amazing outcomes of telecom de-monopolisation in india by dr t.h. chowdary* * director: center for...

Amazing Outcomes of

Telecom De-monopolisation in India

By

Dr T.H. CHOWDARY** Director: Center for Telecom Management and Studies

Chairman: Pragna Bharati (intellect India )Former: Chairman & Managing Director

Videsh Sanchar Nigam Limited &Information Technology Advisor, Government of Andhra Pradesh

T: +91(40) 6667-1191/ 2784-6137(O) 2784-3121®F: +91 (40) 6667-1111, 2789-6103

[email protected]@satyam.com

Talk @ BSNL, Vijayawada : 15 Feb 2008

THC_CTMS S376_Feb'08 2

Telecom Overview (1/5)

• 41 licenced private companies besides the state-owned MTNL and BSNL in 23 licenced areas

• Total number of P-Telcos providing services are 12• Licences for all inland telephone services are state-wide• National long-distance (NLD) & international subscriber

dialing (ISD) are whole country• Some P-Telcos operate only cellular mobile telephone

services• Some only in a few states• State-owned MTNL operators only in 2 cities ( Delhi&

Mumbai)• Some ISPs have taken NSD & ISD licences to cover

their VPN services



• Indian Telephone Industries (ITI) is the state-owned manufacturing company under the administrative control of the DOT.

• The state-owned BSNL/MTNL are having 95% of the local loop for the 39.5 mln fixed lines

• BSNL/MTNL have a telephone market share of 28% of the 250 mln phone; their share is declining.

• There are 3 long distance band-width only ( on O.F cables) providers – National Power Grid Corporation, Rail Tel & ONGC



• ISRO’s INSAT (Indian Satellite) enterprise sells bandwidth for telecoms ( and TV broadcasters)

• 3 Telcos (VSNL; Bharati & Reliance – all private) own undersea cables providing global connectivity

• There are 130 active Internet Service Provider (ISPs) offering dial-up to broad-band; their number can be unlimited; they provide VPN, NLD & ISD; VOIP etc. services. (more than 400 were licensed but they are ineffective)

• CDMA using companies have, as of Sept 2004, 54 mil users

• GSM using companies have 152 mln subscribers• Fixed (wired & wireless) subscribers are 39 mln.



• Optical Fiber transmission systems of 650,000 (520,000 RKH of BSNL) route kms connect about 6000 towns.

• Coaxial ( 6,024 km) and terrestrial microwave and UHF ( 95,330 RKM) are frozen

No more construction since 1997• ISPs are deploying WiFi and WiMAx in cities• Some state governments like Andhra Pradesh

and Gujarat have dedicated State Wide Area Networks ( SWANs) for their e-governances schemes.



• Internet Service Providers (ISPs) - Licences issued >400

• Internet Kiosks: 100,000 • Internet Subscribers: Dial-up: 9.3 million Broad-band: 2.5m(for 256 kbps-2.0 mln & 2MBP -0.5 mln)

• Users: 50 mln [over 35 mln access Internet thro cell-phones]

• Telcos Revenues: $ 31.0 bln/yr• Telcos Investments $ 10 bln/yr• BSNL/MTNL share 28% (declining) of telephones


Teledensity

India Metros

(4 cities)

Other Urban ( about

6000 towns)

Rural

23% 85% 55% 2.3%


Mobile Subscribers

• Prepaid : 85%• Churn : 15%• ARPU/month

Year 2000 2001 2002 2003 2004 2005 2006 2007

$ 29.31 24.73 19.64 14.08 11.68 9.50 8.33 7.44


Sale of Cell Phones

Year 2001 ‘05 ‘06 ’07

mlns 2 31 74 90

• PCs sold/year: 7 mln• PCs in use : 25 mln• There are 60,000 retailers of cell phones• A cell phone is changed on eh average in 9 months!• Nokia, Ericsson, Motorola, LG are the leading vendors


• Villages (habited) : 600,000• % Electrified : 87%• (public) telephoned : 92% (545/600,000)

Public Telephones:

• Along National Highways : 30,000 • Local only : 1.12 mln• NLD & ISD : 887,000• Total : app: 2.1 mln• Telegraphs – dying : 12 mln/yr• Bureau FAX: BSNL : 0.7 mln

(declining)

INDIA


Internet & Broadband: Growth

Month/Year Internet Broad-band

March 1998 0.14 NA

1999* 0.28 NA

2000 0.90 Na

2001 3.00 NA

2002 3.2 NA

2003 3.6 0.008

2004 4.5 0.019

2005 5.65 0.180

2006 7.00 1.35

Sept 2006 8.8 1.82

Sept 2007 12.4 2.50

* Open to private sector & competition


Amazing Outcomes (1/4) • Telephones available on demand • 4/5 ( 7 in some states) Telcos canvassing you to take a

phone• 80% decline in long-distance call and lease charges – India

ONE service – @#7.5/month and – call anywhere @ US 2.5 cents per4 mnt. Several price-service

packages to suit customers pocket• Carpenters, masons, electricians, vegetable vendors,

farmers, students …… sporting mobiles • Capital ( for network) cost/line came down by 86%• Return on investment 33 1/3%


Growth of Phones in India

14.54

0.34

17.8

0.88

21.63

1.2

26.79

1.88

32.97

3.58

39.13

6.43

41.42

10.48

46.32

17.4

44.87

48

45

56

48

92

40

210

0

50

100

150

200

250

Subsc

ribers

in m

illions

1997 1998 1999 2000 2001 2002 Dec '03 Aug '03 Dec-'04 April-'05 March'06 Sept'07

Years

Cellular mobile phones ( PSU + pvt )

Fixed line telephones including WLL ( PSU + pvt )

Source : DOT Annual Report 2003

Total 278 mln = as of Jan’08


AMAZING OUTCOMES (2/4)

• Tele-density up from under 2% in 1994 to over 22% (Sept 2007)

• Over 70 million mobile phones being added per year (under 2 million fixed telephones, mostly fixed WLL phones)

• 170 mln persons use mobiles only• Mobiles exceeded fixed phones in Oct 2004• Rural demand exceeding Urban demand

• For most, first telephones are mobiles



• Pre-paids are 85% in mobiles• Churn about 15%• BSNL losing customers- Public Grievance cell under

Minister directly• Reliance’s “disruptive”market penetration • 600,000 route kilometres of Optical Fibre Cables

by competing Telcos link up 5000 + towns and cities

.



• New services• No waiting for phones• Private companies invested $ 40 bln in a 10y period.• Private companies are investing $ 7.5 bln/year• Foreign direct investment (upto 74% of equity)• Transformation into electronic-photonic information

infrastructure for a knowledge society: e-education; e-governance; e-

sevas (services); e-commerce, e-democracy (advocacy, balloting)

• IT & software and outsourced services to the world


Missing Link – No More

• Over 585,000 (92%) villages have a public telephone , each attended by helpful, self - employed people .

• 90 % of the territory and 99% of the population has access to telephone

• 38% of territory covered by mobile telephony• STD/ ISD public phones - more than a million in street

afford private subscription. corners, grocer shops and other public places and residential complexes for the not so affluent who can’t


Bridging the Digital Divide

• Internet Kiosks by private companies, ISPs and Bharat Sanchar (SOE) for public use.

• Universal Access/ Service Fund and Administrator

• Government (s)putting subsidised public Internet Kiosks in villages

• Content in Indian languages and machine translation of spoken and written English into Indian languages being developed

• Attendants (physically disabled persons, self-employed young) assist seekers for a fee provide e-mail addresses; browsing; video interviews.


Internationally• P-Telcos are also laying and using undersea cables

• Thousands of Satellite Earth Stations (SES) including

V-SATs providing global connectivity through

INTELSAT, INSAT and private Comsats.

• Greatest outcome - helping over five thousand ( and

increasing ) software BPO and call center companies

serve global companies ( export earning in the year

2006-’07 : $ 31 billion)


Telecom: Employment Productivity

• Prior to 1994 – 450 K employees &• 1 employee for 15 phones• In 2007 for PSUs 1 employee for 200 phones• P-Telcos: 1 employee for 2000 phones (New

Business Model of Franchisees & outsourcing • For PSUs: 80% Tech & 20% A/C2 Adm• P-Telcos: 80% Fin; Mktg; H R • 20% Technical


National Do Not Call (NDNC) Register

• Junk mail in the post, spam in the e-mail are familiar menaces

• Unsolicited calls; SMS; by tele-marketers are the new menace , especially for cell phone users

• NDNC Registry designed & implemented by the Regulator, TRAI.

• All telemarketers ( 15,000 having 450,000 lines by Sept’07) required to register with TRAI.

• India’s National Informatics Center (NIC) on contract with the TRAI installed the NDNC Registry; operates & maintains it.


National Do Not Call (NDNC) Register (2)

• Subscribers not wanting to receive unsolicited calls/SMS, have to register (free) with their service provider Telcos

• The NIC prepared a scrubbing module. Tel-marketers have to get the numbers (lists) they wish to call, scrubbed by the NIC. Numbers in the NDNC Registry are scrubbed (deleted) from the tele-marketeers’ lists.

• All this is an on-line operation • If after 45 days of a subscriber registering in the

NDNC; he receives a call the caller is fined $ 12.5 for every call!


National Do Not Call (NDNC) Register (3)

• India’s largest tele-marketer, Info Vision has 9000 people across 23 cetners in India an d 1000 people in US operation

• A telemarketer makes 100 to 120 calls/day• There are about 300,000 employees of

telemarketers ( 15,000)• 5% of telephone subscribers are receiving at

least one call from telemarketers• Tel-marketers’ calls in India now are about

30mln / day!


Telecom Outcomes

• From “Apply, apply - No Reply”

To bounteous supply• We now have 240mln phones, 85% mobiles

– far in excess of 11th plan target• Teledensity increased from 0.9 in 1994 to

21% now (2007)• Telephones work during rains and floods

and storms – New Technologies OF cables and Wireless


Telecom Outcomes contd..

• Cell-phones are now mass consumption appliances.• Their prices came down to one-tenth to one-fifteenth in

eh last 10 years• 85% cell subscriptions are prepaid

- no billing; revenue before costs/ service!- Users control expense

• Affordability increased 15 fold sine 1951; 6 fold in the last decade

• Electricians, drivers, plumbers, carpenters, masons, welders, street-vendors; mazdoors have phones!

• 600k/650k villages have telephones


Telecom Outcomes

Demonopolisation brought • New technologies• Capital costs came down (by 90% from

Rs.40,000/line to less than Rs.4,000/-)• Prices came down ( by 97% for ISD calls 90%

for others)• Myriad new services ( on the cell-phone-digital

cameras, Internet Access)• 90% reduction for global tele-links; enabling

India’s software companies to be competitive spread to Tier II cities [like Visakhapatnam, Mangalore, Coimbatore.....]


Telecom Outcomes

Demonopolisation brought contd..• BPO, KPO & Call Center companies

enabled to be born & remain competitive due to drop in band-width price & bandwidth even in II tier cities

• E-governance, e-procurement, e-education, anytime, anywhere banking; e-public relations

• India becoming R&D & design center for the world


Telecom Outcomes

Demonopolisation brought contd..• We are the lragest(7.5 mln cell phones /

month) market in the world-larger than China (5 mln/m)

• Rs. 90,000 cr of private investment came into the sector

• P-Telcos are investing about Rs. 40,000/yr

• Telecom revenues are Rs. 1,10,000 cr


Down side of Telecom Liberalisation

• Indian equipment manufacture almost dead• Indian R&D – reduced to “nominal”; hardly any

user• Indian contribution to network construction• Low-end; labour intensive (towers, batteries,

A/C; shelters, trenching & cable –laying…)• All network equipment imported/India

Assembled• Indian R&D personnel creating IPR for foreign

owners ( i/c Chinese!)


Reforms in Power & Telecom Sectors

•What must be done in Regulation:Revamp body to make it consumer-caringBuild expertise/ capacityFill with talentsAvoid civil servants, ex-monopolistsMake Appointments TransparentConstitute Regional & National Consumer CouncilsPublish Consultation PapersAssist Research by Consumer bodies & ProfessionalsTRAI to have offices in State capitalsFund consumer bodies to build them into counter wailing power against companies

16/16


Universal Service or Universal Access to Telephone

• Universal Service = A telephone in every home

• Universal Access: A public telephone within easy reach of users, usable non-discriminatorily by any body, at any time.

Eg: coin-boxes in public places ( Malls, shops, Rail/Bus stations, Post-offices etc.,)


PCI

AX TSP

Time

(a) Affordability

A PCI/ Tele-Service Price- PCI: Per Capita Income- TSP: Telephone Service Price- A: Affordability

Bring down price to increase affordability


Affordability of Telephone

1951 1994 2007

Revenue/Line*at current exchange parity

$ 125 $250 $125

Rev. as% of PCI

2.5 1.0 0.12

Affordability PCI

Tel. Svce.Price


Affordability of Electronic Devices:Ratio of Price of Device to Per Capita Income

1951 1974 1994 2007

Radio 2.0 0.5 0.02 0.005

TV Set NA 1.9 1.2 0.37

Year’s Telephone Service

2.5 1.0 1.0 0.12

PC NA NA 6.0 0.75


Universal Service Fund (USF)

• All companies to contribute 5% of revenues to the USF (Currently Rs. 60 bln ($ 1.5 bln)

• USF Administrator (USFA) in the DOT• District-wise (>700 in India) villages without phones

listed; estimates of capital cost ,maintenance & operations are made for providing the VPTs in designated villages

• USFA invites bids from enterprises; criterion for selection; Least subsidy demanded

• Services to be provided as well as where interconnection is available specified

• Amount available: $ 2.5 bln


USF Objectives

• Telephone (s) in the village; school; library

• Internet connection (s)

• Subsidised service to certain categories ( farmers, welfare institutions-child care & old age home)

• E-governance ( services and information to farmers, job-seekers etc.)


Territorial Coverage

• To extend cellular mobile telephone coverage through out the national territory ( 3.3 mln km2)

• 330,000 RBSs are required• 110,000 RBSs exist covering 38% of the

territory• USFA is inviting bids to put up RBS towers,

antennae, shelter, power; A/C and connect by Optical Fiber Cable to the nearest RBS Controller & Mobile Switching Center (MSC)

• USFA would lease them to Telcos


Territorial Coverage (2)

• RBS tower provision is a new business line & many Telcos and non-Telcos are entering this business

• In the Y 2007 program USAF is funding 7,871 towers (RBS) to connect 3.0 mln subscribers.

• 4 companies are engaged now. BSNL, the PSU won 75% of the contracts.

• USF subsidy planned for 20,000 RBSs @ $ 2.5 bln


• A scheme in which BPO work is taken to rural areas to create job opportunities there.

• Broad-band connectivity from infrastructure providers (NPGC, RaiL Tel, GAIL, besides Telcos) to villages

• Selected village graduates, intensively trained in communication skills, English and computer skills & engaged

• Groups of 100 graduates per villages cluster ( within 7 km radius-bicycling distance) assigned BPO work

• Audio-video conferencing in work-places

• Urbanizing the village without moving people to cities• Prosperity to the village-up grades for schools, in health, housing

water and sanitation; roads; electrical power etc. Coastal Villages in Andhra Pradesh show the way led by Satyam computer Services thro’ a philanthropic foundation (By raju)

GRAM IT (IT & ITES)


Dhanyawad:

Thank You

amazing outcomes of telecom de-monopolisation in india by dr t.h. chowdary* * director: center for...

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