Total
Delhi
53.6
15
68.6
12
4
16
33.5
0.49
Mumbai
72.4
15
87.4
11
4
15
31.3
0.36
Kolkata
60.4
13.75
74.15
10
4
14
19.2
0.26
Maharashtra
69.4
15
84.4
12
4
16
50.7
0.6
Gujarat
60.4
12.5
72.9
11
4
15
38.9
0.53
Andhra Pradesh
69.4
13.75
83.15
12
4
16
52.7
0.63
Karnataka
69.4
13.75
83.15
12
4
16
43.1
0.52
Tamil Nadu
67
12.5
79.5
11
4
15
62.2
0.78
Kerala
61.2
15
76.2
11
4
15
28.1
0.37
Punjab
63.2
15
78.2
12
5
17
24
0.31
Haryana
63.8
12.5
76.3
12
4
16
17.2
0.22
Uttar Pradesh — West
61.2
13.75
74.95
11
4
15
37.2
0.5
Uttar Pradesh — East
62.4
13.75
76.15
11
4
15
53.3
0.7
Rajasthan
63.8
15
78.8
12
4
16
37.6
0.48
Madhya Pradesh
63
12.5
75.5
11
4
15
37.3
0.49
West Bengal
53
11.25
64.25
10
4
14
31
0.48
Himachal Pradesh
57.6
10
67.6
11
4
15
6.1
0.09
Bihar
66.8
13.75
80.55
12
4
16
44.7
0.55
Orissa
59.4
11.25
70.65
11
4
15
18.6
0.26
Assam
55
10
65
10
4
14
10.2
0.16
North East
53.2
10
63.2
10
4
14
6.2
0.1
Jammu & Kashmir
49.4
10
59.4
10
4
14
4.7
0.08
81 “TRAI: Spectrum Management and Licensing Framework,” TRAI website, May 2010, page 22, http://www.trai.gov.in/Default.asp,accessed
10 October 2010; “TRAI: The Indian Telecom Services Performance Indicators (July-September 2010),” TRAI website, January 2010, http://www.trai.
gov.in/Default.asp, accessed 15 January 2011; Ernst & Young analysis.
51
Operator spectrum holdings
Country/Region/Operator
Spectrum holding per operator, MHz
India
28-37
Denmark
118.4
EU average
92.6
France
138.5
Germany
65
Italy
72.7
Spain
100.6
Sweden
92
UK
82.2
US
75-96
Source: “Digital Dividend Pavilion - Latin America Wireless Roadmap,” 3g Americas website, February 2009,
http://www.3gamericas.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20
Erasmo%20Rojas.pdf, accessed 14 January 2011; “Presentation to the DoT committee on spectrum allocation
criteria,” Communications Today, http://www.communicationstoday.co.in/images/1-pdotfinal.pdf, accessed 14
January 2011.
Parameters
Recommendations
Availability
Align spectrum bands with globally harmonized bands to achieve interference-free coexistence and
economies of scale.
Identify and vacate new spectrum bands for future use.
Re-farming
Need to bring in additional spectrum for commercial telecom services.
Need to review the present usage of spectrum available with government agencies so as to identify
the possible areas where spectrum can be re-farmed, and to draw up a suitable schedule.
Regular spectrum audits should be carried to oversee the efficient utilization of spectrum.
Spectrum allocation
Spectrum allocation should be based on technology neutrality, service flexibility, timely allocation,
timely spectrum reconciliation and enhanced transparency.
Need to lay down a clear roadmap for spectrum management which should state the requirement and
availability of spectrum for each circle as well as for the whole country. This roadmap should be made
available publicly to ensure transparency.
N
 ational frequency allocation plan should be reviewed every two years.
Spectrum allocation to
existing players
2G spectrum up to the contracted limit should be ensured as initial spectrum.
Allocation of spectrum beyond the contacted limit should be based on market mechanisms.
The contacted limit of spectrum will be 6.2MHz for GSM operators and 5MHz for CDMA operators.
Spectrum allocation to new
players
Allocation of spectrum should be based on auctions. Spectrum should be provided to the highest
bidder, based on a transparent auction mechanism to determine the price.
Spectrum usage charges
The criteria for levying spectrum usage charges should be identified upfront at the time of allocation
of spectrum.
Spectrum sharing and
trading
Service providers should be allowed to enter into arrangements for transfer/sharing of spectrum
among themselves so as to effectively utilize it and attain maximum spectral efficiency in the sector.
It should be based on market price and not administered pricing.
52
4.3.3 Universal Service Obligation Fund
(USOF)82
NTP 1999 envisaged access to basic telecom services for
all, especially those in rural and remote areas, at affordable
prices. In 2002, the Universal Service Support Policy came
into effect, with a universal service levy of 5% being levied
on the adjusted gross revenue (AGR) earned by all telecom
operators except on VAS such as internet service, voice
mail and email. The USOF is estimated to hold around
INR180 billion,83 at the end of FY10. However, rural
teledensity is at 28.4%, whereas urban teledensity is about
137.3%, resulting in a huge digital divide. The USOF has a
long way to go to provide impetus to rural telephony and
bridge the gap between the funds collected and disbursed
in an effective manner.
The USOF covers rural and remote areas with public access
telephones and individual rural household telephones in net
high cost rural and remote areas. The USOF has enabled
telecom development in rural areas through the following
key developments:
VPT and RCP: around 570,000 VPTs are currently eligible
for financial support for operation and maintenance. As of
31 December 2009, BSNL has provided VPTs to 61,186
out of 62,302 uncovered villages. Out of the target of
40,705 rural community phones (RCPs), 40,694 have
been provided as of December 2009.
Tower infrastructure: provide infrastructure support to
set up and manage 7,436 infrastructure sites spread over
500 districts in 27 states. As of 31 December 2009, about
6,950 towers have been set up under this scheme.
Rural broadband: 95,011 broadband connections out of
the proposed 888,832 wireline broadband connections
have been provided as of 31 December 2009.
Multi access radio relay (MARR)-based VPT: out
of 185,121 MARR-based VPTs installed before
April 2002, about 184,500 have been replaced as of
31 December 2009.
Disbursement of the USO levy to the operators
60
55.2
54.1
(INR billion)
50
40
39.4
34.6
32.2
30
20
13.1
17.7
15.0
12.9
18.5
16.0
10
N/A
0
FY05
Funds collected
FY06
FY07
FY08
FY09
Dec-09
Funds disbursed
Source: DoT
83 “Minister Sachin wants to ‘Pilot’ IT revolution in northeast,” Indo-Asian News Service, 7 March 2010, via Dow Jones Factive, © 2010 HT Media Limited.
53
Parameters
Recommendations
Objectives
The USOF framework needs to be reviewed regularly to effectively utilize the funds to achieve universal
service. The USOF should aim to achieve the following:
• 100% rural teledensity by 2015
• 25-30 million broadband subscribers in rural areas over the next five years
• Data coverage to all villages through cable modem termination system (CMTS) data technology
by 2015
• Broadband connectivity for 250,000 gram panchayats by 2012
• At least 20 active public information kiosks with at least 256 kbps speed in every district
headquarters by 2015
Potential usages
The USOF should be utilized for the following:
• Provision of public telecom and information services
• Provision of household telephones in rural and remote areas as may be determined by GoI from time
to time
• Creation of infrastructure for provision of mobile services in rural and remote areas
• Provision of broadband connectivity to villages in a phased manner
• Creation of general infrastructure in rural and remote areas for development of telecommunication
facilities
• Induction of new technological developments in the telecom sector in rural and remote areas
Method of allocation
Subsidies should be distributed through transparent market-oriented allocation methodology.
Fund collection
There is a significant cash reserve lying unutilized in the USOF, so DoT should lower the contribution
from 5% to 1% of AGR.
54
4.3.4Broadband84
India trails all developing Asian countries, as well as
its BRIC counterparts, with a broadband penetration
of just 0.74%.85 There were just 8.8 million broadband
connections at the end of FY10, against the target of 20
million by 2010 set in the Broadband Policy of 2004. The
net broadband addition per month is just 0.1 to 0.2 million.
The growth of broadband is restricted by several factors
such as its perceived utility, application, connectivity, lack
of vernacular content, cost of device and affordability.
Today, socioeconomic growth is dependent on the spread
of broadband services across the country. India has set
a target of 100 million broadband connections by 2014,
connecting 40% of the households in the country. The
drivers for broadband services are broadly classified
as technological, economic, social, behavioral and
government initiatives. India lags behind in terms of ITU’s
ICT Development Index (IDI),86 with a ranking of 129, 106,
and 118 out of 154 countries in terms of ICT access, use,
and skills, respectively. This calls for a critical review of the
Broadband Policy 2004 and the creation of appropriate
infrastructure to support broadband growth.
Broadband services should be encouraged using wireless
media because the laying of fibers block by block at district
headquarters would be costly and time-consuming. To
kick-start the broadband penetration in rural and far-flung
areas, deployment of wireless access should be given
preference and fiber media should be utilized from the
already available fiber capacity across nation. The last mile
access issue can be addressed through the deployment of
wireless technology.
Broadband should be redefined and clauses such
as ‘’always on’’ and minimum speed should be removed
from National Broadband Policy, 2004, in order to
encourage broadband.
The 3C’s — customer, cost and competition — are
essential for improving broadband penetration. The
need to provide broadband services in rural areas should
be met with the help of easy financing and the means
to share capital expenditures. Further, there should
be balanced competition to ensure the quality and
affordability of services.
85 “TRAI: Consultation Paper on National Broadband Plan,” TRAI website, June 2010, page 3, http://www.trai.gov.in/Default.asp, accessed 10 October 2010.
86 “TRAI: Consultation Paper on National Broadband Plan,” TRAI website, June 2010, page 28, http://www.trai.gov.in/Default.asp, accessed 10 October 2010.
55
Parameters
Recommendations
Infrastructure
Optic fiber communication (OFC), high-capacity microwave and satellite connectivity should be
extended to rural, remote and inaccessible areas.
Backhaul connectivity and OFC should be provided to all telecom towers, BSCs and BTS from the
nearest block headquarters.
The development of the customer premises equipment (CPE) model should be supported for the
interoperability of broadband. There is a case for private-public partnership (PPP) in broadband
along the lines of highway construction in India through the build, operate and transfer route.
The Government should foster competition to improve the pace of penetration. More than two
service providers with a rollout obligation should be funded.
Wireless broadband
More spectrum should be made available.
Since growth will be through wireless broadband, the government and private sector should
collectively work toward developing low-cost mobile applications.
Regional content
Content and applications in regional languages should be created to promote rural broadband.
Investments should be made in key content development and services such as e-health and
e-education. The support for local access and content delivery to towns should extend beyond the
150 commercially viable towns.
PC penetration
Workshops by local entrepreneurs should be promoted under the common services centers (CSC)
scheme, which is a part of the National e-Governance Plan (NeGP).
Computer usage by government employees should be encouraged. Online fee payments should
be encouraged for land records, vehicle registration, driving licenses, payment of electric and
water bills.
Discounts should be provided for online payments.
Fiscal incentives
Tariffs need to come down. This can happen only if there are incentives to build infrastructure and
provide broadband services.
The GoI should consider a differential tax to encourage the private sector to set up common access
points. The tax status for expenditure on connectivity/usage should be similar to policies on other
public welfare services such as education and medical allowance.
Right of way (ROW)
ROW procedures should be uniform, and charges for broadband services should be rationalized
across all states.
Broadband connectivity should be made mandatory for all buildings requiring a completion
certificate, on the lines of water and power connectivity. In addition, building and cooperative
society bylaws can be effectively modified to make it mandatory for such entities to invite
broadband service providers to broadband-enable buildings by at least 10 Mbps per household.
Similarly, all national and state highway projects should include the laying of an optic fiber
backbone.
56
4.3.5 Mergers and acquisitions87
At present, intra-circle M&A is allowed subject to the
following conditions:
• The total number of operators in a circle should not fall
below four
• Market share and revenues of the merged entity should
be less than 40% in each circle
• A three-year lock-in for owner’s equity in the new
operators that have been given licenses recently (no
lock-in if fresh equity)
• Maximum spectrum of the merged entity will be
capped at 15MHz for Metros and A circle and 12.4MHz
for B circle and C circle
• No one entity can hold equity stake of 10% or
more in more than one licensee company in the
same circle
The Government should continue to follow the policy
to permit mergers but at the same time retain enough
competition in the market so as to protect the consumer
interest. The TRAI recommendations dated 11 May 2010
should be followed to maintain the balance between the
interests of consumers and service providers.
Parameters
Recommendations
Number of operators
Mergers should not result in less than six operators in the circle.
Service area and license
stipulations
Merger of licenses shall be restricted to the same circle.
Merger of license(s) shall be permitted in the following category of licenses: cellular mobile
telephone service (CMTS) license with CMTS license, unified access services license (UASL) with
UASL, CMTS license with UASL, and UASL with UASL.
Merged licenses in all the categories above shall be in UASL category only.
Market share of merged entity
The share of a merged entity should not be greater than 30% in terms of sub-base or AGR.
Lock-in period
The stipulation regarding the minimum period of three years from the effective date of license for
merger or acquisition should be done away with.
57
4.3.6 Taxation
Over the years, the significance of the telecom sector
to the Indian economy has grown immensely. Currently,
the sector contributes significantly to GDP, as well as tax.
According to TRAI, the operators pay up to 30%88 of their
total revenues toward different levies, which is 23%–25%
higher than their counterparts in other Asian countries.
The Indian telecom sector is subject to numerous taxes
and levies. This includes the uniform license fee, 5% levy
for USOF, VAT, custom duty and other taxes. Currently,
the revenue share license fee (including the USOF) is
prescribed as follows:
• 6% to 10% of AGR for access services, depending on
the category of circle
• 6% of AGR for NLD/ILD services
• 6% of AGR for internet service providers for revenues
accruing from internet telephony service
Despite the significant contribution of the Indian telecom
sector to the growth of the GDP and the tax revenue of the
Indian economy, there are certain key challenges faced by
the sector which are outlined below:
• Sale of light energy: broadband services also continue
to face taxation-related concerns. Various states across
India have issued show cause notices, or passed orders
demanding VAT/sales tax on the activity of providing
broadband connectivity by use of optical fiber cables
treating it to be sale of “artificially created light
energy” under the respective state VAT legislation. The
issue was first taken up in the case of a leading telecom
player by the state of Karnataka, with the matter
going up to the Supreme Court. The Supreme Court
without going into the merits of the case has ordered
a relook at the matter by the state VAT authorities. It
is important to note that currently the industry players
are paying service tax on such broadband services.
The levy of VAT on the activity of providing broadband
connectivity services would lead to double taxation
of such services, thereby leading to greater financial
burden on the telecom sector.
• Recharge coupon vouchers (RCVs): the Indian
telecom sector is also characterized by a large prepaid
subscriber base. As of September 2010,89 96.4%
of the GSM subscribers and 94.1% of the CDMA
subscribers were prepaid subscribers. RCV is one of
the most popular ways to pay for telecommunication
services, which account for 80%–85% of the operator
revenues. Over the years, the bouquet of services has
changed, as the RCVs are witnessing liberalization
in the flexibility of their usage, such as to procure
merchandise, or other services. The issue whether
the sale of RCVs should attract service tax or VAT has
been a subject of constant debate and discussion. It
is important to note that currently industry players
are paying service tax on RCVs, while the dominant
purpose for selling these RCVs is provision of telecom
services to subscribers. The levy of VAT on the sale of
RCVs to subscribers would result in double taxation,
thereby leading to greater financial burden on the
telecom sector.
• Central value-added tax (CENVAT) position on tower
materials and shelters: telecom operators are availing
CENVAT credit on goods such as angles, channels
and beams, which are used for building transmission
towers. Towers and shelters fall under Chapter 73 and
94 respectively of the Central Excise Tariff Act 1985.
The classification of tower, tower material and shelters
has been an industry issue on which even the service
tax authorities in different jurisdictions have taken
a different stand and have sought to deny credit on
these goods treating such goods as not qualifying as
“capital goods” under the CENVAT Credit Rules 2004.
However, these goods could be treated as “component/
spare/accessories” of “capital goods” (i.e., BTS etc.)
and accordingly they can be treated as capital goods
in the hands of an operating company given that
towers and shelters are essential for the provision of
telecommunication services. This position has been
adopted by industry players. Denial of credit on such
goods would lead to an increase in the financial burden
on telecom operators.
88 “Telecom firms want lower tax burden,” The Economic Times, http://economictimes.indiatimes.com/news/news-by-industry/telecom/telecom-firms-wantlower-tax-burden/articleshow/2753840.cms, accessed 10 January 2011.
89 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010),” TRAI website, January 2010, http://www.trai.gov.in/Default.asp,
58
• Levy of entertainment tax on VAS products: there is
a proposal in certain states to levy entertainment tax
on VAS products as such products to entertain
the caller. It is important to note that as per the
current proposal, entertainment tax is not proposed
to be subsumed in goods and services tax (GST).
In case entertainment tax is levied on VAS products,
the non-subsumation of entertainment tax in GST
could impose a significant financial impact on the
telecom industry.
• Upcoming GST regime: according to industry experts,
in view of the exponential growth witnessed by
the telecom sector, GST should not translate into
an ambitious target to generate higher service tax
revenues from the telecom sector. The upcoming GST
regime should aim to simplify the tax structure for
the industry, with all services and goods being taxed
at a standard rate. Further, special consideration has
to be given on certain areas in the backdrop of the
peculiarities of the telecom sector such as “place of
supply rules90” i.e., the state where GST will be paid
for different kind of telecom services; ease in statewise compliances. The upcoming GST regime should,
thus, aim to rationalize the tax structure in the Indian
telecom industry, along with the creation of a roadmap
for a single unified levy. The sector should be provided
tax benefits and incentives in recognition of being a
key contributor to the socioeconomic development and
GDP of the country.
90 Place of supply rules define the place (state) which has the right to tax a service transaction.
59
4.3.7 Foreign direct investment (FDI)
In the past decade, globalization has led to a rapid increase
in FDI, thereby enhancing economic growth in developing
countries. The telecom sector has been among the sectors
that have witnessed substantial growth in FDI. The telecom
sector has a substantial impact on a nation’s economic
development, social stability and national security.
Hence, the balance between economic gains from foreign
investment and national telecommunications sovereignty
presents a challenging task.
FDI in telecom brings advanced technological skills and
large amounts of funds, and enhances market competition.
However, many countries control FDI in telecom
according to their economic and developmental needs,
and due to its influence on national security. As a result,
telecommunication industries are often state-operated and
monopolized in many countries.
The Indian telecom sector needs to foster a suitable
environment where investment and entrepreneurship,
including the development of new forms of electronic
commerce, prosper together. Globally, major FDI in
the telecom sector is facilitated by two international
organizations — the World Trade Organization (WTO) and
the International Telecommunication Union (ITU). The
WTO aims to promote foreign and domestic investment,
and the ITU allocates global spectrum to particular
services and manages scarce communications resources
among countries for the benefit of trade liberalization
and to prevent discrimination between domestic and
foreign suppliers. Together, the WTO and the ITU
encourage the development of a global telecommunication
infrastructure and the formation of an integrated global
telecommunication market.
In the Asia–Pacific region, the telecommunications
market reform has continued, with countries such as the
Philippines, Taiwan and Thailand opening their markets
to foreign investment. In Latin America, several countries
that first privatized their domestic operators in the early
2000s are now preparing for a second round of market
openings. Foreign private investment has entered the
developing markets through joint ventures with local
telecommunication operators or the sale of equity stakes
in state-owned telecommunication entities to private
foreign investors.
FDI in developing countries enables the development of
a local telecommunication infrastructure and universal
access. It results in substantial progress in meeting such
countries’ basic telecommunication requirements. Given
the importance of foreign investment, the policy should
consider raising the upper limit on foreign investment to
encourage more foreign players to invest in the capexintensive telecom sector.
60
4.3.8 Consumer affordability and
rural penetration
The Indian telecom market has some of the lowest tariffs
in the world, with a large majority of people using low-cost
mobile handsets. The DoT has been successful in providing
world-class telecom infrastructure at globally competitive
tariffs and has reduced the digital divide by extending
connectivity to unconnected areas.
Mobile tariffs per minute in US$
0.3
0.2
0.2
0.1
0.23
0.19
0.17
0.16
0.11
0.1
0.0
Belgium
UK
France
Brazil
0.09
Phillipines
Malaysia
0.05
0.04
0.03
0.01
Thailand
Pakistan
China
India
Source: DoT; India Telecom 2010 brochure
In February 2006, a leading operator launched the
“One India Plan.” It was considered affordable,
customer friendly and innovative for both local and long
distance calls. It also removed the distinction between
fixed-line and cellular tariffs. The plan enabled customers
to make calls to any phone from one end of the country
to the other for INR1 any time during the day. This was
61
followed up by incumbent operators introducing cheaper
tariffs, giving India some of the lowest tariffs in the
world. Furthermore, the increase in subscriber base and
teledensity has enabled telecom companies to achieve
economies of scale and, at the same time, provide
leading class services.
Drivers of affordable mobile communication
Policy and regulatory approach
•
•
•
•
•
Transparent regulation
Easy market entry
Lower tax burden
Low risk
License reforms to permit
mobile resale
Operator strategies
•
•
•
•
Innovative business model
Reduction in capex and opex
Increased usage
Highly utilized networks
Affordable mobile
communications
Affordable mobile communication is driven by policy and
a regulatory approach and operator strategies. Factors
such as transparent regulation, easy market entry, lower
tax burden, and low risk enable the creation of policy and
a regulatory approach that helps to drive down tariffs. On
the other hand, operator strategies such as innovative
business models, reduction in capital expenditure and
operational expenditure, increased usage and highly
utilized networks also help lower tariffs. Pakistan has taken
initiatives on the policy and regulatory front by removing
import duties on mobile handsets and reducing SIM
card activation charges to make mobile communication
more affordable. Similarly, operators in Bangladesh have
designed products and services such as micro prepaid topups, which are available in very small increments, and also
allow consumers to transfer airtime between each other
and use it as currency.
There is a need to create a regulatory framework that
enables greater sharing. In order to drive penetration in
rural and remote areas, it is important that alternative
models such as mobile resale be introduced. Resale of
mobile services will allow an entity to resell mobile services
after buying connections in wholesale from the underlying
service provider. The entity will sell the connections to
their end customer and contract and bill them in their
own capacity for the services provided. The entity will not
replicate the efforts of service provider. The services will be
provided only by the underlying access provider who will
continue to address the related compliance requirements.
For the service provider, the entity buying connections in
wholesale will be the customer. This arrangement will allow
SMEs, small office, home offices and other organized/
unorganized groups in rural and remote areas to serve the
needs of the population in a holistic way.
62
4.3.9 Human resource
Number of students by field of study in India
India has the benefit of a huge population, which is
characterized by a dynamic young population base– more
than half of which is under 25 years old. However, only
17%91 of those in their mid–20s or older have completed
their secondary education. India possesses a developed
higher education system that offers training in many fields.
In terms of size and diversity, India has the largest
number of higher education institutions, followed by the
US and China. As of December 2009,92 there were 504
universities and university-level institutions, including 243
state universities, 53 state private universities, 40 central
universities, 130 deemed universities and 33 institutions of
national importance. However, India lags behind China and
the US in terms of student enrollment.
Number of higher education institutions and
student enrollment
25.4
25
21,213
17.8
20,000
20
12.9
10,000
0
15
6,706
India
30
US
10
21,213
China
5
0
Source: Making the Indian higher education system future ready,
Ernst & Young, 2010
Student enrollment in higher
education (million)
Number of higher education
institutions
30,000
1% 2%
3%
Arts
3%
Science
Commerce/
Management
7%
45%
18%
Engineering/
Technology
Medicine
Law
Agriculture
21%
Others
Source: Making the Indian higher education system future ready,
Ernst & Young, 2010
In keeping with the NTP 1999’s R&D objective,
organizations such as the Telecom Centers of Excellence
(TCOE), the Center of Excellence in Wireless Technology
(CEWIT) and the Broadband Wireless Consortium of
India (BWCI) have been established. Such organizations
promote R&D and help in creating a talented workforce.
For instance, in May 2007, a committee comprised of the
DoT, COAI, and AUSPI submitted a report that suggested
ways to form seven TCOEs across India in a PPP mode.
Each TCOE is sponsored by a telecom operating company
and is hosted by a premier technical or management
institute. The main funding for a TCOE comes from
the sponsoring telecom operators, while the GoI provides
basic and research infrastructure.
91 Unleashing India’s Innovation, World Bank website, October 2007, page xv.
92 Ministry of Human Resource Development, Government of India — Annual Report 2009–10, Ministry of Human Resource Development, FY10.
63
4.3.10 Equipment manufacturing93
The production of telecom equipment in India has
increased at a CAGR of 29% from FY04 to FY09, reaching
a value of INR518 billion94 in FY09 during the last five
years. The value of telecom equipment exports was
INR81 billion in FY09 during the last five years. According
to DoT estimates, the requirement for telecom equipment
in India is expected to be about INR5 trillion95 by 2015.
However, the share of locally manufactured equipment
has declined to 30% in FY09 from 74% in FY04. India
needs to position itself as a telecom manufacturing hub in
the long term, and policy initiatives should be focused on
encouraging localized manufacturing.
• Significant export potential: according to the Telecom
Equipment and Services Export Promotion Council
(TEPC), the segment holds an export potential of
INR450-500 billion96 by FY14, further strengthening
the case for a robust telecom manufacturing industry.
• Increased competitiveness in the global market: a
technologically advanced manufacturing ecosystem
in India prospectively offers an international platform
to telecom manufacturers. Thus, localized players
can expect to compete globally with established
manufacturers and make their own mark in foreign
markets in the long run.
The case for a growing telecom electronics and equipment
manufacturing industry is as follows:
• Employment generation: given the right impetus,
growth in the segment holds the potential to triple the
country’s current employment base by FY14.
Parameters
Recommendations
Manufacturing hub
There is a need to set up hardware manufacturing cluster parks (HMCP) across the country and to
upgrade localized infrastructure to support large volume contract manufacturing.
The policy should provide encouragement to localized manufacturers for products designed and
manufactured in India as well as products that are manufactured but not designed in the country.
Fiscal incentives
Domestic telecom equipment manufacturers may be allowed to have access to external commercial
borrowing for capital expenditure and working capital requirements.
In addition, financial institutions should lend money for the capital expenditure and working capital
requirements of the telecom equipment manufacturers at the rates they use when lending to telecom
service providers or infrastructure providers.
It is necessary to ensure the free movement of the equipment/raw materials. In addition, the
provision of a single window clearance for all state-level approvals would be a vital fiscal measure.
Other significant incentives would encompass the removal of withheld tax on the fee for transfer of
technology and software import.
The tax on the payment of royalty should be as low as possible. In order to encourage technology
transfer, royalty payments of up to 5% on domestic sales and 8% on exports should be exempted from
income tax. In order to reduce transaction costs, customs clearance for imports and exports should
be done on a self-declaration basis.
There should be provision for round-the-clock customs clearance, supported by the banking system.
Export promotion
The Government could create a sizable export promotion fund for the Telecom Equipment and
Services Export Promotion Council (TESEPC), resulting in the significant growth of exports to
developing nations.
There is a need to align product certification with international standards and to facilitate global
accreditation for the testing facility.
94 “Indian Telecom: A Tale of Stupendous Growth,” The Viewspaper, 28 February 2010, http://theviewspaper.net/indian-telecom-a-tale-of-stupendousgrowth/, accessed 20 October 2010.
95 “Indian telecom firms may get DoT boost,” LiveMint, 01 April 2010, http://www.livemint.com/2010/04/01215017/Indian-telecom-firms-may-get-D.
html, accessed 02 August 2010.
96 Policy Recommendations to Increase Domestic Telecom Growth and Exports of Telecom Equipment & Services - Telecom Equipment and Services Export
Promotion Council (TEPC), page 4.
64
Bilateral trade programs
Telecom exports from India may be included in bilateral trade agreements with emerging markets in
regions such as South Asia, Africa, Latin America, Russia and Eastern Europe.
Indian trade missions in these regions should proactively seek opportunities in the telecom electronics
and equipment domain and facilitate business interactions.
Taxation
The current taxation structure for mobile handsets must be maintained for long-term growth.
Financial support
Set up an autonomous body, similar to the Telecom Finance Corporation, to assist and provide
guidance to those who want to set up a manufacturing facility.
Investments for accessories
A detailed program should be created to attract investment in the manufacturing of accessories such
as batteries and chargers for mobile handsets.
R&D
R&D should be the key focus. The active participation of the private sector in multiple projects is
expected to lead to R&D benefits that will flow to both the public and the private sector.
A fund for R&D and product development for the segment should be created. Leading class R&D
centers in the PPP mode should be promoted.
Service hubs
65
Telecom equipment manufacturers should be encouraged to create service hubs to develop a global
network and strengthen their presence across India.
4.3.11 Telecom infrastructure97
Infrastructure growth is critical to the rollout of services.
For India to achieve 85% teledensity, it needs 95%
coverage. At present, there is no uniform approval process
across states for setting up telecom infrastructure. The
telecom infrastructure service provider needs to apply to
the local municipality or panchayats for permission to build
a tower. But the lack of guidelines or standard procedures
results in enormous delays and huge cost implications.
Moreover, the tower business is characterized by high
initial capital investments, stable and predictable cash flow,
low working capital requirements and high incremental
profitability. The profitability is dependent on the ability
to increase tenancy on the tower, the rents charged, the
scale and spread of the tower portfolio and the ability to
raise capital. The biggest barrier to setting up telecom
towers and other infrastructure is the wide variation in the
approval process adopted by local bodies.
Given the challenges that the industry faces, there is a
need to lay down a National Telecom Critical Infrastructure
Policy on the lines of NTP 1999 elaborating uniform
procedures for land acquisition, creating a uniform taxation
regime, and extending subsidies and other packages to
create a conducive environment to boost national telecom
infrastructure building and thereby ensure the increased
participation of all the stakeholders.
Parameters
Recommendations
State subject
There is an urgent need for simplification and harmonization of complex rules and processes so that
unreasonable barriers do not impede the rollout of infrastructure. GoI should announce a National
Telecom Critical Infrastructure Policy (NTCIP). If legislative amendments are needed, they should be
adopted in a timely manner.
There is a need for national ROW policy for rollout of backhaul network.
Tower infrastructure needs to come under the Indian Telegraph Act, and GoI should declare mobile
and tower infrastructure as “Critical Infrastructure Services.”
Tower infrastructure should be erected in accordance with the NTP and licenses granted by the
GoI under the Indian Telegraph Act. These are not matters of local self-government or municipal
departments, but are matters liable to be governed by the GoI or regulatory authority constituted by
it in accordance with the NTP.
Telecom/broadband connectivity should be considered a necessity such as water and power in every
housing facility. This mandate should be included in bylaws of the local and state governments.
There is also a need for an empowered committee or similar structure to engage with roads and
power ministries, which are directly connected with the growth of tower infrastructure.
Full utilization of towers—
optimum sharing
There should be laws governing the rollout of towers. A 70-meter tower could service an area of 2-3
square kilometers, and there could be distance guidelines for the same.
The rollout subsidy could be fixed at a flat amount based on the approved tower design for a period of
five years.
Every tower should be fully utilized. If an existing tower is not operating at 100% capacity, then
no new tower should be allowed in that zone, which avoids duplication of capex. Once the existing
tower is at capacity, a new tower could be awarded through a bidding process. Such practice is being
followed in developed countries such as the US.
Technological approaches that can potentially reduce the direct and indirect costs of creating telecom
infrastructure should be encouraged. The march of technology-IP/converged platforms is leading to
integrated technology-neutral host platforms. Also, in-building solutions and DAS make it possible to
conserve spectrum and reduce the visual impact of towers.
Civic issues
Civic issues such as zoning regulation, single window clearance and preferential treatment for sharing
and incentives need to be addressed in a timely manner.
66
Taxation on towers
Rationalize the tax structure across states in the form of tax cuts, fiscal incentives and subsidies. The
fee levied on tower companies should not be viewed as a source of income to fund the development
of a municipality.
T
► he Central Government should not impose a cess on tower operators. Since tower operators do not
directly serve the end consumer, a cess should not be levied on them. Currently, there is no cess on
handset manufacturers, call centers (with about 40,000 employees) and BTS manufacturers.
T
► he immediate cost of infrastructure creation can be brought down significantly by reducing
government duties and taxes, which account for 60% of infrastructure companies’ outgo.
Infrastructure companies are akin to players such as equipment vendors and network management
companies. There is little justification for imposing costs such as lincense fees on these players,
because they do not interface directly with end users.
SACFA clearances
Telecom service providers coordinate with a variety of departments for site clearances which is a
time-consuming process. The SACFA Committee should be revamped as part of a faster and simpler
site clearance process.
Utilization of USOF and
incentives
USOF subsidies are required to defray the cost of infrastructure creation in rural areas.
The USOF contribution toward the setup of telecom infrastructure and its role for rural rollouts should
be specified.
Time-related incentives ought to be provided to tower infrastructure providers to speed up
deployment.
Grievance redressal
A broader framework should be created to handle and settle grievances involving infrastructure
companies in the event of a conflict.
Safety concerns
Each tower should have a structural certificate, which should be approved by a competent authority.
Tower specification and standardization requirements should be clearly spelled out. There could be
6-10 standard designs for a tower, which would be approved by a “design approving authority.”
The development of specific IS code of telecom towers will help the industry to follow optimized
design parameters, which will make towers safer. Standardized design across operators and
geography would further help optimize sharing and potentially reduce cost.
Power tariffs and
consumption
Telecom services should be treated as a public utility service, and the industrial rate structure should
be made applicable to towers across all states.
The state electricity boards should be advised to place a priority on applications for utility connections
from telecom infrastructure service providers.
Grid power supply should be made available.
Energy consumption
Indian mobile operators and equipment vendors need to develop energy-efficient networks by
designing and deploying low-energy BTSs that are powered by renewable energy.
Operators should reduce their existing diesel generator run times by deploying the latest fastcharging batteries and improving their partial-state-of-charge capabilities.
The energy used by tower companies should fall under a uniform classification in all states.
The dependence on diesel could be reduced if the Government utilizes the current diesel subsidy to
support a move toward renewable energy options such as solar, fuel cells or wind power, and treating
these efforts as part of the overall effort to reduce greenhouse gases and the country’s carbon
footprint.
There should be a method to cash in carbon credits.
67
Aesthetic concerns
There could also be special consideration made for camouflaging towers in and around certain
specific urban areas having heritage or other architectural significance; and not for all generic
urban areas.
Even for limited camouflaging, there should be a joint endeavor between civic agencies and other
related departments.
Environmental issues
If these BTSs can be run on renewable energy resources, annual carbon emissions could be reduced.
118,000 renewable energy base stations could reduce annual carbon emissions by up to
6.3 million tonnes.
Alternative sources of energy need to be developed and deployed wherever found feasible. Service
providers are using green shelters or deploying outdoor BTS wherever found feasible to reduce power
consumption. Operators are also experimenting with the use of non-conventional sources of energy
wherever feasible for meeting energy requirements. The feasibility of using biofuels is also being
studied. These measures have the potential to reduce the carbon footprint significantly, increase the
energy efficiency of new network equipment and optimize network technology to increase energy
efficiency. There should be incentives for tower companies to optimize fuel and power costs.
Operators should be encouraged to use green technologies.
Misplaced apprehensions
on health hazards of
electromagnetic radiation
from mobile antennae-BTS
International institutions like the World Health Organization, the British Medical Association, the
International Commission on Non Ionizing Radiation Protection (ICNIRP) and the GSM Association
have opined that there is no conclusive evidence of any health hazards due to radiation from mobile
towers. Local authorities and consumer groups should be made more aware of this. While the
operators are making their best efforts to educate the general public, a positive public stand by the
regulator would be extremely helpful. Furthermore, there is a need to fix the feed strength to control
radiation emissions.
Recent surveys have shown that the radio frequency exposure from base stations ranges from
0.002% to 2% of the levels of international exposure guidelines, depending on a variety of factors
such as the proximity to the antenna and the surrounding environment. In fact, due to their lower
frequency, at similar radio frequency exposure levels, the body absorbs up to five times more of the
signal from FM radio and television than from base stations. This is because the frequencies used in
FM radio (around 100MHz) and in TV broadcasting (around 300 to 400MHz) are lower than those
employed in mobile telephony (900MHz and 1,800MHz) and because a person’s height makes the
body an efficient receiving antenna. Further, radio and television broadcast stations have been in
operation for the past 50 or more years without any adverse health consequence being established.
68
4.3.12 Enterprise data
The share of data service in India’s total telecom revenue is
about 11% as compared with many other countries where
it ranges from 20% to 40%. India does not rank in the top
10 data revenue earning countries.
Ranking of subscribers, data revenue, and
service revenue98 by country
Rank
By
subscribers
By data
revenue
By service
revenue
1
China
US
US
2
India
Japan
China
3
US
China
Japan
4
Russia
UK
France
5
Brazil
Italy
Italy
6
Indonesia
Germany
UK
7
Japan
France
Germany
8
Germany
Korea
India
9
Pakistan
Spain
Spain
10
Italy
Australia
Brazil
The Indian enterprise sector requires the ability to provide
sophisticated IP-based and other data communications
services to meet needs of enterprise and multinational
customers. However, current ILD and NLD licenses
were drafted before the development of current GTS
services and technologies, and are largely premised on
the provision of mass market consumer voice services.
Therefore, these licenses do not allow the use of adequate
encryption in accordance with current commercial
standards to protect confidential information. They also
do not address the contracting and billing arrangements
required by enterprise and multinational customers and
do not clearly set forth licensee obligations regarding data
services required by customers. Despite the large number
of players entering the enterprise data segment, telecom
licenses are voice-centric. Therefore, most regulations
are voice-centric and do not cover issues related to
enterprise service providers. Regulatory restrictions
related to interconnection of data and public switched voice
networks interfere with the realization of these services’
full potential.
Focus area
Recommendations
Encryption
Encryption levels in ILD and NLD licenses should be upgraded to allow strong encryption of up to 256
bits to protect confidential information in accordance with international best practices.
In the interest of national security, the customer should undertake to make its encryption key
available to the licensed entity on demand.
Lawful interception
T
he proper treatment of data services under the ILD and NLD licenses, including lawful interception
and monitoring conditions, should be clarified.
The security/lawful monitoring and interception requirements applicable to enterprise data services
should be specified, with attention given to MPLS and IP-VPN services, which do not connect to a
public network.
International private leased
circuit (IPLC) regime
Indian BPOs are addressing contact center requirements globally to collect voice calls outside of India
and transporting them over an IPLC or MPLS link provided by the authorized service providers. In line
with international practice, BPO customers need variable per minute usage-based pricing model both
for inbound and outbound calls.
To promote competition in the IPLC segment, a wholesale pricing regime should be introduced. It
should be retail minus and avoid vertical price squeeze by the incumbent.
Interconnection regime and
cable landing station (CLS)
access
Access charges under existing Reference Interconnect Offers (RIOs) should be fair, non-discriminatory
and cost-based.
Access charges under new RIOs for accessing new cables should represent only the actual
incremental network costs of providing the access services.
Costing should be in place for RIO charges to ensure proper cost-oriented charges, specifically LIRC.
Taxation
Need to eliminate the cumulative assessment of licensing fees on the purchase of inputs, which
imposes double taxation on ILD and NLD license holders.
98 Enterprise Sector, Association of Competitive Telecom Operators, November 2010.
69
4.3.13 Convergence99
The ITU defines convergence as the integration of
customer end terminal equipment, or access devices such
as the telephone, television and personal computer. Triple
play is also used to define the end result of convergence,
which refers to the combination of three services —
internet, telecom and telephone. Convergence has evolved
due to the processes of digitalization and computerization.
Technological convergence has made way for business
convergence, with a service provider offering a bundle of
services. Hence, a telco provides video, data and telephone
through separate channels, whereas another telco provides
triple play through a single channel.
Market-related convergence arises due to consumer
expectations of one-stop service availability and
bundling of services. Today, most of the telecom
operators provide broadband services in addition to voice
communication services. As a result, the convergence of
voice and data has created a trend for tariff plans based
on the volume of data transferred with common billing
for interchangeable use of voice calls and data services.
Convergence has led to increased competition in the
marketplace, impacting both the telecommunications
and broadcasting sector as a whole.
In the US and Hong Kong, commercial power lines have
been used to provide telecommunication and internet
services. In the near future, it is expected that these lines
will become an alternate medium for providing information
services, taking convergence to a new level. Convergence
creates opportunities such as the combination of
either equipment or businesses to provide multiple
telecommunications, broadcasting and internet-based
services by a single operator. At the same time, it poses
challenges that need to be addressed from a regulatory
perspective. It is essential to create a regulatory framework
that addresses the issues arising from both technological
and business convergence.
70
4.3.14 Security
In the recent past, India has witnessed a series of terrorist
attacks, with terrorism being primarily attributable to
religious communities and radical movements. The
key stakeholders associated with security concerns
surrounding telecom equipment include the DoT, the
Ministry of Home Affairs, Indian intelligence agencies,
telecom equipment manufacturers and telecom operators.
As a result, the GoI has taken steps regarding telecom
infrastructure equipment, issuing guidelines related
to the import of network equipment from foreign
telecommunications vendors. The key players that have
been impacted by the security concerns include one of
the world’s leading mobile handset manufacturers, virtual
private networks (VPNs), internet service providers and
one of the world’s leading internet search engines.
manufacturers, as the requested information is considered
sensitive and proprietary.
In 2009, the DoT blocked calls to mobile devices without
a 15-digit International Mobile Equipment Identity (IMEI)
number, which is a unique number allotted to every mobile
phone for the identification purposes. The IMIE number
helps intelligence agencies track mobile phone users and
curb anti–national activities. This move is expected to have
impacted approximately 25 million users, with Chinese
mobile phones being the major category.
Although the GoI has initiated these steps to enhance
security and curb terrorism with the help of mobile
telephony, other issues remain that continue to raise
concerns over security. Firstly, Know Your Customer (KYC)
verification process for a mobile connection faces issues
The guidelines mandate the sharing and monitoring of
such as forged documents, leaving the telecom system
source code and design along with Indian security agencies.
highly vulnerable. Secondly, with the rapid growth in
Further, the guidelines put the onus for compliance on the
voice and data traffic, modern data mining and network
mobile operator, with penalties for non-compliance. The
management infrastructure that is able to monitor
DoT has also mandated thorough inspection of hardware,
terabytes and exabytes of data need to be set up, along
software and facilities at the time of procurement and
with a trained workforce. Thirdly, any suspicious equipment
periodic review thereafter. The guidelines outlined by the
that is active in a network should be liable to being disabled
GoI impact the commercial viability of telecom equipment
via government-approved encryption.
71
4.4. Key enablers for potential
opportunities
Telecom will find its immense use in schemes and
initiatives aimed at socioeconomic development in the
years to come such as m-commerce, the UID scheme and
financial inclusion.
4.4.1m-commerce100
The next revolution that is expected through the use of
mobile phones is the emergence of m-commerce. Mobile
phones provide the consumer an opportunity to transact
anytime and anywhere. m–commerce finds its applications
across various end markets such as banking and financial
institutions, paying bills for utilities such as power and gas,
booking tickets for transportation services such as trains
and taxis and online shopping. The rollout of 3G services
in India is expected to boost market growth, driven by the
uptake of services such as mobile web browsing, mobile
banking and multimedia messaging service (MMS).
The m-commerce service umbrella in India has been limited
primarily to payment and transfer systems, with each
broad category providing an array of services.
Going forward, the rollout of 3G services and
increasing usage of WAP, web-enabled phones
and smartphones by mobile subscribers is expected to
play an important role in the growth of m-commerce.
It is forecasted to overtake e-commerce in terms of the
number of transactions, with synergy existing between
e–commerce and m–commerce, especially in the case of
banking and internet-based purchases.
m-commerce
Mobile banking
• Inter–account fund transfer
• Account inquiry
• Stock trading
• Bill payment
Mobile payments
• Information services, including
current affairs, tourism and
search engines
• Ticketing (e.g., train, cinema)
• Shopping (i.e., purchase of goods
and services)
Mobile transfer
• Prepaid card top-up
• Person-to-person transfers
• International remittances
100See 5.9. for global practices.
72
4.4.2 M2M communication
According to Ericsson, the world is expected to witness
50 billion101 connected devices in 2020, with machine–
to–machine (M2M) communication being the key driver
behind this exponential increase in connected devices.
Utilities, government, health care, education, finance,
transportation and other emerging industries are expected
to be at the forefront in adopting M2M communication.
M2M is characterized by small amounts of data between
the device and network, and will enable networks to
support automated machine communications. The key
advantages provided by M2M include cost and spectrum
efficiency, service quality and security, redundancy and
coverage.
4.4.3 Mobile money
Mobile communication and secure mobile transaction
opportunities will bring a transformation in the manner
in which money is managed, mobilized and generated in
future. It will significantly impact the banking industry,
where the ability to conduct transactions from anywhere
and at any time inherently lends itself to real-time
101The World of 50 billion connections, Ericsson, December 2010, page 2.
73
monetary settlements. Mobile payment technology will
transform the nature of physical interaction between
consumers, merchants and banks. The initial application
will focus on mobile banking, to look at account information
and transfer small amounts of money between various
accounts; over a period of time, bill payment related
to utility and others will become a major application;
thereafter, adoption of other services such as ticketing,
coupons and advertising would pick up, with mobile
money becoming a truly rich and integrated application for
consumer convenience. This will cause a reduction in the
cost of transactions, owing to increased volume, disruptive
business models and reduced legal and professional fees.
4.4.4M-health
M-health applications include the use of mobile devices in
collecting community and clinical health data, delivery of
health care information to practitioners, researchers and
patients, real-time monitoring of patient vital signs and
direct provision of care via mobile tele-medicine. It offers a
huge potential for health care delivery in India. There are a
number of government schemes and other initiatives from
medical service providers offering tele-medicine services,
to extend affordable health care to all in the country.
4.4.5M-education
4.4.7 MNREGA and UID
M-education offers innovative use of mobile and wireless
technologies for education. It aims to bridge the supplydemand gap of high-quality teachers in the country. It
enables a virtual community to facilitate the learning
activities of teachers, students and peers through
collaboration in a distributed environment.
MNREGA and UID strive for providing inclusive growth.
MNREGA aims at enhancing the livelihood security of
people in rural areas by guaranteeing 100 days of wageemployment in a financial year to a rural household whose
adult members volunteer to do unskilled manual work.
MNREGA achieves twin objectives of rural development and
employment. The UID program is critical to improving the
delivery of social services, subsidies and other government
programs while also strengthening national security.
4.4.6 Financial inclusion
Financial inclusion is central to the overall task of
inclusive growth. Financial inclusion aims to bring
the unbanked and under-banked population into the
organized financial services framework and assist in growth
of the electronic payments market in India. In India, about
80% of households do not have bank accounts. The ability
of the Indian telecom sector to reach the masses owing
to its scale and built-in affordability will help to achieve
financial inclusion.
The integration of such programs with mobile
telephony will benefit the nation. For instance, an
integrated system for taking biometric attendance through
hand-held devices and transmitting it through mobile
phones for authentication is expected to solve the
challenge of attendance. Once workers have logged in, this
data could be transmitted to MNREGA, and help them earn
their daily wages.
74
5. Global practices
75
5.1. Licensing
Hong Kong
In February 2001, the Hong Kong Government released its 3G licensing framework. Following the
pre–qualification exercise, the Government decided to issue four licenses through auctions.
The pre–qualification criteria included investment, network rollout, quality of service and financial
capability.
The Government selected a royalty-based proposal that required the bidder to pay a certain
percentage of its annual 3G revenue turnover determined by the auction, with a guaranteed minimum
payment. The royalty auction included the following:
• Bidders were asked to bid for a level of annual royalty of the percentage of turnover from their 3G
services network operations.
• Successful bidders were expected to pay a minimum royalty fixed by the Government for the
first five years of the license. From the sixth year on, the successful bidders were required to pay
royalties according to the royalty percentage determined at the time of auction, with the same
royalty percentage applying to all licensees.
• Successful bidders were required to provide a five-year rolling guarantee of the minimum royalty
payment for the entire license period.
Sweden
• In May 2000, Sweden issued an invitation to provide network capacity for UMTS mobile
telecommunications services. The Government decided to issue four licenses for up to
31 December 2015.
• The selection of applicants was based on the “beauty contest” criteria (i.e., allotting licenses to
operators who best meet stated pre-set criteria).
• The Government focused on rapid rollout and nationwide coverage. Further, the Swedish law
states that licenses are allocated based on specific criteria, which is to the advantage of operators
and consumers, as operators do not pay expensive fees to the state for the issue of licenses.
Japan
• In 1998, the Japanese Ministry of Posts and Telecommunications (MPT) published the draft for
the introduction of 3G services and solicited public comment. In March 2000, the MPT established
the technical regulations and publicized the licensing policies.
• The number of 3G operators was fixed at three per region, with new as well as incumbent
opeartors — but not fixed regional operators — being eligible.
• Since the 3G license allocation in Japan was straightforward, with the number of applicants
matching the number of licenses, the policy for comparative selection was not invoked.
• The three-license limit was driven by a shortage of spectrum, with the regulator having a total of
60MHz of spectrum for 3G services.
76
Allocation of 3G mobile licenses102
Country
Number of
licenses
Mobile
incumbents
Method
Date
Sum paid
(US$ million)
Austria
6
4
Auction
November 2000
610.0
Australia
6
4
Auction
March 2001
351.7
Canada
5
4
Auction
January 2001
Finland
4
3
Beauty contest + nominal fee
March 1999
Nominal
France
4
3
Beauty contest + nominal fee
July 2001
4,520.0
Germany
6
4
Auction
July 2000
45,870.0
Italy
5
4
Auction
October 2000
10,070.0
South Korea
3
2
Beauty contest + fee
End 2000
3,080.0
Netherlands
5
5
Auction
July 2000
2,508.0
New Zealand
4
2
Auction
January 2001
51.4
Norway
4
2
November 2000
44.8
Portugal
4
3
December 2000
360.0
Spain
4
3
March 2000
Sweden
4
3
Beauty contest
December 2000
44.08
Switzerland
4
2
Auction
December 2000
116.0
UK
5
4
Auction
April 2000
1,482.0
120.0 each
35,390.0
Note: The “beauty contest” approach purports to allocate licenses to operators who best meet stated pre-set criteria.
Policy-makers and regulators should focus on creating
interest among providers and providing incentives for
long-term investment. This is done through the principle
of renewal expectancy, and through promoting regulatory
certainty through a fair, transparent and participatory
renewal process. It is essential to provide details about
license renewal or reissue, and ensure sufficient lead times
and transitional arrangements in the event of non-renewal
or changes in licensing conditions. Public consultation
procedures and the right to appeal also increase the
prospects for a successful renewal process.
5.2. Spectrum
Re-farming of spectrum
• The US Government created the Spectrum Relocation
Fund (SRF) in December 2004, which provides a
funding mechanism through which federal agencies
can recover the costs associated with relocating their
radio communications systems from certain spectrum
bands, which were authorized to be auctioned for
commercial purposes. In September 2006,103 the
Federal Communications Commission (FCC) concluded
the auction of Advanced Wireless Services (AWS) in
the 1,710–1,755MHz band paired with the 2,110–
2,155MHz band. The 1,710–1,755MHz band used by
federal agencies was reallocated to AWS under the
provisions of Commercial Spectrum Enhancement
Act (CSEA), including the use of the SRF to facilitate
relocation of federal communications systems. The
102“3G Mobile Licensing Policy,” ITU website, page 50, http://www.itu.int/osg/spu/ni/3G/casestudies/GSM-FINAL.pdf, accessed 22 October 2010.
103“1710–1755MHz spectrum band relocation,” National Telecommunications and Information Administration website, page 1, http://www.ntia.doc.
gov/reports/2008/SpectrumRelocation2008.pdf, accessed 12 October 2010.
77
AWS auction raised US$13.7 billion in net winning
bids, and facilitates the provision of innovative new
wireless services in the commercial market.
• I n March 2007, the UK Department of Trade
and Industry’s spectrum strategy committee, in
consultation with the Office of Communications
(Ofcom), formulated policies and a strategic plan
for the future allocation of spectrum to meet the
needs of users in both the public and the private
sector. The committee formulated the strategic plan
for the Ministry of Defense (MoD), civil aeronautical,
civil maritime, emergency and public safety
services (E&PSS) and science services. The MoD has
management rights to 35%104 of the spectrum
bands listed in the UK Frequency Allocation Table
(UKFAT), and it has begun a program to identify
which spectrum can be released and time frame for
releasing it.
• I n 2006, the Australian Communications and Media
Authority (ACMA) reviewed government spectrum
holdings, sharing or reallocation opportunities for
spectrum, and spectrum regulation. One of the key
recommendations of the Independent Review of
Government Spectrum Holdings (IRGSH) was a regular
review of all defense band allocations.
• In 2010, the Brazilian telecommunications regulator,
ANATEL, agreed to re-allocate spectrum in the 2.6GHz
band to support the nationwide deployment of nextgeneration mobile broadband services. The 2.6GHz
band had previously been allocated to multichannel
multipoint distribution service (MMDS) operators to
support pay-per-view TV services. The re–allocation
benefits the country’s mobile operators, giving them
the option to deploy LTE immediately.
• In Italy, as a part of spectrum re–farming, the Ministry
of Communications and the Ministry of Defense have
agreed to make 2x75MHz spectrum available for
WiMAX in the 3.4–3.6GHz band.
is guaranteed the moment it is needed, the possibility
exists to use the spectrum for other applications
the primary user does not need. Spectrum could be
shared on a short-term or long-term basis under the
condition that the use is vacated immediately when
the need arises.
• Geographical sharing: in certain situations, spectrum
is needed only in certain geographical areas. Spectrum
assigned to the maritime sector may need to be used
for maritime radio services only near the coastline,
inland waterways and rivers. Such spectrum could be
made available for other applications inland.
Spectrum trading
• Spectrum trading gives public and private sector entities
the opportunity to decide which spectrum to release
or share. It also provides the terms and flexibility to
enter into leasing arrangements for a limited time if
the bodies do not wish to dispose of the spectrum
permanently. The critical success factors for spectrum
trading include a large number of buyers and sellers; an
inefficient primary mechanism of spectrum allocation
that makes it necessary to move to a market-based
method of secondary allocation; and innovation in the
supply and demand for radio-based technologies.
• In 1989, New Zealand was the first country to introduce
open market trading of spectrum. The secondary
trading of spectrum provided benefits such as economic
efficiency, promotion of innovation and flexibility.
• In 2003, the FCC formulated rules for spectrum trading,
simplifying them in mid-2004. The FCC distinguished
between de jure rights, i.e., assignment of the license
to another party, and de facto control, i.e., transferee
retains the license and legal responsibilities, but
transfers management control of the spectrum. Further,
in 2004, the FCC proposed the concept of developing
smart devices that adjust to the spectrum they use and
take advantage of underused spectrum.
Sharing of spectrum
• Time sharing: defense needs to use part of the
spectrum only in crisis situations during exercises.
While it is important to ensure that access to spectrum
104“A Strategy for Management of major Public Sector Public Holdings,” UK Department for Business, Innovation and Skills website, page 28, http://www.
bis.gov. uk/files/file38572.pdf, accessed 12 October 2010.
78
5.3. Universal Service
Obligation Fund
In many countries, a separate universal service fund has
been set up, with the aim of increasing overall teledensity.
Most European countries, with a relatively small
geographical area and high population density, have
not considered the creation of a universal fund. On the
other hand, countries with large geographic areas and
consequently much higher costs to serve rural areas have
funds that aim to cater for the rural population.
Communication service providers are obliged to contribute
to this fund in many countries. The contribution rate
ranges from 0.1% in France to 6% in Malaysia. In most
countries, subsidies are granted according to formulas for
compensating operators already serving high-cost rural
areas within their operating territory, or proposing to
expand into high-costs areas.
Brazil has developed a mechanism that achieves universal
objectives through obligations imposed on its licensees.
The Brazilian legal framework uses a variety of tools
to achieve universal service. As a result, the telecom
regulator, ANATEL has imposed a coverage obligation
rather than a funding mechanism.
In Greece, USO services were provided by incumbent
operators. However, after liberalization of the telecom
sector, a competitive tender mechanism was used. In the
UK, BT is the designated USO provider. In Mexico, the
incumbent operator was required as part of its privatization
to install payphones in 20,000 rural areas over a five-year
period to meet the policy goal of ensuring some telephone
access in all villages with at least 500 residents.
Universal service levies by country105
Country
Contribution by operators
Malaysia
6%
India
5% of license fee
Colombia
5%
US
Less than 4% (plus state levies)
Russia
2%
Canada
1.5% (plus federal contributions)
Peru
1%
Uganda
1%
Nigeria
1%
Considering USOF for rural wireless broadband services
With the rising importance of broadband, governments should consider whether they should create a USOF for
broadband services. The key reasons include:
• Considering whether broadband is an essential service of significant “social importance”
• Estimating the degree of expected market penetration of broadband service
• Assessing the nature and extent to which broadband will not be made available by the market and the
associated reasons
• Identifying and specifying the objectives and desired outcomes
• Assessing the extent to which market demand and delivery will meet the specified objectives
• Considering the social and economic disadvantages incurred by those without access to broadband if there
is no government intervention
• Estimating the costs of intervention to widen broadband deployment through the use of the USO
mechanism
• Estimating the costs of intervention through the use of the USO mechanism compared with the use of other
approaches
105Organization for Economic Co-operation and Development: Working Party on Telecommunication and Information Services Policies, page 19, http://
www.oecd.org/dataoecd/59/48/36503873.pdf, accessed 20 October 2010.
79
Methods of utilizing USOF across various countries106
Developed countries
Country
Source of revenue
Method of allocating funds
Australia
Levy on licensed operators depending on
market share of eligible revenue.
The Government determines the level of subsidy
paid to the USO provider.
Canada
Both fixed and mobile operators pay a fixed
percentage of eligible telecom revenue.
Universal service fund compensates costs
estimated on the basis of long run marginal
costs, and additionally 15% for joint and
common costs.
France
Operators contribute a percentage of
revenue i.e., 0.1%.
Compensation for costs incurred by USO
provider.
Italy
Major operators contribute 1% of revenue.
The USO provider makes an offer to provide
services at specified cost, and the regulator
decides what part to accept.
Japan
Telecommunications carriers contribute to
the USOF.
The telecommunication carriers are eligible to
receive universal service funds.
Country
Source of revenue
Method of allocating funds
Argentina
1% of all operators’ gross revenues.
Government to determine based on its goal to
increase wireless and wireline teledensity.
Brazil
1% of service providers’ gross operational
revenues earned from telecom services.
Universal service fund supports ICT projects
consistent with the Government’s development
objectives.
Chile
Government budget.
Subsidies distributed through competitive
bidding, with the lowest bidder being the winner.
Colombia
5% of national and long distance operators’
revenues, plus funds from license fees.
Malaysia
Fixed and mobile network operators
contribute 6% of their weighted revenue
from designated services to the fund.
Starting in 2002, operators invited to submit
proposals for universal service provider and
to be compensated from the fund through a
competitive process.
Nepal
2% levy on the revenues of the incumbent
operators, ISPs and mobile operators.
India
5% levy on the revenue of
telecommunication operators.
Peru
1% of all operators’ gross revenues.
South Africa
0.16% of all operators’ revenues.
Subsidies mainly awarded to tele–center projects
and areas of greatest need.
Uganda
1% levy on all sector participants, including
telecom operators, the postal service,
couriers and ISPs.
Developing countries
106 Organization for Economic Co-operation and Development: Working Party on Telecommunication and Information Services Policies, April 2006, page 19.
80
5.4. Broadband
Broadband networks are an essential infrastructure for the
global economy, as they provide businesses and consumers
with fast and continuous access to internet–based
services, content and applications. Broadband services
have economic benefits both in developed and developing
nations. However, infrastructure, regulatory environment,
urban–rural divide and other factors that impact broadband
penetration are very different in developing nations.
Emerging markets such as India need to adopt leading
practices that facilitate rapid and cost-effective deployment
of broadband technologies.
23%,108 in comparison with 4% in developing economies.
Furthermore, it declined to just 2%, if China is excluded
from the developing world. Although the world is
witnessing a rise in broadband penetration, the growth
rate is much higher in the developed world. For instance,
during 2005–08, Eastern Europe added 19.5 million fixed
broadband subscribers, whereas African countries were
able to add 2.4 million fixed broadband subscribers.
Broadband penetration by country 2009
Netherlands
The essential leading practices that enable countries
to increase broadband penetration include: adoption of
regulations that embraces innovation and competition;
form PPPs, invest in infrastructure and latest technology;
encourage competitive ecosystems; and release spectrum
for the sustainable deployment of broadband services.
The firm combination of national objectives toward
broadband services with leading practices is expected to
enable developing nations to achieve benefits of
broadband growth.
37.1%
Korea
33.5%
UK
29.5%
Finland
26.7%
US
26.4%
Australia
23.3%
China
7.7%
India
0.7%
0%
10%
20%
30%
40%
Source: OECD; TRAI; Intel
Monthly broadband charges on a purchasing power parity basis (US$)
60
50
40
30
20
10
0
56
35
UAE
Germany
34
32
29
23
22
20
18
16
Saudi
Arabia
China
Japan
UK
Canada
US
Hong
Kong
India
7
Israel
Source: “Measuring the Information Society,” ITU, 2010; Booz & Company analysis
There are more than 497.8 million107 broadband
subscriptions across the world. However, a large digital
divide exists between the developed and the developing
2. Increased security aware1. Investment in information
world in terms of broadband penetration. The broadband
ness controls will be implesecurity has increased:
penetration
rate ingrowth
developed
nearly to mitigate new or
The survey revealed
in theeconomies ismented
organization’s annual investment in
information security. Of all
participants, 61% (46% globally)
agreed that their organization will
spend more this year in information
security than it did last year.
increased risks:
3. The number of organizations currently evaluating the
use of virtualization
techniques is growing:
The survey revealed that more
A total of 34 % of respondents
than 60% of the respondents are
revealed that they are either
implementing security awareness
evaluating or planning to evaluate
controls to mitigate new or
virtualization techniques in the
increased risks. Other top trends
next 12 months. However, 23% of
107World Broadband Statistics: Short report, Point Topic Ltd., page 4.
that emerged were increases in
the global respondents stated that
108“Intel: Realizing the benefits of broadband,” Intel website, page 2, http://www.intel.com/Assets/PDF/Article/WA-323857001.pdf, accessed 12
auditing capability and stronger
they have embraced cloud
October 2010.
identity and access management
computing, as against only 8% by
systems.
Indian organizations.
81
4. The trend of actions that
organizations have taken to
control the leakage of
5. The Information Security
Management System (ISMS),
which covers the overall
South Korea
Policy element
Action
Objectives
•►The South Korean Government created an action plan for the emergence of a knowledge-based
society, with each citizen having access to a personal computer. The Korean Digital Divide Act
created the five–year master plan to close the digital divide, formulated the action plans, and
launched the Korean Agency for Digital Opportunity and Promotion (KADO)
Priorities
•►Encourage infrastructure investment by incumbents and market entrants
• Support construction of new high-capacity digital broadband backbone, through funding
• Financial support for R&D, technology demonstration projects, subsidies for purchase of personal
computers by low-income citizens
• Promote digital literacy
• Support e–governance, e–commerce, education and other information and communications
technology (ICT) services
Incentives and initiatives
•►Offer a 30%-50% discount on telecom service charges to low-income and disabled users
• Provide low-interest loans for communications infrastructure development in less-advantaged
regions, as well as funding for information society–related R&D
• Plan to implement number portability for both wireline and wireless services
• Create fund for promotion of digital literacy
• Develop content for disabled people and elderly people
• Create and support ICT
United Kingdom
Policy element
Action
Objectives
• Create a “digitally rich” UK, where all have the confidence to access the new and innovative
services delivered by computer, mobile phone, digital television or any other device
• Bridge the digital divide arising due to access cost related to internet services
• Establish the UK as a world leader in digital excellence with public services that are responsive,
personalized and efficient
• Use ICT to reduce social exclusion
Priorities
• Transform learning with ICT
• Set up a digital challenge for local authorities to achieve both excellence and equity in ICT
• Make the UK a safe place to use the internet
• Promote the creation of innovative broadband content
• Create a strategy for the transformation of delivery of key public services
• Have Ofcom (the independent regulator and competition authority for the UK telecom industry)
set out regulatory strategy
• Improve access to technology for the digitally excluded and ease technology use for the disabled
Incentives and initiatives
• Ensure that ICT is embedded in education to improve the quality of the learning experience for all,
re-engage those who have been disaffected and equip children with skills increasingly essential in
the workplace
• Have Ofcom research the prospects for home broadband adoption, focusing on adoption among
the more disadvantaged
• Provide support to BBC and commercial market for experimentation in broadband content using
commissions and partnerships
82
5.5. Mergers and acquisitions
The telecom sector has evolved at different rates
around the world, with different views on each
regulatory issue. The emergence of new technologies
and applications worldwide has forced mobile operators
to expand their global footprint through mergers and
acquisitions, especially in emerging markets. However,
there is a lack of regulatory consistency at the
international level, which would help overcome the
challenges posed by globalization.
In any country, the key to the telecom sector is radio
spectrum management. A spectrum cap refers to the
amount of spectrum any operator or group of operators
can hold in a geographic area. The US and the UK have
gradually eased their respective spectrum caps.
In the US, a spectrum cap was in place from 1994 to 2003.
It placed a limit of 45MHz on the commercial mobile radio
spectrum (CMRS) that a single entity could acquire in any
geographical area across the US. In 2001, the cap was
raised to 55MHz, and it was abolished in 2003. After the
elimination of the spectrum cap, the FCC used a cap of
70MHz in deciding mergers. After the auction in 700MHz
band, the spectrum cap in the US stands at 95MHz.
83
In the UK, the telecom regulator, Ofcom, has proposed a
cap on the award of spectrum to a mobile operator. The
spectrum under 1GHz is the obvious choice for mobile
broadband as the airwaves have higher propensity which is
needed for high data rate services. Ofcom has proposed a
cap on the amount of spectrum held by any operator in the
spectrum range under 1GHz. In March 2010, the merger
of the UK operations of two mobile operators was cleared
by the European Commission. The combined amount of
spectrum held by the two parties — at 1,800MHz — was
larger than that of their competitors. As a result, the
parties offered to surrender 15MHz of spectrum, allowing
other competitors to rollout services.
Similarly, a spectrum cap has been implemented in
Canada, Mexico and Guatemala. However, other countries,
such as Australia, have abstained from the implementation
of a spectrum cap.
5.6. Equipment manufacturing
Finland: Market openness, liberalization and innovation drive the telecom equipment industry109
Background
• Prior to the 1990s, the Finnish economy was dominated by forest-related industries. However,
in the late 1990s, the economy shifted to ICT and consumer electronics, with electronics and
electrotechnics accounting for about 25% of the country’s exports. These changes were primarily
driven by higher education and the emergence of knowledge-based industries. Further, the
country’s ICT sector has benefitted from investment in R&D, which more than doubled between
1985 and 2005.
Strategic initiatives
• First-mover advantage: in the 1970s, Finland’s state-owned post, telegraph and telephone (PTT)
operator developed the Nordic mobile telephony standard in collaboration with Sweden-, Norway-,
and Denmark based PTTs. In 1991, the first GSM network was launched in Finland, with Nordic
countries benefitting from the first-mover advantage in the mobile telecom industry worldwide.
• Deregulation and increased competition: in the late 1980s and early 1990s, Finland lowered the
entry barriers through the introduction of reforms. After the collapse of the Soviet Union in 1991,
the country redirected its trade to the West, and joined the European Union in 1993. From 1987
to 1997, Finland deregulated the telecom sector by the adoption of the Telecommunications Act
and a new Radio Act, and in 1991, networks were opened to free competition.
• Foreign direct investment: in 1993, Finland removed the restriction on foreign ownership
in Finnish firms and restrictions on capital inflows. The country witnessed more than fivefold
growth in FDI from 1990 to 2000, particularly in the ICT sector. An increase in FDI has resulted in
technology transfer and cooperation that has helped to fuel the telecom sector.
• Specialization in telecom: Finland’s ICT sector has developed specialization in the
manufacturing and export of telecom equipment, with telecom equipment manufacturing
accounting for 90% of the ICT manufacturing in 2003. It employed more than 80,000 people in
over 4,000 firms in 2000.
• Development of clusters: the development of the Finnish telecom industry is also attributed
to the emergence of an ICT cluster, which encourages cooperation among a wide range of
manufacturers and suppliers. The mobile telecom cluster, which is also known as Finland’s Wireless
Valley, includes a wide range of stakeholders, including mobile application developers, equipment
manufacturers, component manufacturers and electronics contract manufacturers, content
owners and content providers for mobile applications, mobile network operators, academic and
research institutions, consulting firms, public certification and standardization authorities and
financial service providers.
• Skilled workforce: Finland has a strong skilled workforce, primarily driven by a robust educational
system in which basic, secondary and tertiary education is free of charge. The country has
invested in a number of technical universities, which has facilitated the emergence of Finland in
the telecom sector by providing a large pool of engineers.
109 Caroline Lesser, “Market Openness, Trade Liberalisation and Innovation Capacity in the Finnish Telecom Equipment Industry,” OECD Publishing,
29 July 2008.
84
China: Emergence of a global manufacturer and innovator110
Background
• China’s telecom sector has witnessed rapid growth in the last two decades, with the emergence of
Chinese firms that have successfully competed in the global marketplace, despite the presence of
multinationals.
• Over the years, Chinese manufacturers have evolved from producing cheap and low-quality
imitations to products that use high-end advanced technology.
• The emergence of a strong telecom sector in China has also been driven by a burgeoning domestic
market with the highest number of mobile subscribers in the world, government support to
domestic telecom enterprises and the presence of a well–qualified technical workforce.
Strategic initiatives
S
► ince 1978, China has implemented numerous reforms that have boosted the country’s
manufacturing and trade. The key reforms undertaken by the country include development of a trade
policy, reduction in tariff barriers and development of an enabling environment to attract FDI.
• Export processing: in the late 1970s and 1980s, China established an export processing policy.
Under the policy, raw materials such as parts and components and other intermediate imported
goods do not have any duty imposed, as long as they are used to produce export goods. This
enabled the country’s domestic and foreign-owned firms to compete, worldwide.
• Tariff barriers: during the 1980s and early 1990s, the country reduced its tariff barriers
drastically. In the 1980s, some of its tariff rates were above 50%. The implementation of the
export processing regime facilitated the reduction of tariff rates. In 2001, the tariffs reached less
than 15%. Additionally, the US granted China the most favored nation status in 1980, and the
country joined the WTO in 2001.
• Foreign direct investment: in 1979, China implemented policies that favored the inflow of FDI,
along with technological expertise. This helped the country to produce products rapidly.
• Research and development: during the late 1990s, leading global telecom manufacturers
launched their R&D centers in China. These centers have helped global players to understand
the local market and helped in the overall development of the telecom sector. Furthermore,
R&D led to the emergence of Chinese manufacturers that spend a significant portion of their
revenues on R&D.
5.7. Telecom infrastructure
time limited. National roaming was permitted in rural
areas for a longer period than for urban areas.
• Other European NRAs followed the Commission’s
• Brazil is split into 11 licensing areas with 4 operators in
each licensing area. These operators are encouraged
to share both civil and electronic infrastructure,
particularly in rural areas that may be costly to
serve otherwise.
• Infrastructure sharing has been well accepted globally.
In the EU, individual national regulatory authorities
are required to notify the EU Commission of decisions
regarding infrastructure sharing. The awarding of 3G
licenses led to an increase in applications to share
infrastructure and in particular for new 3G operators
to be permitted to use national roaming to provide full
geographic coverage. Initially, the EU took a negative
view of the benefits versus costs of infrastructure
sharing and saw it as having a potential negative
impact on competition. As a result, although national
roaming was permitted for new entrants, it was often
approach and as such active infrastructure sharing was
limited. The operators challenged the Commission’s
decision. The European Court of First Instance ruled
in favor of the operators and stated that the EU had
overplayed the competition concerns. This has led
to greater opportunities for operators to engage in
infrastructure sharing.
• In Australia, operators have commercially
negotiated for 3G site and RAN sharing. An
administrative group has been established to own
and operate existing RAN and fund future network
rollout plans as agreed with operators.
• In Sweden, there are five operators, four of whom
have formed two separate consortiums of two
operators each. Each consortium has built a joint
network. The regulator permitted this level of sharing,
110 Behzad Kianian and Kei-Mu Yi, “China’s Emergence as a Manufacturing Juggernaut: Is It Overstated?” Federal Reserve Bank of Philadelphia,
2009.
85
but required each operator to maintain 30% of its
network separately.
• In Norway, a number of commercially negotiated and
regulated agreements exist between the two main
operators and the MVNOs. There are commercial
agreements between the main operators. The main
operator is obliged to provide national roaming
and MVNO access, publish tariffs and reference
offers, implement accounting separation and is
subject to price and accounting controls for national
roaming. All operators may share sites and masts.
Radio network controllers (RNC) may be shared
physically, but operators must retain logical control
over their networks and spectrum. All transmission
routes (i.e., optic fiber, cables, P-P radio lines) may
be shared. For core networks, the mobile switching
center (MSC) may not be shared. The Ministry of
Transport and Communications may, subject to an
individual consideration, allow fulfillment of the
coverage requirements through roaming in networks
based on other technologies than Universal Mobile
Telecommunications System (UMTS), provided such
networks can offer sufficient capacity and that the
arrangement is without substantial disadvantage
to subscribers.
5.8. Convergence
• In the US, the Federal Communications Commission
(FCC) is an independent agency that regulates
interstate and international communications by
radio, television, wire, satellite and cable and content.
However, cable TV services require approvals at the
municipal level. Telecom operators that provide IPTV
services on their broadband networks have demanded
amendments to the regulations to allow them to
provide national franchise and rollout of services. The
cable industry has opposed this demand, as the cable
industry underwent the time-consuming and expensive
process to secure city-by-city franchises over the last
three decades. Recently, the state of Texas passed
a bill deregulating the telecom markets. This has
made it possible for telephone companies to receive
a statewide franchise to provide video services that
compete with cable.
• In Canada, the Canadian Radio-television and
Telecommunications Commission (CRTC) is an independent
public authority to regulate and supervise all aspects of
the Canadian broadcasting system, as well as to regulate
telecom common carriers and service providers.
• In Canada in 2002, the regulatory functions of the
Broadcasting Standards Commission, Independent
Television Commission, Office of Telecommunications,
Radio Authority and Radio Communications Authority
were combined to form Ofcom. It is also the regulator of
the UK communications industries, with responsibilities
across television, radio, telecommunications and wireless
communications services.
• In July 2005, the Australian Broadcasting Authority and
the Australian Communications Authority merged to form
the Australian Communications and Media Authority.
• I► n July 2000, the Independent Communications Authority
of South Africa was established. It is the regulator of the
telecommunications and the broadcasting sectors, and
took over the functions of two previous regulators – the
South African Telecommunications Regulatory Authority
and the Independent Broadcasting Authority.
5.9. m-commerce
Globally, the rollout of 3G has provided the required impetus
to drive widespread adoption of m-commerce services. Mobile
networks in North America witnessed growth in data services
that were also driven by the introduction of smartphones.
After smartphones were released, networks’ packet data grew
nine times larger than voice services. In India, voice revenues
are expected to decline at a CAGR (2008–15) of 1.1% to reach
US$19.5 billion111 in 2015, but data revenues are expected
to increase at a CAGR of 16.7% during the same period.
m-commerce is very popular in countries where most of the
population is unbanked. Countries such as Sudan, Ghana, the
Philippines and South Africa have been the largest adopters
of this service. Latin American countries such as Uruguay,
Paraguay, Argentina, Brazil, Venezuela, and Mexico have also
implemented m-commerce successfully.
111Ovum: Mobile regional and country forecast pack: 2010–15, Ovum website, http://www.ovumkc.com/, accessed 16 October 2010.
86
Multiple reforms in the Indian telecom sector have
coalesced to produce a remarkable decade of continued
success. Looking ahead, progressive policies will become
increasingly important to guide unparalleled growth and
transformation in the sector.
87
Conclusion
The telecom sector in India has witnessed a series of
fundamental structural and institutional reforms over the
past decade. The best feature of India’s regulatory regime
has been its open and transparent approach, with which
the regulatory authorities make industry information
public and accessible, and encourage a healthy level of
consultation with stakeholders. This approach has helped
the sector grow by leaps and bounds. The report is an
attempt to help understand the viewpoints of various
stakeholders and to arrive at reasonable and practical
recommendations to help overcome the challenges that
the sector faces and harness its opportunities.
The key recommendations for improving the existing
scenario focus on licensing framework, spectrum,
USOF, broadband, M&A, equipment manufacturing and
infrastructure sharing.
• A single license should cover all telecom services.
There should be uniform fee structure across all
telecom circles.
• Future policy should encourage identifying and
vacating spectrum bands for future use. Spectrum
allocation should be based on technology neutrality,
service flexibility, timely allotment, timely spectrum
reconciliation and enhanced transparency. Spectrum
sharing and trading should be allowed.
• Broadband infrastructure — OFC, high-capacity
microwave and satellite connectivity — must be
extended to rural, remote and inaccessible areas.
Content and applications in regional languages should
be created to promote rural broadband.
• The USOF should be utilized for the provision of public
telecom, information services, household telephones
and broadband connectivity in rural and remote
areas. It should be used for creating infrastructure
for the provision of mobile services and development
of telecommunication facilities, and inducting new
technological developments in rural and remote
areas. The distribution of funds should be through
transparent market-oriented allocation methodology.
DoT should also consider lowering the contribution to
1% of AGR toward the fund.
• Operators must be allowed to merge intra-circle while
being allowed to combine spectrum. The share of a
merged entity should not be greater than 30% in terms
of subscriber base or AGR.
• HMCP should be set up across the country, and
fiscal incentives should be provided to promote local
manufacturing. R&D initiatives should be encouraged.
• A National Telecom Critical Infrastructure Policy
on the lines of NTP 1999 should establish uniform
procedures for land acquisition, a uniform taxation
regime, and subsidies and other packages for creating
an environment conducive to boosting the construction
of national telecom infrastructure and ensuring the
increased participation of all the stakeholders.
The key recommendations for advancing the sector to
the next level of growth focus on financial inclusion,
m-commerce, convergence, security concerns and
consumer affordability.
88
Glossary
AWS Advanced Wireless Services
A2PApplication-to-person
ACMA
Australian Communications and Media Authority
ACTO
Association of Competitive Telecom Operators
ADC Access deficit charge
AGR Adjusted Gross Revenue
ARPU Average Revenue Per User
AUSPI Association of Unified Telecom Service Providers of India
BSCs Base Station Controllers
BTS Base Transceiver Stations
BWA Broadband Wireless Access
BWCI Broadband Wireless Consortium of India
CAGR
Compound annual growth rate
CDB Cut-out Distance Band
CEWIT
Center of Excellence in Wireless Technology
CLS Cable Landing Station
CMRS Commercial Mobile Radio Spectrum
CMSPs Cellular Mobile Service Providers
CMTS Cellular Mobile Telephone Service
CMTS Cable Modem Termination System
COAI Cellular Operators Association of India
CPE
Customer Premises Equipment
CPP Calling party pays
CRBT Caller Ring Back Tones
CRTC Canadian Radio-television and Telecommunications Commission
CSC Common Services Centers
CSEA Commercial Spectrum Enhancement Act
CVD Countervailing Duty
DAS Distributed Antennae Sharing
DoT
Department of Telecommunications
DSL Digital Subscriber Lines
89
E&PSS Emergency & Public Safety Services
FCC
Federal Communications Commission
FDI Foreign direct investment
FICCI Federation of Indian Chambers of Commerce and Industry
FY Financial Year
G2BGovernment-to-business
G2C Government-to-citizen
G2EGovernment-to-employee
G2G Government-to-government
GBT Ground-Based Towers
GMPCS Global Mobile Personal Communications Services
GoI Government of India
GST Goods and Services Tax
HMCP
Hardware Manufacturing Cluster Parks
IAMAI Internet & Mobile Association of India
IBA Independent Broadcasting Authority IBA
ICASA
Independent Communications Authority of South Africa
ICNIRP
International Commission on Non Ionizing Radiation Protection
ICRIER Indian Council for Research on International Economic Relations
ICT Information and Communications Technology
IDI ICT Development Index
ILD International long distance
IMEI International Mobile Equipment Identity
IPF Infrastructure Provisioning Fee
IP-I Infrastructure Provider-I
IPLC International Private Leased Circuit
IP-VPN IP-based Virtual Private Network
ISPAI Internet Service Providers Association of India
IT Information Technology
ITeS IT-enabled Services Sectors
ITU International Telecommunication Union
90
KADO Korean Agency for Digital Opportunity and Promotion
kbps kilobit per second
KYC Know Your Customer
MARR Multi Access Radio Relay
MCD Municipal Corporation of Delhi
MMDS Multichannel Multipoint Distribution Service
MMS Multimedia Messaging Service
MNP Mobile number portability
MNREGA Mahatama Gandhi National Rural Employment Guarantee Act
MoD Ministry of Defense
MoU Minutes of usage
MPLS Multiprotocol Label Switching
MSCs Mobile Switching Centers
MTNL Mahanagar Telephone Nigam Limited
NCAER National Council of Applied Economic Research
NDMC New Delhi Municipal Council
NeGP National e-Governance Plan
NFAP National Frequency Allocation Plan
NLD National long distance
NRAs National Regulatory Authorities
NTCIP National Telecom Critical Infrastructure Policy
NTP National Telecom Policy
OFC Optic fiber communication
P2A Person-to-application
P2P Person-to-person
PAN Permanent Account Number
PCOs Public Call Offices
PMRTS Public Mobile Radio Trunked Services
POPs Point of Presence
PPP Private-public Partnership
PSU Public Sector Undertakings
PTT Posts, Telephone and Telegraph
RCP Rural Community Phones
RCV Recharge Coupon Voucher
RIOs Reference Interconnect Offer
91
RKM Route Kilometer
RNC Radio Network Controllers
ROW Right of way
RPM Rate per minute
RTT Roof-top tower
SACFA Standing Advisory Committee on Radio Frequency Allocation
SATRA South African Telecommunications Regulatory Authority
SIM
Subscriber Identity Module
SRF Spectrum Relocation Fund
TCOE Telecom Centers of Excellence
TDSAT Telecommunications Dispute Settlement and Appellate Tribunal
TEC Telecommunication Engineering Center
TEMA Telecom Equipment Manufacturers Association
TESEPC Telecom Equipment and Services Export Promotion Council
TRAI Telecom Regulatory Authority of India
UAS Unified Access Service
UID Unique identification number
UIDAI Unique Identification Authority of India
UKFAT UK Frequency Allocation Table
UMTS Universal Mobile Telecommunications System
USOF Universal Service Obligation Fund
VAS Value-added services
VoIP Voice over Internet Protocol
VPNs Virtual Private Network
VPTs Village Public Telephones
VSNL Videsh Sanchar Nigam Limited
WMO Wireless Monitoring Organization
WPC Wireless Planning & Coordination Wing
WTO World Trade Organization
92
Notes
93
94
Notes
95
96
About Federation
of Indian Chambers
of Commerce and
Industry (FICCI)
FICCI, set up in 1927, is the largest and oldest apex
organization of Indian business. With a nationwide
membership of over 1,500 corporates and over 500
chambers of commerce, FICCI espouses Indian businesses
and speaks directly and indirectly for over 250,000
business units. FICCI maintains the lead as the proactive
business solutions provider through research, interactions
at the highest political level and global networking.
FICCI organizes a large number of exhibitions, conferences,
seminars and meets for promoting business.
97
Ernst & Young’s Global
Telecommunications
Center
Telecommunications operators are facing the challenges
of growth, convergence, business transformation,
technological change and regulatory pressures in
increasingly difficult economic conditions. Operators choose
Ernst & Young because they value our industry-based
approach to addressing their assurance, tax, transaction and
advisory needs. They know that they have much to gain from
our clear understanding of the opportunities, complexities
and commercial realities of the telecommunications industry —
wherever in the world they’re operating.
What gives us this understanding is our Global
Telecommunications Center. Operating from Paris, Cologne,
Johannesburg, Riyadh, Delhi, Beijing and San Antonio, the
Center brings together people and ideas from across the
world, to help our clients address the challenges of today
— and tomorrow. Our clients benefit from our insights on
key trends and emerging issues. These may relate to the
economic downturn, next-generation services, infrastructure
sharing, outsourcing, revenue assurance, operational
efficiency, regulations, future growth markets or mergers and
acquisitions. We help our clients react to trends in a way that
improves the financial performance of their business.
Learn more about our approaches and services by visiting our
website: www.ey.com/telecommunications
98
Contacts
Global Telecommunications Center
Vincent de La Bachelerie
Global Telecommunications Leader
vincent.de.la.bachelerie@fr.ey.com
Jonathan Dharmapalan
Global Deputy Telecommunications Leader
jonathan.dharmapalan@ey.com
Marc Chaya
Global Telecommunications Markets Leader
marc.chaya@fr.ey.com
Adrian Baschnonga
Global Telecommunications Senior Analyst
abaschnonga@uk.ey.com
Steve Lo
Global Telecommunications Center — Beijing
steve.lo@cn.ey.com
Holger Forst
Global Telecommunications Center — Cologne
holger.forst@de.ey.com
Prashant Singhal
Global Telecommunications Center — Delhi
prashant.singhal@in.ey.com
Serge Thiemele
Global Telecommunications Center — Johannesburg
serge.thiemele@ci.ey.com
Wasim Khan
Global Telecommunications Center — Riyadh
wasim.khan@sa.ey.com
Mike Stoltz
Global Telecommunications Center — San Antonio
michael.stoltz@ey.com
99
100
Ernst & Young
Assurance | Tax | Transactions | Advisory
About Ernst & Young
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transaction and advisory services. Worldwide, our
141,000 people are united by our shared values and
an unwavering commitment to quality. We make a
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of which is a separate legal entity. Ernst & Young
Global Limited, a UK company limited by guarantee,
does not provide services to clients. For more
information about our organization, please visit
www.ey.com
© 2011 EYGM Limited.
All Rights Reserved.
EYG no. EH0091
In line with Ernst & Young’s commitment to minimize its
impact on the environment, this document has been printed
on paper with a high recycled content.
This publication contains information in summary form and is therefore
intended for general guidance only. It is not intended to be a substitute
for detailed research or the exercise of professional judgment. Neither
EYGM Limited nor any other member of the global Ernst & Young
organization can accept any responsibility for loss occasioned to any
person acting or refraining from action as a result of any material in
this publication. On any specific matter, reference should be made to
the appropriate advisor.
The opinions of third parties set out in this publication are not
necessarily the opinions of the global Ernst & Young organization or
its member firms.
About Federation of Indian Chambers of
Commerce and Industry (FICCI)
FICCI, set up in 1927, is the largest and oldest apex
organization of Indian business. With a nationwide
membership of over 1,500 corporates and over
500 chambers of commerce, FICCI espouses Indian
businesses and speaks directly and indirectly for over
250,000 business units. FICCI maintains the lead as
the proactive business solutions provider through
research, interactions at the highest political level
and global networking.
FICCI organizes a large number of exhibitions,
conferences, seminars and meets for promoting
business.

Enabling the next wave of telecom growth in India

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