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Growth of Telecom Sector in India

How telecommunication turned Free Indias

Economic dream into reality?

Executive Summary:-

World-class telecommunications infrastructure is key to economicand social development of the country. It is critical for thedevelopment of Information Technology; sectors like services,travel, tourism, hotels, airlines are linked to communications andwould get a fillip. It is also anticipated that a major part of the GDP

of the country would be contributed and supported by this sector.

The cellular industry has taken off fast and had a major positiveimpact on the economy and lifestyles of people. It is in the limelightand is seeing rapid growth rates each year with strong underlyingdemand drivers.

India is one of the fastest growing telecom markets in the world with

an addition of more than 6 million connections per month. FDIinflow in Indian Telecom sector is the highest among all sectors. It isemerging as telecom manufacturing hub. Year 2007 has beendeclared as "Year of Broadband" in India.

What Is Telecommunication?

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Telecommunications is the transmission of data and informationbetween computers using a communications link such as a standardtelephone line. Typically, a basic telecommunications system wouldconsist of a computer or terminal on each end, communication

equipment for sending and receiving data, and a communicationchannel connecting the two users. Appropriate communicationssoftware is also necessary to manage the transmission of databetween computers. Telecom in the real sense means transfer of information between two distantpoints in space. The popular meaning of telecom always involves electrical signals and now a days people exclude postal or any other raw telecommunication methods from its meaning.Therefore, the history of Indian telecom can be started with the introduction of telegraph.

Services:-

Electronic mail (e-mail) is a message transmitted from one personto another through computerized channels. Both the sender and

receiver must have access to on-line services if they are notconnected to the same network. E-mail is now one of the mostfrequently used types of telecommunication.

Voice mail is similar to an answering machine in that it permits acaller to leave a voice message in a voice mailbox. Messages aredigitized so theCaller message can be stored on a disk.

Internet is a continuously evolving global network of computernetworks that facilitates access to information on thousands oftopics. The Internet isUtilized by millions of people daily.

Facsimile (fax) equipment transmits a digitized exact image of a document over telephone lines. At the receiving end, the fax machine converts the digitized databack into its original form.

Videoconferencing involves the use of computers, television cameras, and communications software and equipment. This equipment makes it possible toconduct electronic meetings while the participants are at different locations.

General Packet Radio Service (GPRS) is a new non-voice valueadded service that allows Mobile Phones to be used for sending andreceiving data over an Internet Protocol (IP)-based network. GPRSas such is a data bearer that enables wireless access to data networkslike the Internet, enabling users to access E-mail and other Internetapplications using Mobile Phones

With GPRS you can enjoy a continuous wireless connection to datanetworks (Internet) and access your favorite web sites, entertainmentservices and other web applications.

GPRS is an extended service of GSM Network adding the ability tosurf the Internet on your phone at slightly higher speeds. GPRS

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Internet surfing is comparable to dial-up Internet service in it's speed,operating at around 4 to 5 Kilobytes per second.

Multimedia Messaging Service (MMS)

With GPRS and services based on GPRS introduced, there has been

renewed spark in this sector. However not all service operators are offering the service as yet. The quality of the pictures has scope to improvement aswell. Camera compatibility in cell phones is a feature in demand for new purchases. New phone purchases are generating demand for camera phone compatibility and accessories. Onset offaster data delivery technologies such as GPRS

Dial-in Services

Many cellular service providers offer a number of dial-in services which are very useful in day to day life like Dial for a Cab, Pizza, Delivery, Flowers, Weather, Astrologer, Ask meservice, Flight Information On Line, Food On Line, Ticket On Line, Vastu On Line, Dentist On - Line.

Short Messaging Services (SMS)

SMS (text messaging) allows a short message to be sent and receivedon cell phones, including from the Internet mail server. SMS became a paid service from a free/ fixed charge service. SMS contributes 12 per cent of the revenuesfor cellular operators at the national level. The volume of short messages grew by over three times during the year 2002, with the figure touching 2.45 billion, up from 806 million messagesin the year 2001.

Introduction to Telecom

The telecom industry is one of the fastest growing industries in India.India has nearly 200 million telephone lines making it the thirdlargest network in the world after China and U.S.A with a growth

rate of 45%, Indian telecom industry has the highest growth rate inthe world.History of Indian Telecommunications started in 1851 when the firstoperational land lines were laid by the government near Calcutta(seat of British power). Telephone services were introduced in Indiain 1881. In 1883 telephone services were merged with the postalsystem. Indian Radio Telegraph Company (IRT) was formed in1923. After independence in 1947, all the foreign telecommunication

companies were nationalized to form the Posts, Telephone andTelegraph (PTT), a monopoly run by the government's Ministry ofCommunications. Telecom sector was considered as a strategicservice and the government considered it best to bring under state'scontrol.

The first wind of reforms in telecommunications sector began toflow in 1980s when the private sector was allowed in

telecommunications equipment manufacturing. In 1985, Departmentof Telecommunications (DOT) was established. It was an exclusiveprovider of domestic and long-distance service that would be its ownregulator (separate from the postal system). In 1986, two whollygovernment-owned companies were created: the Videsh Sanchar

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Nigam Limited (VSNL) for international telecommunications andMahanagar Telephone Nigam Limited (MTNL) forService in metropolition area.

In 1990s, telecommunications sector benefited from the generalopening up of the economy. Also, examples of telecom revolution in

many other countries, which resulted in better quality of service andlower tariffs, led Indian policy makers to initiate a change processfinally resulting in opening up of telecom services sector for theprivate sector. National Telecom Policy (NTP) 1994 was the firstattempt to give a comprehensive roadmap for the Indiantelecommunications sector. In 1997, Telecom Regulatory Authorityof India (TRAI) was created. TRAI was formed to act as a regulatorto facilitate the growth of the telecom sector. New National Telecom

Policy was adopted in 1999 and cellularservices were also launche in the same year.Telecommunication sector in India can be divided into two segments: Fixed Service Provider (FSPs), and Cellular Services. Fixed line services consist of basic services, national or domesticlong distance and international long distance services. The state operators (BSNL and MTNL), account for almost 90 per cent of revenues from basic services. Private sector services are

presently available in selective urban areas, and collectively account for less than 5 per cent of subscriptions. However, private services focus on the business/corporate sector, and offerreliable, high- end services, such as leased lines, ISDN, closed user group and videoconferencing.

What is CDMA & GSM ?

In cellular service there are two main competing networktechnologies: Global System for Mobile Communications (GSM)and Code Division Multiple Access (CDMA). Cellular carriers

including Sprint PCS, Cingular Wireless, Verizon and T-Mobile use one or the other. Understanding the difference between GSM and CDMA will allow you tochoose a carrier that uses the preferable network technology for your needs.

The GSM Association is an international organization founded in1987, dedicated to providing, developing, and overseeing theworldwide wireless standard of GSM. CDMA, a proprietary standarddesigned by Qualcomm in the United States, has been the dominantnetwork standard for North America and parts of Asia. However,GSM networks continue to make inroads in the United States, as

CDMA networks make progress in other parts of the world. Thereare camps on both sides that firmly believe either GSM or CDMAarchitecture is superior to the other. That said, to the non-investedconsumer who simply wants bottom line information to make achoice, the following considerations may be helpful.

Coverage:

The most important factor is getting service in the areas you will beusing your phone. Upon viewing competitors' coverage maps youmay discover that only GSM or CDMA carriers offer cellular servicein your area. If so, there is no decision to be made, but most peoplewill find that they do have a choice.

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Data Transfer Speed:

With the advent of cellular phones doing double and triple duty asstreaming video devices, podcast receivers and email devices, speed is important to those who use the phone for more than making calls. CDMAhas been traditionally faster than GSM, though both technologies continue to rapidly leapfrog a long this path. Both boast "3G" standards, or 3rd generation technologies.

Subscriber Identity Module (SIM) cards:

In the United States only GSM phonesuseSIM cards. The removableSIM cardallows phones to be instantly activated, interchanged, swappedout and upgraded, all without carrier intervention. The SIM itself is tied to the network, rather than the actual phone. Phones that are card-enabled can be used with any GSM carrier.

Roaming:

For the most part, both networks have fairly concentrated coveragein major cities and along major highways. GSM carriers, however,have roaming contracts with other GSM carriers, allowing wider

coverage of more rural areas, generally speaking, often withoutroaming charges to the customer. CDMA networks may not coverrural areas as well as GSM carriers, and though they may contractwith GSM cells for roaming in more rural areas, the charge to thecustomer will generally be significantly higher.

International Roaming:

If you need to make calls to other countries, a GSM carrier can offer

international roaming, as GSM networks dominate the world market.If you travel to other countries you can even use your GSM cellphone abroad, providing it is a quad-band phone (850/900/1800/1900

MHz). By purchasing a SIM card with minutes and a local number in the country you are visiting, you can make calls against the card to save yourself international roaming charges fromyour carrier back home. CDMA phones that are not card-enabled do not have this capability, however there are several countries that use CDMA networks. Check with your CDMA providerfor your specific requirements.

HISTORY OF THE TELECOM SECTOR IN

INDIA :-

The telegraph act of 1885 governed the telecommunications

sector. Under this act, the government was in-charge of

policymaking and provision of services . Major changes in telecommunications in India began in the 1980s.Under the Seventh Plan (1985-90), 3.6 percent of total outlay was set aside for communications and since 1991, more than 5.5 percent is spent on it (Figure 1). The initial phase of telecomreforms began in 1984 with the creation of Center for Department of Telematics (C-DOT) for developing indigenous technologies and private manufacturing of customer premise equipment.Soon after, the Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) were set up in 1986. The Telecom Commission was established in 1989.

When telecom reforms were initiated in 1994, there were threeincumbents in the fixed service sector, namely DoT (Department ofTelecom), MTNL and VSNL. Of these, DoT operated in all parts ofthe country except Delhi and Mumbai. MTNL operated in Delhi andMumbai and VSNL provided internationaltelephony.Given its all-India presence and policy-making powers, the DoT enjoyed amonopoly in the telecom sector prior to the major telecom reforms.However, subsequent to the second phase of reforms in 1999, which

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included restructuring the DoT to ensure a level playing field amongprivate operators and the incumbent, the service-providing sector ofDoT was split up and called Department of Telecom Services (DTS).DTS was later corporatized and renamed Bharat Sanchar NigamLimited (BSNL). This meant separation of the incumbent service

provider from the policy-maker. Broadly, DoT is now responsible forpolicy-making, licensing and promotion of private investments inboth telecom equipment and manufacture and provision of telecomservices. BSNL, a corporate body, is responsible for the provision ofservice.

A crucial aspect of the institutional reform of the Indian telecomsector was setting up of an independent regulatory body in 1997

the Telecom Regulatory Authority of India (TRAI), to assureinvestors that the sector would be regulated in a balanced and fairmanner. TRAI has been vested with powers to ensure itsindependence from the government. The government has retained thelicensing function with itself. The main issue with respect tolicensing has not been whether it should be with the regulator butthat the terms and conditions of licensing should involveconsultations with TRAI to ensure transparency in the bidding

process Some of the main functions of TRAI include fixing tariffsfor telecom services, dispute-settlement between service providers,protecting consumers through monitoring of service quality andensuring compliance to license conditions, setting service targets andpricing policy for all operators and service providers.

Further changes in the regulatory system took place with the TRAIAct of 2000 that aimed at restoring functional clarity and improving

regulatory quality. TRAI can frame regulations and can levy fees andcharges for telecom services as deemed necessary. The regulatorybody also has a separate fund (called the TRAI General Fund) tofacilitate its functioning. To fairly adjudicate any dispute betweenlicensor and licensee, between service provider, between serviceprovider and a group of consumers, a separate disputes settlementbody was set up called Telecom Disputes settlement and appellate tribunal (TDAST).

Actually, telecommunications is not a new concept. It began in the mid-1800s with the telegraph, whereby sounds were translated manually into words; then the telephone, developed in 1876,

transmitted voices; and then the teletypewriter, developed in the early 1900s, was able to transmit the written word.

Since the 1960s, telecommunications development has been rapidand wide reaching. The development of dial modem technologyaccelerated the rate during the 1980s. The 1990s have s een the greatest advancement intelecommunications..

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Deregulation and new technology have created increasedcompetition and widened the range of network services availablethroughout the world. This increase in telecommunicationcapabilities allows businesses to benefit from the informationrevolution in numerous ways, such as streamlining their inventories,

increasing productivity, and identifying new markets. In thefollowing sections, the technology of modern telecommunicationswill be discussed.

Private Participation in Telecom :-

For the provision of basic services, the entire country was dividedinto 21 telecom circles, excluding Delhi and Mumbai (Singh et. al.1999). With telecom markets opened to competition, DoT andMTNL were joined by private operators but not in all parts of thecountry. By mid-2001, all six of the private operators in the basicsegment had started operating (Table 1). Table 2 shows the numberof village public telephones issued by private licensees by 2002.

After a recent licensing exercise in 2002, there exists competition inmost service areas. However, the market is still dominated by theincumbent. In December 2002, the private sector provided

approximately 10 million telephones in fixed, WLL (Wireless LocalLoop) and cellular lines compared to 0.88 million cellular lines inMarch 1998 (DoT Annual Report, 2002). 72 per cent of the totalprivate investment in telecom has been in cellular mobile servicesfollowed by 22 per cent in basic services. After the recent changes,the stage is now set for greater competition in most service areas forcellular mobile Over time, the rise in coverage ofcellular mobile will imply increased competition evenfor the basic service market because of competition among basic and cellular mobile services.

Teledensity and Village Public Phones (VPTs) :-

India's rapid population increase coupled with its progress in telecomprovision has landed India's telephone network in the sixth positionin the world and second in Asia (ITU). The much publicized statisticabout telecom development in India is that in the last five years, thelines added for basic services is 1.5 times those added in the last five

decades! The annual growth rate for basic services has been 22percent and over 100 percent for internet and cellular services. AsDossani (2002) argues, the comparison of teledensity of India withother regions of the world should be made keeping in mind theaffordability issues. Assuming households have a per capita incomeof $350 and are willing to spend 7 percent of that total income on

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communications, then only about 1.6 percent of households will beable to afford $30 (for a $1000 investment per line).

Teledensity has risen to 4.9 phones per 100 persons in Indiacompared to the average 7.3 mainlines per 100 people around the

world. Figure 2 shows the growth rate of fixed and cellular mobilesubscription between 1998 and 2002. Although, the coverage is stillmuch higher in urban areas - 13.7 in urban areas compared to1.4 inrural areas, the government has made efforts to connect villagesthrough village public telephones (VPT) and Direct Exchange Lines(DEL). This coverage increased from 4.6 lakhs in March 2002 to5.10 lakhs in December 2002 for VPT and from 90.1 lakhs in Marchto 106.6 lakhs in December 2002 for DELs. BSNL has been mainlyresponsible for providing VPTs; more than 84 percent of the villageswere connected by 503610 VPTs with private sector also providing7123 VPTs .The overall telecom growth rate is likely to be high for some years,

given the increase in demand as income levels rise and as the shareof services in overall GDP increases. The growth rate will be evenhigher due to the price decrease resulting from a reduction in cost of

providing telecom services. A noteworthy feature of the growth rateis the rapid rate at which the subscriber base for cellular mobile hasincreased in the last few years of the 1990s, which is not surprisingin view of the relatively lower subscriber base for cellular mobile.

Foreign Participation:-

India has opened its telecom sector to foreign investors up to 100percent holding in manufacturing of telecom equipment, internet

services, and infrastructure providers (e-mail and voice mail), 74percent in radio-paging services, internet (international gateways)and 49 percent in national long distance, basic telephone, cellularmobile, and other value added services (FICCI, 2003). Since 1991,foreign direct investment (FDI) in the telecom sector is second onlyto power and oil - 858 FDI proposals were received during 1991-2002 totaling Rs. 56,279 crores (Figure 4) (DoT Annual Report,2002). Foreign investors have been active participants in telecom

reforms even though there was some frustration due to initialdithering by the government. Until now, most of the FDI has come inthe cellular mobile sector partly due to the fact that there have beenmore cellular mobile operators than fixed service operators. Forinstance, during the period 1991-2001, about 44 percent of the FDIwas in cellular mobile and about 8 percent in basic service segment.

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This total FDI includes the categories of manufacturing andconsultancy and holding companies

Tariff-setting :-

An essential ingredient of the transition from a protected market tocompetition is the alignment of tariffs to cost-recovery prices. Inbasic telecom for example, pricing of the kind that prevailed in Indiaprior to the reforms, led to a high degree of cross-subsidization andintroduced inefficient decision-making by both consumers andservice-providers. Traditionally, DoT tariffs cross-subsidized thecosts of access (as reflected by rentals) with domestic andinternational long distance usage charges (Singh et. al. 1999).

Therefore, re-balancing of tariffs - reducing tariffs that are abovecosts and increasing those below costs - was an essential pre-condition to promoting competition among different serviceproviders and efficiency and genral.TRAI issued its first directive regarding tariff-setting following NTP99 aimed at re-balancing tariffs and to usher in an era of competitiveservice provision. Subsequently, it conducted periodic reviews andmade changes in the tariff levels, if necessary. Table 4 shows the

current level of telephone charges in India effective from January,2003. Re-balancing led to a reduction in cross-subsidization in thefixed service sector.

Service Quality :-One of the main reasons for encouraging private participation in theprovision of infrastructure rests on its ability to provide superiorquality of service. In India, as in many developing countries, low

teledensity resulted in great emphasis being laid on rapid expansionoften at the cost of quality of service. One of the benefits expectedfrom the private sector's entry into telecom is an improvement in thequality of service to international standards. Armed with financialand technical resources, and greater incentive to make profits, privateoperators are expected to provide consumers value for their money.Telephone faults per 100 main lines came down to 10.32 and 19.14in Mumbai and Delhi respectively in 2002-03 compared to 11.72 and

26.6 in 1997-98 (Figures 6 and 7). Quality of service was identifiedas an important reform agenda and TRAI has devised QOS (Qualityof Service) norms that are applicable across the board to all operators(Singh et. al. 1999).

Pre reform period and Telecommunication in India :-

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Before 1990's Telecommunication services in India were completegovernment Monopoly - the Department of Telecommunication(DoT). Government also retained the rights for manufacturing ofTelecommunication equipments. MTNL and VSNL were created in

the year 1986.Early 1990's saw initial attempts to attract privateinvestment. Telecommunication equipment manufacturing was delicensed in the year 1991.The first step toward deregulation and beginning of liberalization andprivate sector participation was the announcement of NationalTelecom Policy 1994.NTP 1994 , for the first time, allowedprivate/foreign players to enter the 'basic' and the 'new cellularmobile section. FDI up to 49% of total equity was also allowed inthese sectors. The policy allowed one private service provider tocompete in basic services with the incumbent DoT in each DoTinternal circle. It allowed duopoly in cellular mobile services in eachcircle. As part of the implementation of the NTP 94, licenses wereissued against license fees through a bidding process. This policyinitiated the setting up of an independent regulatorthe TelecomRegulatory Authority of India (TRAI), which was established in

1997. The main objective of TRAI is to provide an effectiveregulatory framework to ensure fair competition while, at the sametime, protect the interest of the consumers.Liberalization and reforms in Telecom sector since early 1990's tilldate are brefied below.

1991-92:1. On 24th July 1991, Government announced the New Economic Policy.2. Telecom Manufacturing Equipment license was delicensed in 1991.3. Automatic foreign collaboration was permitted with 51 per cent equity by the collaborator.

1992-93:

Value added services were opened for private and foreign players onfranchise or license basis. These included cellular mobile phones,radio paging, electronic mail, voice mail, audiotex services, videotexservices, data service using VSATs and video conferencing.

1994-95:

1. The Government announced a National Telecom Policy 1994 in September 1994. It opened basic telecom services to private participation including foreign investment.

2. Foreign equity participation up to 49 per cent was allowed in basictelecom services, radio paging and cellular mobile. For value addedservices the foreign equity cap was fixed at 51 per cent.3. Eight cellular licensees for four metros were finalized.

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1996-97:1. TRAI was set up as an autonomous body to separate the regulatory functions from policy formulations and operational functions .2. Coverage of the term "infrastructure" expanded to include telecom to enable the sector to avail of fiscal incentives such as tax holiday and concessional duties.

3. An agreement between Department of Telecommunication (DoT)and financial institutions to facilitate funding of cellular and basictelecom projects.

4. External Commercial Borrowing (ECB) limits on telecom projectsmade flexible with an increased share from 35 per cent to 50 per centof total project cost.5. Internet policy was finalized.

1998-99:FDI up to 49 per cent of total equity, subject to license, permitted in companies providing Global Mobile Personal Communication (GMPC) by satellite services.

1999:1. National Telecom Policy 1999 was announced which allowed multiple fixed Services operators and opened long distance services to private operators.2. TRAI reconstituted: clear distinc tion was made between the recommendatory and regulatory functions of the Authority.3. DOT/MTNL was permitted to start cellular mobile telephone service.4. To separate service provid ing funct ions f rom policy and l icensing functions , Department of Telecom Services was set up.5. A package for migrat ion f rom f ixed l icense fee to revenue sharing offered to exi st ing cel lu lar and basic service providers .6. F irst phase of re-balancing of tarif f structure s tarted. STD and ISD charges were reduced by 23 per cent on an average.7. Voice and data segment was opened to full competition and foreign ownership increased to 100 per cent from 49 per cent previously.

2000-01:

1. TRAI Act was amended. The Amendment clarified andstrengthened the recommendatory power of TRAI, especially with

respect to the need and timing of introduction of new servicesprovider, and in terms of licenses to aServices provider.

2. Department of Telecom Services and Department of Telecom operations corporatized by creating Bharat Sanchar Nigam Limited.3. Domestic long distance services opened up without any restriction on the number of operators.

4. Second phase of tariff rationalization started with furtherreductions in the long distance STD rates by an average of 13 percent for different distance slabs and ISD rates by 17 per cent.5. Internet Service Providers were given approval for setting up of

International Gateways for Internet using satellite as a medium inMarch 2000.6. In August 2000, private players were allowed to set upinternationalGateways via the submarine cable route.

2001-02:

1. Communication Convergence Bill, 2001 was introduced in August2001.

2. Competition was introduced in all services segments. TRAIrecommended opening up of market to full competition andintroduction of new services in the telecom sector. The licensingterms and conditions for Cellular Mobile were simplified toencourage entry for operators in areas without effective competition.

3. Usage of Voice over Internet Protocol permitted for internationalTelephony service.

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4. The five-year tax holiday and 30 per cent deduction for the nextfive years available to the telecommunication sector till 31st March2000 was reintroduced for the units commencing their operations onor before 31st March 2003. These concessions were also extended tointernet servicesProviders and broadband networks.

5. Thirteen ISP's were given clearance for commissioning ofinternational gateways for Internet using satellite medium for 29gateways.6. License conditions for Global Mobile Personal Communicationsby

Satelite finalized in November 2001.

7. National Long Distance Service was opened up for unrestrictedentry with the announcement of guidelines for licensing NLD

operators. Four companies were issued Letter of Intent (LOI) forNational Long Distance Service of which three licenses have beensigned.8. The basic services were also opened up for competition. 33 BasicService licenses (31 private and one each to MTNL and BSNL) wereissued up to 31stDecember 2001.9. Four cellular operators, one each in four metros and thirteen werepermitted with 17 fresh licenses issued to private companies in

September/October 2001. The cell phone providers were givenfreedom to provide, within their area of operation, all types of mobileservices equipment, including circuit and/or package switches thatmeet the relevant International Telecommunication Union (ITU)/Telecom Engineering Centre10. Wireless in Local Loop (WLL) was introduced for providingtelephone connection in urban, semi-urban and rural areas.12. Government allowed CDMA technology to enter the Indianmarket.13. Reliance, MTNL and Tata were issued licenses to provide theCDMABased service in the country.

14. TRAI recommended deregulating regulatory intervention incellular tariffs, which meant that operators need no longer have priorapproval of the regulator for implementing tariff plans except undercertain conditions.

2002-03:1. International long distance business opened for unrestricted entry.2. Telephony on internet permitted in April 2002.3. TRAI finalized the System of Accounting Separation (SAS) providing detailed accounting and financial system to be maintained by telecom service providers.

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2003-04 :

1. Unified Access Service Licenses regime for basic and cellularservices was introduced in October 2003. This regime enabledservices providers to offer fixed and mobile services under one

license. Consequently 27 licenses out of 31 licenses converted toUnified Access Service Licenses.2. Interconnection Usage Charge regime was introduced with theview of providing termination charge for cellular services and enableintroduction of Calling Party Pays regime in voice telephonysegment.3. The Telecommunication Interconnection Usage ChargesRegulation 2003 was introduced on 29th October 2003 which

covered arrangements among service providers for payment ofInterconnection Usage Charges for Telecommunication Services andcovered Basic Service that includes WLL (M) services, CellularMobile Services, and Long Distance Services(STD/ISD) throughout the territory of India.

4. The Universal Service Obligation fund was introduced as amechanism for transparent cross subsidization of universal access intelecom sector. The fund was to be collected through a 5 per centlevy on the adjusted grossRevenue of all telecom operators.

5. Broadcasting notified as Telecommunication services underSection2(i)(k) of TRAI Act.

2004-05:

1. Budget 2004-05 proposed to lift the ceiling from the existing 49

per cent to 74 per cent as an incentive to the cellular operators to fallin line with the

New unified licening norm.

2. 'Last Mile' linkages permitted in April 2004 within the local areafor ISP's for establishing their own last mile to their customers.3. Indoor use of low power equipments in 2.4 GHz band de-licensedfrom August 2004.4. Broadband Policy announced on 14th October 2004 . In this policy, broadband had been defined as an "always-on" data connection supporting interactive services including internetaccess with minimum download speed of 256 kbps per subscriber.

5. The Telecommunications (Broadcasting and Cable Services)Interconnection Regulation 2004 was introduced on 10th December2004.6. BSNL and MTNL launched broadband services on 14th Jan.2005.7. TRAI announced the reduction of Access Deficit Charge (ADC)

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by 41 per cent on ISD calls and by 61 per cent on STD calls whichwere applicableFrom 1st February 2005.

2005-2006:

1. Budget 2005-2006 cleared a hike in FDI ceiling to 74 per centfrom the earlier limit of 49 per cent. 100 per cent FDI waspermitted in the area of telecom equipment manufacturing andprovision of IT enabled services.2. Annual license fee for National Long Distance (NLD) as well asInternational Long Distance (ILD) licenses reduced to 6 per cent ofAdjusted Gross Revenue (AGR) with effect from 1st January 2006.

3. BSNL and MTNL launched the 'One-India Plan' with effect from1st March 2006 which enable the customers of BSNL and MTNL tocall from one end of India to other at the cost of Rs. 1 per minute,any time of the dayTo phone.

4. TRAI fixed Ceiling Tariff for International Bandwidth, CeilingTariff for higher capacities reduced by about 70 per cent and forlower capacity by 35Percent.

5. Regulation on Quality of Service of Basic and Cellular MobileTelephone Services 2005 introduced on 1st July 2005.6. BSNL announced 33 per cent reduction in call charges for alltheCountries for international calls.

7. Quality of Service (Code of Practice for Metering and BillingAccuracy) Regulation 2006 introduced on 21st March 2006.

What is Target Measure in 11th plan:

11th plan (2007-20012):

FDI in Telecom sector has increased in recent years with value of 81.62 billion with share of 10% in total inflow during January 2000 to June 2005.

This is mainly in telecom services and not in telecom manufacturing

sector. Therefore, it is essential to enhance the prospect for inflow ofincreased funds. The NTP 1999 sought to promote exports oftelecom equipments and services. But till date export of telecomequipment remains minimal. Most of the state-of-the-art telecomequipments including mobile phones are imported from abroad.There is thus immense potential for indigenous manufacturing in

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India. Certain measures like financial packages, formation of atelecom export promotion council, creation of integrated facilities fortelecom equipment through SEZ and encouraging overseas vendorsto set up facilities in India, are required for making India a hub fortelecom equipment manufacturing and attract FDI.

The telecom sector has shown robust growth during the past fewyears. It has also undergone a substantial change in terms of mobileversus fixed phones and public versus private participation. Thefollowing table and discussions from the report of the working reporton the telecom sector for the 11th plan (2007-2012)will show thegrowth of telecom sector since 2003:

Important policy initiatives:-

Broadband policy unveiled in 2004 - Targets 20 millionbroadband subscribers by 2010

Focus on making India a regional Telecom manufacturing hub

FDI in Telecommunication:-

8

FDI Inflow after liberalisation

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FDI limit increased from 49% to 74%

100% FDI permitted under automatic route in the

manufacturing sector

Deregulation virtually complete and Unified Licensing regime

Interconnection Usage Charge framework in place

Exemption from customs duty for import of Mobile SwitchingCentres

Major Player of Telecommunication:-Airtel

Bharti Airtel - Integrated operator with presence in all segments

Leads the mobile segment in the country

Vodafone

Represents the largest foreign investment in the telecom services sector in India

Vodafone is acquiring Hutch in $415 million

Reliance

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Reliance Communications - Largest player in India in theCDMA segment

Plans a GSM network

Idea

It is the company of Aditya Birla Group.

It is the player of GSM sector.

Spice

It is the player of GSM.

It provide service in Punjab and Karnatka.

Tata Indicom

Tata Teleservices - Integrated operator (with VSNL) withpresence in all segments

Provides CDMA services in 20 circles

BSNL

BSNL - Incumbent service provider and World's 7th largestTelecommunications Company providing comprehensive rangeof telecom services in India

Services include Wireline, CDMA mobile, GSM Mobile,Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIPservices, IN Services etc.

MTNL

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MTNL - State owned operator covering the cities of Mumbai anDelhi

Provides both fixed and mobile services

Recent developments are indicative of the paradigm shiftin wireless growth :-

Of the 160 million subscribers, more than 90 million subscribersadded in the last two years

More than 5 million subscribers added every month since Dec.2005, translating into the highest growth rate in the world

On a comparison of growth since introduction of mobiletelephony, India surpasses China at the same stage of marketevolution

In the 11th yearIndia 76 mn. China 24 mn.

Indias telecom market has grown rapidly in

the last few years

2

Subscriber Annual Growth Rate

18

India China comparison

0

250

500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Year

MillionSubscribers

China

India


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Fixed Line V/S Mobile

Telephony Subscribers (Wireless and Landline): 281.51 million (Jan.2008)

Cell phones: 248.23 million (April 2008)

Land Lines: 39.42 million (March 2008)

Yearly Cellphone Addition: 83 million (2007)

Monthly Cellphone Addition: 10.16 million (March 2008)

Teledensity: 26.22% (March 2008)

Projected teledensity: 500 million, 40% of population by 2010.

Broadband connection: 3.47 million (Feb 2008)

3

Fixed Line vs Mobile

Landlines: Landline service in India is primarily run by BSNL/MTNL and Reliance Infocomm though there are several other private players too, such as Touchtel andTata Teleservices. Landlines are facing stiff competition from mobile telephones. The competition has forced the landline services to become more efficient. The landline network quality hasimproved and landline connections are now usually available on demand, even in high density urban areas.

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Mobile Cellular: The mobile service has seen phenomenal growthsince 2000. In September 2004, the number of mobile phoneconnections have crossed fixed-line connections. Currently there arean estimated 282.29 million mobile phone users in India comparedto43.73 million fixed line subscribers. India primarily follows the

GSM mobile system, in the 900 MHz band. Recent operators alsooperate in the 1800 MHz band. The dominant players are Airtel,Reliance Infocom, Vodafone, Idea cellular and BSNL/MTNL. Thereare many smaller players, with operations in only a few states.International roaming agreements exist between most operators andmany foreign carriers

Internet Users: Number of Internet users in India is the 4th largest in the world. Internet population is expected to grow to 132 million users by 2009.

Broadband Internet access: Broadband connections have continued growth since beginning on 2006. At t he end of November 2006total broadband connections in the country have reached 2 million. However the definition of broadband is pretty constrained in India compared to other countries. A 256

kbit/s always on connection is the definition of broadband in India compared to 2 Mbit/s in other countries.However most ISPs,especially the Government managed

companies are now offering speeds up to 2 Mbit/s.

BSNL, Sify, MTNL, Airtel, Netcom, Reliance and Hathway aresome of the major ISPs in India. TRAI has defined broadband as 256kbit/s or higher. However, many ISPs advertise their service asbroadband but don't offer the suggested speeds. Recently, Airtel and

Hathway have begun offering unlimited downloads. Broadband inIndia is more expensive as compared to Western Europe/UK andUSA. After economic liberalization in 1992, many private ISPs haveentered the market, many with their own local loop and gatewayinfrastructures. The telecom services market is regulated by TRAI.ADSL providers include:

Internet Usage Stats and Telecommunications Market Report

Internet Usage and Population Statistics:

YEAR Users Population%

Pen.UsageSource

1998 1,400,000 1,094,870,677

0.1

% ITU

1999 2,800,000 1,094,870,6770.3%

ITU

2000 5,500,000 1,094,870,6770.5%

ITU

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2001 7,000,000 1,094,870,6770.7%

ITU

2002 16,500,0001,094,870,6771.6%

ITU

2003 22,500,0001,094,870,6772.1%

ITU

2004 39,200,0001,094,870,6773.6%

C.I.Almanac

2005 50,600,0001,112,225,8124.5%

C.I. Almanac

2006 40,000,0001,112,225,8123.6%

IAMAI

2007 42,000,0001,129,667,5283.7%

IWS

Gross National Income:

GNI per capita is US$ 1,140 ('04) according to World Bank.

India Broadband Subscribers:

188,600 broadband subscribers as of 1Q/2004 per WMRC.

Call Rates Slashed: Communication rates in India fell sharply after the year 2000 when infrastructure improvements and entry of many major players

made Indian Telecom a highly competitivesector.

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5

MOBILE TARIFFS IN INDIA ARE LOWEST WHEN

COMPARED TO GLOBAL BENCHMARKS

Several Indian firms gaining a foothold in the global market :-

Indian service providers acquiring scale in the International LongDistance market through acquisitions

Acquisitions - FLAG by Reliance, Tyco and Teleglobe byVidesh Sanchar Nigam Limited

VSNL is now the world's fifth largest carrier of voice globally Reliances FLAG network connects with 28 countries. FLAGs

FALCON cable system when completed would connect 12countries with 25 international cable landing stations

Bharti-Singtel and VSNL investments in undersea cable Tata teleservices-VSNL, Bharti, Reliance have end-to-end

presence in ILD, NLD and Access; BSNL has announced plansto get into ILD

Focus on corporate connectivity - IPLCs, Frame relay, VPNs

The following lists show some of the markettrends in India:

Present Trends in GSM Mobile Segment: Intensive subscribers growth.

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60% of subscribers are prepaid. Majority of revenue are from voice-based services. Compatible handsets pushing Java Games and GPRS usage. Content services mainly SMS based. A huge market for cheaper handsets.

Present Trends in CDMA Segment WLL (M) and WLL (fixed):

Rapid subscriber additions. 30% are prepaid, rest postpaid. Handsets are available for as low as $12 (with subscription). Smart wireless and Internet access. SMS over fixed line.

Present Trends in Fixed Phones Segment:

The growth compared to mobile segment is negligible. Public sectors are constantly losing their market share to privateoperators. The consumers are shifting towards the mobile segment. Low subscribers addition.

REPORTS:-

India Internet and Telecommunications Reports :-

India - Key Statistics and Telecommunications Market ReportIndia continues to be one of the fastest growing major telecommarkets in the world. Sweeping reforms introduced by successiveIndian governments over the last decade have dramatically changedthe nature of telecommunications in the country. The mobile sectorhas grown more than tenfold from 2001 to around 60 millionsubscribers by mid-2005. Whilst GSM technology still dominates,CDMA has quickly grabbed 23% of this market. The mobile industryshould continue to boom. Fixed-lines, although not as spectacular asmobiles, is growing solidly. This report presents the key measures ofthis dynamic market and takes a general look at the development anddirection of the market.

Telephone connections are today affordable to everyone and are alsoeasily available. Gone are the days, when one had to wait for years toget a telephone connection. The number of telephone connectionswhich was only 2.15 million (fixed lines) in 1981 increased to 5.07million(fixed lines) in 1991. Today (as in 2003), there are 54.62million telephone connections of which 41.33 million are fixed line

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telephone connections, 12.69 million are cellular mobiles and theremaining 0.60 million are WLL telephones1. Wireless in LocalLoop (WLL) telephones and cellular mobile telephones wereunknown in India a few years ago. Cell phones charges have comedown so much that today one can see even a common man going

around with a cell phone in his hand. The private companies aregiving various incentives to attract customers, a situation which isentirely opposite to the conditions prevailing in the pre reforms erawhen one had to wait for yearsTo get a telephone connection.

India-Internet and E-Services Market Report:-

Despite the considerable popular interest in Internet in India, the ISP

market has been in disarray. According to the telecom regulator,there were around 180 operational ISPs in the country, after a periodof market rationalisation. Despite the large number of providers,10% of the ISPs have 90% of the subscribers. The state-owned BSNL and MTNL have grown rapidly to hold first and secondplace in terms of subscribers. The growing popularity of cybercafeshas been playing a big role in fuelling Internet development in India.This report looks at the ISPs and other aspects of Indias Internet

market. There is also some information on Internet content and e-services.

India - Broadband and Data Services Report:-

India appears to have embraced the Internet with a degree ofambivalence. There is tremendous enthusiasm amongst the dial-upusers and an estimated 60% of users regularly access the Internet viathe countrys more than 10,000 cybercafes. But when it comes tohigh-speed broadband access, there is reluctance, especially withinthe corporate sector, and the take-up rate has been slow. By early2005 there were about 700,000 broadband subscribers apenetration of less 0.1%. This report looks at the stage thedevelopment of broadband Internet has reached in India. Some

information is also provided on data services available in thecountry.

Key Findings:-

- Much of the growth in Asia Pacific Wireless Telecommunication

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Market is spurred by the growth in demand in countries like Indiaand China.

- India s mobile phone subscriber base is growing at a rate of82.2%.

- China is the biggest market in Asia Pacific with a subscriber baseof 48% of the total subscribers in Asia Pacific. Compared to thatIndia s share in Asia Pacific Mobile Phone market is 6.4%.Considering the fact that India and China have almostcomparable populations, Indias low mobile penetration offers hugescope for growth.

- The Internet Access Market in India is all set to grow twice theexisting value what with the increase in deregularization, literacylevel, increasing consumer awareness, PC penetration etc.

- Broadband Wireless Market in India is all set to take off in a bigway. Over 70% of the households in India has no access to wiredlines and the number of mobile phone users far outnumbers PC

owners. Such a scenario presents a very good opportunity forWireless Broadband Services.

Conclusion:

Telecommunications is one of the fastest-growing areas of tec hnology in theworld.

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Its rapid growth, businesses and individuals can access informationat electronic speed from almost anywhere in the world.

By including telecommunications in their operations, businesses can

provide better services and products to their customers.

For individuals, telecommunications provides access to worldwideinformation and services.

WEBLIOGRAPHY:-

http://www.123eng.com/forum/viewtopic.php?p=37711

www.imacs.com

http://www.ficci.com/telecom.htm

http://www.internetworldstats.com/asia/in.html

http://www.rncos.com/Report/IM073.htm

http://pages.ebay.in/included/land/banner1.html

www.bsnl.co.in

www.trai.gov.in

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Bibliography:-

The Indian Telecom Industry by ScopeeKnowledge Center Ltd.

Telecoms, Cultures, & Candor by DavidPetruziello

Indian telecom market by Meera Singh

Mobile phone prices drop on tax breaks.(Business).: An article from: India Telecom
http://www.amazon.com/Indian-Telecom-Industry-eKnowledge-Center/dp/B0000640KC/ref=sr_1_3?ie=UTF8&s=books&qid=1210583183&sr=8-3http://www.amazon.com/Telecoms-Cultures-Candor-David-Petruziello/dp/1419619675/ref=sr_1_8?ie=UTF8&s=books&qid=1210583183&sr=8-8http://www.amazon.com/Indian-telecom-market-Meera-Singh/dp/0870324055/ref=sr_1_11?ie=UTF8&s=books&qid=1210583183&sr=8-11http://www.amazon.com/Mobile-phone-prices-breaks-Business/dp/B0008FB26I/ref=sr_1_30?ie=UTF8&s=books&qid=1210583290&sr=8-30http://www.amazon.com/Mobile-phone-prices-breaks-Business/dp/B0008FB26I/ref=sr_1_30?ie=UTF8&s=books&qid=1210583290&sr=8-30http://www.amazon.com/Indian-Telecom-Industry-eKnowledge-Center/dp/B0000640KC/ref=sr_1_3?ie=UTF8&s=books&qid=1210583183&sr=8-3http://www.amazon.com/Telecoms-Cultures-Candor-David-Petruziello/dp/1419619675/ref=sr_1_8?ie=UTF8&s=books&qid=1210583183&sr=8-8http://www.amazon.com/Indian-telecom-market-Meera-Singh/dp/0870324055/ref=sr_1_11?ie=UTF8&s=books&qid=1210583183&sr=8-11http://www.amazon.com/Mobile-phone-prices-breaks-Business/dp/B0008FB26I/ref=sr_1_30?ie=UTF8&s=books&qid=1210583290&sr=8-30http://www.amazon.com/Mobile-phone-prices-breaks-Business/dp/B0008FB26I/ref=sr_1_30?ie=UTF8&s=books&qid=1210583290&sr=8-30

final telecom(1)

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