Telecom sector regaining momentum
By Anand Kumar
The last few days have seen several major developments that will once again accelerate growth in the sector. India has about 300 million phone users, including over 250 million cell phone subscribers. Every month, an additional eight million new cell phone subscribers are signed up by the service providers, making it the world’s fastest growing cell phone market.
India ranks second in the world after China in terms of cell phone base, but in terms of growth — eight million additional subscribers every month — it has overtaken China as well. But the past few months have seen the telecommunications industry being snared in meaningless squabbles between the various stake holders, which threatened to slow down expansion of the sector.
Last week saw the Telecommuni-cations Regulatory Authority of India (TRAI), come out with a bold proposal, recommending the removal of all restrictions on internet telephony. If the government accepts its proposals, long-distance rates in the country are expected to tumble by 50 per cent, dramatically slashing down phone bills for millions of consumers.
Though India has made tremendous advances in telecommunications, it has failed to exploit the benefits of convergence of technology, especially between the internet and telecommunications, or the internet and television. The delay in accepting technological advances and the inevitable demise of existing monopolies in long-distance telephony was leading to huge costs in terms of opportunities lost.
Last week, the union cabinet also approved the policy framework for the commercial roll-out of internet protocol TV (IPTV), allowing broadcasters to share their channels not just with cable and direct-to-home (DTH) service providers, but even with IPTV platforms.
Internet service providers (ISPs) including state-owned BSNL and MTNL are already providing IPTV feeds to customers in several cities in the country. Now with the government endorsing the TRAI’s proposals on IPTV, other private ISPs and telecommunications companies will also be able to provide television programmes through the internet to their subscribers.
For viewers, this means an additional channel for watching movies and entertainment programmes. DTH operators provide a limited number of movies, but with IPTV becoming a reality, a whole new world of entertainment will be thrown open for the consumer.
Several international players are also likely to enter the IPTV segment, as the TRAI has suggested that the foreign investment cap be kept at 74 per cent, as against 49 per cent in the cable
TV business.
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THE TRAI’s move, recommending internet telephony, has however, not gone down well with the cell phone operators. The Cellular Operators Association of India (COAI), the industry lobby for GSM (Global System for Mobiles) operators has stoutly opposed the move. Telecommunication operators got licences after paying an entry fee Rs16.51 billion, whereas ISPs will not have to pay such hefty fees, argue the cell phone operators.
“It is very unfair to allow unfettered access to ISPs, as many of the new cell phone operators are still waiting for allotment of spectrum to start their services,” says the COAI. “It is imperative that ISPs should be required to migrate to universal access service license and should be subject to the same entry fee, license fee, revenue share and other conditions as applicable to existing licensees.”
T.V. Ramachandran, director-general, COAI, warns that unrestricted internet telephony would “destroy the business viability of existing service providers.”
But the TRAI dismisses these objections and notes that unfettered internet telephony should be allowed in the interests of consumers. Nripendra Misra, the TRAI chairman, argues that Indian subscribers have been denied access to advanced, value-added services — unlike consumers elsewhere in the world — because of the delay in allowing unrestricted internet telephony. Regulatory restrictions, he says discourage technological advancements and result in grey market activities.
Under the current policy regime, internet telephony is allowed only from one computer to another, and not to a landline or a cell phone. Of course, unrestricted internet telephony will not destroy the existing business of telephone operators. PC penetration in India is extremely low, a little above 3.5 per cent, and internet and broadband coverage is also very limited. There are about 4.5 million broadband subscribers in India, half the target of nine million set by the government.
Rajesh Chharia, president, ISP Association of India, points out that telecom operators also stand to gain with the opening of net telephony, as 70 per cent of the revenues of ISPs will go to the telephone operators. “Instead of looking at us as competition, they should join hands to reach out to untapped markets,” he adds.
For telephone subscribers, internet telephony would mean a drastic cut in their long-distance telephony costs, from Rs2 a minute at present to less than 50 paise, or even as low as 10 paise a minute. Local calls would be free from PCs.
According to the National Association of Software and Services Companies (NASSCOM), the move to allow unrestricted internet telephony will give a boost to the Indian IT and BPO (business process outsourcing) industry. The sector has seen a slowdown in growth; internet telephony would reduce costs sharply, making Indian BPOs more competitive.
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THE raging battle between GSM operators — who dominate the cell phone market in India — and CDMA (code division multiple access) operators is also coming to an end. Last week saw virtually all the GSM operators accept the TRAI’s proposal to provide inter-connection to Reliance Communications (RCom), part of the Anil Dhirubhai Ambani group.
RCom has acquired a GSM license, despite stiff resistance from other operators, and is now planning to roll out its services in this rapidly growing segment. Two of the leading GSM operators, Bharti Airtel and Vodafone, had refused to connect their network with RCom’s, which could have led to another long round of court battles.
The telecoms regulator had set a deadline for last Thursday for the other GSM operators to provide inter-connection to RCom. Some of the GSM players were planning to go in an appeal against the TRAI’s ruling. However, at the last minute they decided to back off, enabling hassle-free entry for RCom.
Competition is also getting hotter in the country’s biggest cell phone market, Mumbai, with the entry last week of Aditya Birla group’s Idea Cellular, as the fifth GSM operator in the country’s financial and commercial capital.
Idea Cellular, which has over 28 million subscribers nationwide, is investing about Rs8 billion for its foray into the Mumbai market. It expects to get a 20 per cent share of the market.
With 3G services expected to roll-out soon across India, Idea will be looking at luring subscribers in this segment. Says Kumar Mangalam Birla, chairman, Aditya Birla group: “Mumbai is the commercial capital of the country and merits world class mobile services. The Mumbai launch bolsters our position as a leading telecom player in the country.” It’s not going to be a smooth ride for India’s fifth-largest cellular operator, though. Mumbai has the maximum penetration of cell phones in the country — there are close to 15 million cell phone users in the city with a population of around 16 million. But despite the saturation coverage, every month about 350,000 new subscribers sign up for cellular services in Mumbai. Four GSM operators account for nearly 10 million subscribers, and the CDMA operators have another five million subscribers.