Enabling the next wave of telecom growth in India

Industry inputs for National Telecom Policy 2011


Enabling the next wave of telecom growth in India

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

Enabling the next wave of telecom growth in India


After embracing a closed. boosting the industrial growth over the past decade. especially in the 1990s. recognizing the need to overhaul its policy framework.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. 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. with the market evolving into the world’s second largest in terms of subscribers. 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. iv Enabling the next wave of telecom growth in India . centralized economic model for four decades. India has reached the goals set in NTP 1999 far ahead of time. promoting India’s emergence as a major manufacturing and export base of telecom equipment and universal availability of basic telecom services to all villages. Indian telecom is an economic miracle in the making. India shifted to a market-oriented model. Liberalization initiatives.” the provision of leading class services at reasonable prices. The announcement of the National Telecom Policy (NTP) in 1994 marked the first steps toward the new model. and the overall teledensity has reached more than 60%. With plenty of strong potential value remaining. which had played a key role in shaping the sector. Presently. resulted in an improved business climate and in an increase in investment across the country. there are more than 700 million subscribers in India. India has faced challenges in liberalizing its telecom industry from a monopoly to a decentralized competitive model. Government. It aimed at making available “telephone on demand. issued the NTP 1999. In 1999.

The opportunities around which the policy initiatives need to be designed include financial inclusion. broadband. mergers and acquisitions scenario. reasons for refusal to renew and appeals to regulatory decisions Enabling the next wave of telecom growth in India v . m-commerce and convergence. Universal Service Obligation Fund (USOF) structure. infrastructure segment. The major recommendations for the policy framework for the Indian telecom industry are as follows: Focus areas Licensing Recommendations 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. equipment manufacturing. renewal procedures. taxation and aspects of foreign direct investment (FDI).The present challenges include the spectrum and licensing framework.

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 Merger 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) vi Enabling the next wave of telecom growth in India .Focus areas Spectrum Recommendations 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: • Provision 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.

there is no unique. 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 Telecom infrastructure 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. However. convergence. 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. security concerns and consumer affordability. 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.Focus areas Taxation Recommendations The upcoming goods and service tax (GST) regime should aim to simplify the tax structure for the industry. 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 Need to lay down a National Telecom Critical Infrastructure Policy on the lines of NTP 1999 elaborating uniform procedures for land acquisition. m-commerce.. 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. Enabling the next wave of telecom growth in India vii . which imposes double taxation on ILD and NLD license holders FDI Given the importance of foreign investment.

NLD. analysis and insights provided by Ernst & Young. infrastructure and convergence. It examines the NTP 1999. value-added services (VAS). This report reflects the key conclusions of that wider study. which is used by the Government of India (GoI) as a decisionmaking guide for the Indian telecom sector.Methodology In 2010. equipment manufacturing. USOF. viii . ILD. These findings have been combined with secondary research. The study gives a detailed perspective on the telecom sector in India. It identifies and evaluates the critical success factors that are applicable across all telecom segments such as spectrum. FDI. licensing framework. Ernst & Young conducted a research study on the Indian telecom sector in collaboration with one of the leading business organizations in India — FICCI. Ernst & Young conducted comprehensive interviews with senior executives in the Indian telecom sector. infrastructure. consumer affordability and the role of the regulator. security. These interviews provided a firsthand perspective on the opportunities and challenges faced by various stakeholders in the sector. outlining the phenomenal growth witnessed by the sector and recommendations for the existing policy framework that will enable the next level of growth. The research program studies in detail all the key segments of the telecom landscape — wireless. broadband. As a part of the research program. wireline.

Mahendra Nahata Managing Director Himachal Futuristic Communication Shamik Das Chief Executive Officer S Tel Pvt.Syed Safawi President Reliance Communications Ltd. Rajiv Mehrotra Chief Executive Officer Vihaan Networks Ltd. Ashok Sharma National Head — Regulatory Aircel Ltd. Ltd. Sanjay Kapoor Chief Executive Officer Bharti Airtel (India & South Asia) Mahesh Uppal Director Com First (India) Pvt. VSM Chairman and Managing Director Tulip Telecom Ltd. Ltd. HS Bedi. Ltd. Anil Sardana Managing Director Tata Teleservices Ltd. Mathews Director General Cellular Operators Association of India Rajat Mukarji Chief Corporate Affairs Officer Idea Cellular Ltd. Lt. List of participants Virat Bhatia President. South Asia AT&T Communication Services India Pvt. B S Shantharaju Chief Executive Officer Indus Towers Ltd. Ltd. SC Khanna Secretary General Association of Unified Telecom Service Providers of India Himanshu Kapania Deputy Managing Director Idea Cellular CS Rao Head of Corporate Affairs and Regulatory Division Reliance Communications Naresh Ajwani Chief Regulatory & Corporate Affairs Viom Networks Ltd. ix . Parag Kar Senior Director — Government Affairs Qualcomm India Pvt. India Ericsson India Vsevolod Rozanov President and Chief Executive Officer Sistema Shyam TeleServices Ltd. Ltd. Corporate Affairs & Business Development. P Balaji Head of Communications. Col. TV Ramachandran Resident Director Vodafone Essar Rajan S. External Affairs. Brijendra K Syngal Senior Principal Dua Consulting Pvt.

It provides a forum for discussion and exchange of the ideas between these bodies and service providers. Over the years. nonprofit. governments and academia. policy-makers. it has joint business councils with 79 countries across the world. and its stand on policy issues is sought after by think tanks. COAI has emerged as the official voice for the Indian GSM industry and interacts directly with ministries. Cellular Operators Association of India (COAI): established in 1995. 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. coverage and teledensity in India. fixed–line services and VAS across the country. economic and political change. Association of Unified Telecom Service Providers of India (AUSPI): constituted in 1997. regulators. FICCI is active in 39 sectors of the economy. AUSPI is the representative industry body of unified access service licensees providing CDMA and GSM mobile services. who share a common interest in the development of cellular mobile telephony. non-governmental society dedicated to the advancement of modern communication through the establishment of a world-class cellular infrastructure. Home to 400 professionals. COAI is a registered. . financial institutions and technical bodies. AUSPI is a registered society that works as a non-profit organization with the aim of delivering improved access. The organizations’ publications are widely read for their in-depth research and policy prescriptions.Industry associations Federation of Indian Chambers of Commerce and Industry (FICCI): established in 1927.

functioning as an association of companies operating in areas such as domestic and international call centers. communicating on behalf of the industry and helping to create a favorable business environment for the industry. . business process outsourcing.Association of Competitive Telecom Operators (ACTO): established in 2008. medical transcription. Indian missions abroad and leading national and international trade associations. The association was formed by several leading non-integrated long-distance carriers that provide service to the enterprise market segment. with the mission of promoting internet for the benefit of all. It plays an active role in the dissemination and exchange of information among the GoI. conducting research. The association’s activities include promoting the digital economy. which includes IT-enabled services. 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. OSPAI is the representative industry body. tele-medicine. Other Service Providers Association of India (OSPAI): established in 2008. financial services. ISPAI acts as a collective voice of the ISP community. evaluating and recommending industry standards and practices. foreign agencies. ACTO is an industry body that focuses on policies that enhance enterprise telecommunications in India. knowledge process outsourcing. TEMA is an industry association for telecom equipment manufacturers as well as component and cable manufacturers. tele-trading. IAMAI is an industry body representing the interests of online and mobile VAS industry. Telecom Equipment Manufacturers Association (TEMA): established in 1990. information technology (IT). creating platforms for its members. Internet & Mobile Association of India (IAMAI): founded in January 2004. It has helped in shaping telecom policies for ISPs and internet entrepreneurs to grow their services in a supportive and enabling environment. tele-education. Internet Service Providers Association of India (ISPAI): founded in 1998. embassies. trade missions. business process outsourcing and multinational company segments.

2.2. Wireless 2. History of the Indian telecom industry 2.1. Wireline 2. Regulatory framework 2.7. Evolution of the telecom sector in India 2.1. Overview 1. Key enablers under existing scenario 4. Telecom equipment manufacturing in India 2. Key challenges of NTP 1999 31 34 41 4 Key enablers 4.3. Key achievements of NTP 1999 3.2 Licensing Spectrum 45 46 47 48 48 50 1 Enabling the next wave of telecom growth in India .6. Value-added services 2. Connected Indian: telecom mission 2020 4. Importance of telecom 3 3 5 Infrastructure 2.3. National long distance and international long distance 2. Connected India: telecom vision 2020 4.2.8.Contents 1. Internet and broadband subscribers 2. Overview of the Indian telecom industry 2.1 4.3. Indian telecom sector Achievements and setbacks of NTP 1999 3.2.3. Outlook 9 10 12 14 15 16 17 19 21 22 27 28 3.1.

3.6 4.3.9 Universal Service Obligation Fund (USOF) Broadband Mergers and acquisition Taxation Foreign direct investment (FDI) Consumer affordability and rural penetration Human resource 53 55 57 58 60 61 63 64 66 69 70 71 72 72 73 73 73 74 74 74 4.3.3 4.7 4.3.8 4.3 4.4 4.4 4.12 Enterprise data 4.4.5 4.13 Convergence 4.11 Telecom infrastructure 4.14 Security Equipment manufacturing 4. Key enablers for potential opportunities 4.4.6 4.4.7 m-commerce M2M communication Mobile money M-health M-education Financial inclusion MNREGA and UID 4.3. Global practices Conclusion Glossary 75 87 89 Enabling the next wave of telecom growth in India 2 .

The easy access to mobile services is the outcome of positive regulatory changes.” The Financial Express.pdf. accounting for nearly 3.9%3 of GDP. accessed 10 October 2010. http://www. low tariffs and significant investments in telecom infrastructure and networks. In less than a decade. India’s service sector was estimated to account for 56. The process of liberalization started in the mid-1980s and gathered momentum in the 1990s. 1 2 3 4 India: Rising growth potential. “Redefining The Hindu Rate Of Growth. http://www. to GDP. low-priced handsets.6%4 of total GDP in FY10. Ernst & Young report. page 8.com/ind-eco. Overview Over the past two decades. The Indian economy maintained a growth rate of more than 5% even during the global recession. “India’s Macroeconomic Indicators.1. accessed 19 October 2010. In FY10 (financial year ended 31 March 2010). with the further opening of the economy and the creation of regulatory institutions to march toward fully competitive markets.financialexpress. India is now closely integrated with the global economy and is considered one of the pillars of global economic growth.1 Indian telecom sector 1. India has grown rapidly from a “command and control” economy to a market-based economy. the telecom sector has been the major contributor to India’s growth. compared with 3. India 2012: telecom growth continues. intense competition among multiple operators. As a result of liberalization. November 2008.5%2 annually from 1950 to 1980. 26 August 2010. 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. 13 October 2010. while the industrial sector and agriculture sector contributed 28. 3 Enabling the next wave of telecom growth in India . DBS Group Research. India’s GDP has been rising by more than 7%1 annually in the past decade.” Export-Import Bank of India website. respectively.com/news/redefining-the-hindu-rate-ofgrowth/104268/0. Within the services sector.12 April 2004.6%.5% and 14.eximbankindia.

” http://www.com/2009/02/carriers-ebidta/.telecomcircle. e-Charge Economies of scale Low acquisition cost (no handset subsidy) Source: “How can carriers make 40% EBIDTA margin at 2 cents/min tariff?. accessed 25 October 2010. Enabling the next wave of telecom growth in India 4 .Indian telecom model Outsourcing non-core activities like IT. network Infrastructure sharing Paradigm shift from average revenue per user (ARPU) to revenue per min Focus on prepaid Low cost distribution.

page 17. a government organization. States with 10%6 higher teledensity have grown 1. states with a higher teledensity have grown faster than those with lower teledensity. Bihar could have witnessed 4% faster growth if it had enjoyed the same teledensity as Punjab. 5 Enabling the next wave of telecom growth in India . It is one of the main architects of the accelerated growth and progress of different segments of the economy.2. creates efficient information flows. has partnered with a leading telecom equipment and service provider to provide “Fisher friend. response to emergencies and in the overall strengthening of the sociocultural ethos of the country. According to a World Bank study.com/2009/01/19224316/ Highteledensity-states-grew-f. and have helped those who catch the fish communicate with merchants and transporters in an efficient and effective manner. registering a consistent overall growth rate of more than 35% over the past decade in terms of subscribers. a 1% increase in mobile subscribers is estimated to increase per capita GDP by about US$200. security. World Bank. There is a substantial relationship between increase in teledensity and the economic development of a region.html. accessed 10 October 2010.” LiveMint.1 Economic growth Indian telecom has emerged as one of the greatest economic success stories. Mobile telephony had a profound impact on the fishing community in the southern state of Kerala.6% points. shared on a rotating basis. September 2010.2. The well-distributed network of telecommunication services results in widening markets. By virtue of being a carrier and disseminator of information. for instance.2% faster. mobile telephony has made the rural and underdeveloped markets much more efficient. business communication. along with free access to information service.” through which fishermen are provided free mobile handsets. says study. a 10%5 increase in teledensity is known to boost GDP growth by 0. 1. In other words. 5 6 Unfinished Business: Mobilizing new efforts to achieve the 2015 millennium development goals. It has helped to reduce the time spent by agents and owners waiting for boats. The advantages of the advent of telecommunications are manifold and explicitly verifiable from the phenomenal success of the sector.http://www. According to a study by the Indian Council for Research on International Economic Relations (ICRIER). reduced business risk and made those involved with fishing feel much safer at sea. The MS Swaminathan Research Foundation (MSSRF). Mobiles have helped to co–ordinate demand and supply.1. Importance of telecom Telecommunication is pivotal to a country’s socioeconomic growth. Samar Srivastava. lowers transaction costs and is an effective substitute for infeasible physical transport. 19 January 2009. 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. The usage of mobile phones has enabled fishermen to respond quickly to market demand and prevent wastage. “High-teledensity states grew faster.livemint.

With more untapped territories being connected through telecom.2. low employee attrition and the potential for scalability. Indian villages account for 70%7 of the country’s total population. 1. Further. RuralShores is an initiative that aims to reverse the trend. • • • 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. and establishing the mobile testing of diseases.2. page 13. systems engineering and systems design and integration are popular examples.Rural Divide. the spread of telecom and information services to rural areas is enabling the setup of rural business process outsourcing (BPO). a committed workforce and business continuity. creating an atmosphere of economic diversification. resulting in the organized aggregation of supply and demand Providing enhancement of microfinancing. improving access to and connectivity with health centers.3 Social development Connectivity fosters social development.2. As a result. This represents an innovative approach in providing quality health care whenever and wherever needed. the lack of employment opportunities in rural India has forced people belonging to villages to move to the cities. It aims to introduce rural youth to BPO and to provide employment in their village. providing the following advantages: • • • 7 Challenges Before An Integrated India: Bridging The Urban . employment and a strong socio-cultural ethos Open rural areas to foreign investment. it ensures complete information protection. 64% of consumption expenditure and 33% of national savings. Communication facilities in rural areas are critical for the development of rural India. Operations such as data entry. call center operations. revenue accounting. 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. Nielsen. generating awareness. The telecom sector has led to the growth of a range of communication technology-enabled activities and services. processing of insurance claims. 56% of the country’s income. the hitherto dormant economic potential is being increasingly tapped.1. Enabling the next wave of telecom growth in India 6 . In return. RuralShores: bringing jobs to rural India Over the years. software development. customer support centers. leading to the inclusion of rural India in the global economic milieu and reducing the rural-urban divide. technology transfer and entrepreneurship Facilitating national and regional integration. Moreover. the quality of life in rural area improves. thus reducing the pressure of urban migration 1. The provision of telecom services in rural areas and the obscure hinterland has made previously abandoned areas highly accessible. Participation in the initiative is an act of corporate social responsibility.2 Job creation Besides being one of the largest revenue generators. corporations benefit through cost-effectiveness due to the lower costs associated with a rural ecosystem. health and increased citizen participation in civil society. telecom is also a major creator of jobs. August 2010. human resource services. However.4 Rural development According to FICCI and Nielsen study. including improved education. guaranteed service levels. The current synergy between health reform initiatives and advantages in technologies has resulted in the proliferation of e-medicine projects.

including the “Millennium Development Goals.” Department of Industrial Policy & Promotion. It is an irreplaceable component for achieving most developmental goals. and creating new economic opportunities for women through digital empowerment.” 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.9 billion). and can be used as an instrument of international relations and diplomacy. G2G services are transactions between the central/national and local governments. Delivering literacy and education to women wherever they live or work: this opens up new avenues and allows for flexible learning times. processing of passport application.in/. Government to employee (G2E): this includes G2C services as well as specialized services that cover only government employees.2. specifically the development of small and medium enterprises (SMEs). Significant progress has been made in the computerization of railway bookings. • Government to citizen (G2C): this comprises information dissemination to the public. Government to business (G2B): this entails services between government and the business community. and between the departments and their agencies and bureaus. health care.5 E-governance E-governance that helps exploit the power of information and communication technology to transform accessibility. It is facilitating women’s participation in the political and economic processes of the country. The four main types of e-governance services provided are as follows: • Government to government (G2G): these services take place at two levels — the local or domestic level and the international level. 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. G2G services are transactions between governments. the inflow of FDI into India’s telecom sector was approximately INR407. hospital information and libraries.6 Strengthening investments Attractive trade and investment policies have transformed the Indian telecom sector into one of the most investorfriendly markets. allocation of the Permanent Account Number (PAN) to income tax payers. downloading application forms. as well as basic citizen services such as license renewals. Indian ministries and government departments are working to computerize their operations to make them simpler and increasingly accessible for Indian citizens. renewing licenses. conduct of public examination and customs clearance. ordering of birth/death/marriage certificates and filing of income taxes. 1.2. high illiteracy and negative social norms.2. as well as citizen assistance for basic services such as education. quality and the cost-effectiveness of public services has been made possible by the telecom revolution. 7 Enabling the next wave of telecom growth in India . Since the advent of IT and communication technology.nic. registering businesses. The services offered through G2B transactions also assist in business development. Business services offered include obtaining current business information.1 billion (US$8. rules and regulations. memos. obtaining permits and the payment of taxes. Achieving gender equality and empowering women is crucial because of its cross-cutting influence. making it easily accessible and increasing transparency. 1.1. Most relevant information about these entities is now available on their websites.8 accounting for more than 8% of approved FDI. accessed 10 October 2010.7 Gender equality The advent of communications technology has helped overcome institutional and social barriers of mobility. among others. On a global footing. including the dissemination of policies. 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. Simplifying the application and approval procedures process for SME requests would encourage business development. Between FY00 and FY10. http://dipp.

transfer funds.2.” CyberMedia India Online Ltd. focus on global telecom standardization activities and the promotion of entrepreneurship. the value of mobile payment transactions in India is expected to reach approximately US$1. the generation of intellectual property right (IPR). monitoring health trends and provisioning primary health care. • Helping lower child mortality and improve maternal health: this is done by providing information on nutrition. Furthermore. the development of manufacturing capability. strengthening health networks. thus overcoming cultural and language barriers. In India. this data could be transmitted to MNREGA. as these become a tool for commerce. paying bills for utilities such as power and gas.ciol. booking tickets for transportation services such as trains and taxis and online shopping. 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. 1. which aim to provide inclusive growth. making sure the worker is paid for the day.9 1. places great emphasis on research and development 9 “Nokia to rollout mobile banking in India.2. Mobile banking enables customers of banks and other financial institutions to access their account information. 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. accessed 12 October 2010. m-commerce finds its applications across various end markets such as banking and financial institutions. the TCOEs have focused on the technological and management challenges that Indian operators face in reaching all sections of society while offering affordable solutions. http://www. For instance.3 billion by 2013. the elimination of ghost workers. NTP 1999. The integration of such programs with mobile telephony is expected to benefit such programs of national importance. According to Cybermedia India Online Limited.9 Facilitating research and development The growth in high-speed communication and advances in internet technology are making India a major R&D hub. For instance.com/News/News/News-Reports/Nokia-to-rollout-mobile-banking-in-India/134910/0/.8 m–commerce This is the next revolution that is expected to emerge through the use of mobile phones. (R&D). the introduction of electronic muster rolls. 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. trade stocks and purchase financial products such as insurance.2.and the Indira Gandhi National Open University. formulated by the GoI. 14 April 2010. These organizations have helped to create synergy among academia. The challenges surrounding these programs include job cards for those demanding work.. Mobile phones provide consumers an opportunity to transact anytime and anywhere. Efforts are constantly being made to devise more affordable technology for the masses. the telecom industry and the Government for the creation of new services and applications. taking relevant education that is well aligned to the needs of the communities to their doorstep. 1. leading class services and a global presence. This is one of the most befitting instances of the telecom and internet revolution. wage payments and the authorization of wages electronically. the introduction of GPS-enabled biometric systems at the grass-roots level continues to remain a challenge. Once a worker has logged in. Enabling the next wave of telecom growth in India 8 .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). there is a significant focus on technology with the potential to improve rural connectivity. In pursuance of the NTP 1999’s objective toward R&D.

2 9 Evolution of the telecom sector in India Enabling the next wave of telecom growth in India .

Karachi and Ahmedabad.1. with exchanges being opened in Kolkata. The formulation of NTP 1994 was followed by the launch of mobile telephony in India in 1995. In 1881. Brief history of the Indian telecom sector • 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 • 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. VSNL and MTNL aimed at providing services to international and metropolitan areas. In the early 1980s. DoT was established in 1985 to provide domestic and long-distance services in India. Further. and guidelines for intra-circle M&A 2005–11 2000–05 1990–2000 1980–90 1947–80 Enabling the next wave of telecom growth in India 10 .2. respectively. and the TRAI was established in 1997. telephone services were introduced. In January 2000. Interconnect Usage Charges (IUC). and calling party pays (CPP) • 2004: Broadband policy. the sector underwent its first wave of change. Chennai. which is now known as Tata Communications. However. to set up 5 million lines per year • 1985: Establishment of DoT • 1986: Establishment of VSNL and MTNL • 1991: Telecom equipment manufacturing completely deregulated • 1992: VAS opened to private sector participation • 1994: NTP 1994 • 1997: Establishment of TRAI • 1999: NTP 1999 • 2000: Establishment of TDSAT • 2003: Unified Access Service License (UASL). Following independence. two wholly government-owned companies — Videsh Sanchar Nigam Limited (VSNL). Telecom equipment manufacturing was also de–licensed in 1991. NTP 1999 enabled the telecom sector to reach an average subscriber growth rate of more than 35%. Its history begins with the laying down of the first experimental electric telegraph line in Kolkata. and Mahanagar Telephone Nigam Limited (MTNL) were formed. The introduction of NTP 1999 heralded pro-consumer policies. The introduction of the New Industrial Policy 1991 initiated the liberalization process in India. and were under government control. all foreign telecommunication companies in India were nationalized to constitute the Posts. Telephone and Telegraph (PTT). Mumbai. The liberalization of the sector resulted in the need for a regulator. 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 Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) was established to take over the adjudicatory and disputes functions from TRAI. primarily due to initiatives taken by the regulator and service providers. universal licensing regime. 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. in 1986. and the NTP was announced in 1994.

The GoI also introduced the Broadband Policy 2004. 11 Enabling the next wave of telecom growth in India . The GoI commenced the auction for 2x5MHz in the 2100MHz band for 3G services in April 2010. During the same year. The fund was introduced to provide access to telegraph services to people in rural and remote areas at affordable prices. and INR300 million for the rural C circles. which witnessed fierce bidding for spectrum. March 2007 and January 2008. raising INR385. in February 2004. 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. telecom towers were accorded “Infrastructure Status” by the Reserve Bank of India (RBI). the licensee was required to endeavor to rollout services using wireline technology. the DoT issued guidelines for the intra-circle merger of cellular mobile telephone service (CMTS)/UAS licenses. reaching the final stage in May 2010. In May 2003. The auction aimed at allotting three to four 3G licenses for each of the 22 regional circles. In February 2008.6 billion).2 billion) in auction revenues.7 billion to the GoI.2 billion for the B circles. Operators were allowed to share infrastructure in their tower installations. among others. which covered the levy paid by mobile operators to the state–run operator. In November 2005. using any technology. In March 2008. The GoI subsequently issued licenses in November 2003. January 2004. through which all local incoming calls were made free. which mainly used the proceeds of ADC to develop rural telephony services. the GoI introduced the Unified Access Service (UAS) licensing regime. Additionally. In July 2010. The bidding process continued for a period of 16 days. the TRAI abolished the access deficit charge (ADC).In 2002.2 billion for the more populated A and Metro circles. In 2004.2 billion (US$14. which permitted an access service provider to offer both fixed and/or mobile services under the same license. Thus. e–commerce. The seven winners were required to pay INR509. the Government concluded the auction of BWA services across India. BSNL. the amount payable by BSNL and MTNL for 3G services pushed the total auction revenue to INR677. mobile services had outpaced fixed-line services with nearly 45 million mobile subscribers. Further. in case UASL was not allocated spectrum due to non-availability. ADC was the fee paid by private mobile operators to the state-owned BSNL. The reserve price for 3G services was categorized on the basis of circles — INR3. The GoI offered two 20MHz blocks in the 2. the GoI raised in excess of INR1 trillion from the auction of 3G and BWA services. the calling party pays (CPP) regime was introduced. FDI limit in the telecom sector was increased from 49% to 74%. December 2006.3GHz range in each of the country’s 22 circles.4 billion (US$8. the Universal Service Support Policy came into effect. entertainment. Allocation of spectrum and grant of wireless license was subject to availability and. as these constitute an essential and possibly the most expensive component in the entire telecom service delivery infrastructure. INR1. Following the auction of 3G mobile services. providing statutory status to the USOF in December 2003. which recognized the ubiquitous potential of broadband services and their contribution toward the GDP growth and improved quality of life through e–governance. The bidding process continued for 34 days. The Broadband Policy 2004 specified targets in terms of subscribers. education and medicine. the DoT approved the sharing of infrastructure among mobile operators. new UASL guidelines were issued.

licensing. R&D and standardization and validation of equipment. The key departments of the ministry include the Department of Telecommunications. The key feature of India’s regulatory regime is transparency in industry information. administrative monitoring of public sector undertakings (PSUs). Its key responsibilities include: • • • • Policy. Department of Telecommunications (DoT). licensing and coordination matters relating to telegraphs. telegraph and other means of communication The laws governing the telecom sector include the Indian Telegraph Act. and the Telecom Regulatory Authority of India Act. the Department of Information Technology. The key stakeholders as a part of the regulatory environment in the telecom ecosystem include the Ministry of Communications & Information Technology (MICT). wireless. the Telecom Regulatory Authority of India (TRAI) and the Telecom Dispute Settlement & Appellate Tribunal (TDSAT). 1933.2. among other matters Enabling the next wave of telecom growth in India 12 . wireless spectrum management. an open approach and encouragement of consultation with stakeholders. MICT • • • The MICT is part of the Indian Government.2. and the Department of Posts The MICT formulates policies with respect to telecom. data. and four part-time members that are secretaries to the GoI of the concerned departments The Telecom Commission is responsible for policy formulation. telephones. 1885. 1997 DoT • The DoT is a part of the MICT. 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 commission consist of four full-time members that are ex-officio Secretary to the GoI in the DoT. post. the Indian Wireless Telegraphy Act. Regulatory framework A number of positive regulatory changes have driven growth in the sector. the Telecom Commission.

and between a service provider and a group of consumers. such as administrative and financial functions. the GoI established the Telecom Dispute Settlement & Appellate Tribunal (TDSAT). and the terms and conditions of license to a service provider 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 Levying fees and other charges Ensuring compliance with universal service obligations Performing other functions.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. 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 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 Enabling the next wave of telecom growth in India . 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.

page 4.0% 52.5 FY00 61. The telecom revolution in the country has impacted both the urban and rural population.0% 26.7% 37.trai. The wireless segment has been registering monthly mobile additions of about 15 to 2011 million subscribers.3 621. The capital cost to provide mobile service varies in the range of US$50–US$90 per subscriber. Enabling the next wave of telecom growth in India 14 .4 FY05 300.12 whereas wireline subscribers account for 4.3 million Teledensity (%) 50% Rural 32. the total teledensity has risen above 50%.pdf. urban subscribers account for more than 65% of the overall subscriber base.3 FY06 70% 60% 723. affordable handsets.2% 12. with the mobile segment leading this growth.3% Urban 67. accounting for 95.3 million subscribers.9% 140. September 2010 100%= 723.2% 205. high economic growth. December 2009. Subscriber base and teledensity (wireless and wireline) 800 Total subscribers (million) 700 600 500 400 300 200 100 0 2.” Department of Economic Affairs – Ministry of Finance.1% to reach 621.2.0% 98. 63 /2010. reduced tariffs.9 FY07 3. “Telcos to recoup 3G bid money in 5-6 years: Analysys Mason.in/Default.com/ pdf/ppp_position_paper_telecom_122k9. 12 Ernst & Young analysis. 30 May 2010. wireless subscribers constitute the majority of the total subscriber base. Overview of the Indian telecom industry India is the world’s second-largest telecom market.6% 36. In the past decade. accessed 10 December 2010.3. http://www.”TRAI website.13 in comparison with US$200–US$350 per subscriber for wireline.7% Source: TRAI 10 “TRAI Press Release No. hypercompetition in the sector.5 429.9% 28. the total subscriber base grew from FY00 through FY10 at a compound annual growth rate (CAGR) of 36. 11 Shauvik Ghosh.1%.3% 45.5 FY04 9. accessed 10 October 2010.html.3 40% 30% 20% 10% 18.asp. http://pppinindia.6 FY03 7. As of September 2010. accessed 12 October 2010.1% 54. http://www. Lower costs and the additional benefit of mobility that is associated with wireless subscribers have led to the stagnation of the wireline subscriber base. com/2010/05/30230743/Telcos-to-recoup-3G-bid-money. 13 “Position paper on the Telecom sector in India. The total subscriber base (including wireline and wireless) reached 723.9%.7 FY08 FY09 FY10 Sep-10 0% Total subscribers Source: TRAI Teledensity According to TRAI. Urban and rural subscriber base. Such phenomenal growth can be attributed primarily to the country’s large population. leading toward a huge urban–rural digital divide.3 million10 in September 2010.gov.0 FY02 5. infrastructure sharing and the introduction of positive and enabling regulatory reforms. However.livemint.3% FY01 4.0% 76.” LiveMint.

1 261.6% 9.com/presentation/Mobile_VAS. The advent of NTP 1999 paved the way for aggressive growth in the wireless subscriber base. July 2010.7 4.6% 58.9 0. http://www. CDMA. Over an extended period. page 2.1% of the total wireless subscriber base. 16 “Penetration of Mobile Telephony in India & Value added services in Indian Mobile Telephony market. Mobile services were commercially launched in India in 1995.7 584.in/Default.8% 391.2% 3.March 2010).6 0.0% 98.7 million CDMA 15.pdf.” TRAI website. The road ahead for the Indian telecom sector is expected to be more eventful. India’s mobile market is the second largest in terms of subscribers in the world after China.4% 3.8 165.gov. 84. September 2010 100% = 687.asp. accessed 10 October 2010. In the initial years of mobile telephony.8% 52. Wireless India has emerged as one of the world’s fastest-growing telecom markets.8 33.0 33.7% 687.1 million16 subscribers. FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Sep-10 Wireless subscribers Teledensity Source: TRAI Wireless subscribers: GSM vs. and this growth is primarily attributed to the growth in wireless services. VAS. the gap between GSM and CDMA has widened as the GSM subscriber base has grown more rapidly.1% Source: TRAI 14 Ernst & Young analysis.2% 6.2 14. with average monthly subscriber additions in the range of 0.3 million15 subscribers in Wireless subscribers in India 800 700 Wireless subscribers (millions) 600 500 400 300 200 100 0 1.9% GSM GSM subscribers constitute about 84.” Zinnov Research and Consulting.3 49.6% 1.4.5 13. mobile number portability (MNP) and the growth of manufacturing.05–0.0% 70% 60% 50% Teledensity (%) 40% 30% 20% 10% 0% FY10.trai. http://www.2.5%14 to reach 584. primarily due to the advent of new services such as 3G. October 2006.1 22. 15 Enabling the next wave of telecom growth in India . 15 “TRAI: The Indian Telecom Services Performance Indicators (January . the growth in the number of subscribers was very low.zinnov. The wireless subscriber base in India grew from FY00 through FY10 at a compound annual growth rate (CAGR) of 77. accessed 15 October 2010.

17 Ernst & Young analysis. the advantage of mobility among wireless networks and inadequate infrastructure of the wireline network.9% -3.8 39.3% 0. DoT In FY00.6 million village public telephones (VPTs) in India. Wireline subscribers 50 45 Wire line subscribers (million) 40 35 30 25 20 15 10 5 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Sep-10 -3.18 with a teledensity of 3.5 million19 public call offices (PCOs) and 0. As of September 2010.5 40.9% 3. In the future.7 18.7% -2.5.1% of the subscribers in FY10. Although fixed-line operators are trying to offer VAS such as high-speed internet access. there were 3.7% 38.March 2010).6% FY00 Wireless FY10 Wireline 93. the urban market has dominated the wireline subscriber base. video on demand and videoconferencing. Wireline The Indian wireline market grew at a CAGR of 3.3 7. Enabling the next wave of telecom growth in India 16 .3%17 during the period between FY00 and FY10.0 37. http://www. additional private players have also ventured into the fixed-line market. wireline service continues to face stiff competition from wireless services.0 25% 20% 35. January 2010.4 38.September 2010).” TRAI website. 18 “TRAI: The Indian Telecom Services Performance Indicators (January . the wireline subscriber base was 37 million. Over the years. 19 “TRAI: The Indian Telecom Services Performance Indicators (July . Furthermore.1%.6% 40.7 17. accounting for 73.4 41. driven by the immense potential for data growth. Although wireline infrastructure in India is not as extensive as wireless infrastructure.9% 32. http://www. accessed 15 January 2011.asp. In FY10.3% -1. there is a significant opportunity for future growth.asp.4% 5. improved mobile coverage. the wireline market accounted for 93.trai.9% 94. accessed 10 October 2010.3% 41.0% 26.trai. July 2010.in/Default.9%. the wireline subscriber base has declined due to lower mobile tariffs. besides other new technologies. cheaper handsets.1% 22. the major wireline operators in India also operate mobile networks.6 Growth rate (%) 15% 10% 5% 0% -5% -10% Wire line subscribers Source: TRAI Growth rate Change in the composition of subscribers 100% 80% 60% 40% 20% 0% 6.1 41. in FY10.in/Default.2.4% of the subscribers. The wireline market is dominated by the governmentcontrolled incumbent players.” TRAI website. where they see higher revenue growth and continue to invest extensively.3% -3.gov. In the recent past. Apart from these two players.gov.1% Source: TRAI. the emergence of new technologies such as fiber to the home is expected to drive the growth of the wireline market in India. it accounted for 5.

3 3.9%20 and 117.1 8. knowledge sharing. The minimum threshold speed for a broadband connection is 256 kilobits per second (kbps) or more.4 2. Booz & Company. 17 Enabling the next wave of telecom growth in India . the number of internet and Internet and broadband subscribers (million) 20 15 10 5. cable television networks. entrepreneurship and services. From FY05 through FY10. a 10%22 increase in broadband penetration leads to a 1. Although the internet is a function of various factors such as literacy. Further. This falls short of a Broadband Policy’s goals of 40 million internet subscribers and 20 million broadband subscribers by the end of 2010.9 1.5% to reach 16.2 million and 8. Also. governance.8 6. it has made significant inroads in the urban market.3% increase in GDP. org/2010/10/09/international-insights-%E2%80%93-september/.8 million.3 6. Internet and broadband The internet has revolutionized the lifestyle of many Indians by creating a new means of communication.6 5 0 0. access to personal computers and electricity. such as opportunities for education. employment and the delivery of services.2 FY05 9. http://intug. it is estimated that a 10%21 increase in broadband penetration translates to a 1. FY06 FY07 Internet subscribers FY08 FY09 Broadband subscribers FY10 Sep 10 Source: TRAI 20 Ernst &Young analysis. respectively in FY10. 22 “Broadband Commission Presents Report to United Nations. The opportunities hold a much larger promise for India’s large low-income population and a growing economy. whereas traditional internet connections have a speed of less than 256 kbps. the evolution of technology and increase in bandwidth has given rise to internet connections at speeds faster than traditional dial–up connections. accessed 25 October 2010. September 2010.9 16. Broadband brings a number of benefits.5 10. 21 Bringing Mass Broadband to India: Roles for Government and Industry.3 13.6.9 11.3 17. June 2010.2 broadband subscribers has increased at a CAGR of 23. Broadband infrastructure plays a vital role in a country’s achievement across domains such as social progress and economic development. terrestrial wireless and future technologies. digital subscriber lines (DSL) on copper loop. According to Booz & Company.2.” International Telecommunications Users Group website. governance. The DoT formulated the Broadband Policy 2004.5% increase in labor productivity in a country. satellite media. which envisions the creation of a framework through various access technologies such as optical fiber.

6% 4. broadband users are concentrated in urban areas. September 2010 1. As of September 2010. primarily in business districts or high–end residential areas of the larger cities.6% Source: TRAI Source: TRAI Digital subscriber line (DSL) is the preferred technology among service providers for both internet access and broadband services. and 86.3% 0.5% DSL Dial-up Wireless Cable modem Ethernet Others 50. September 2010 3.Market share by subscribers of technologies in internet access.9% of the market share in broadband access.8% 4.0% Market share by subscribers of technologies in broadband. despite a structured framework that included ambitious goals to be met in 2010.5% 31.0% 10.5% 6. . Currently. DSL constituted 50. especially in the case of broadband services. Broadband penetration continues to be very low in India. The share of wireless technology continues to be negligible and remains to be fully exploited.5% DSL Cable modem Ethernet Wireless Others 86.5% of the market share in internet access. The key factors responsible for the widespread adoption of broadband include affordability and availability.6% 0.

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$10 billion mark in the next five years.262 FY10 1.2. multiprotocol label switching (MPLS) based IP-VPN services. It has spurred the demand for IP-based virtual private network (IP-VPN) services in India. network integration.556 FY09 930 480 70 110 65 210 250 130 30 56 1. network management. internet connectivity. A majority of global operators in this space are also offering VAS such as network security.800 45 6. network storage and enterprise voice solutions.251 39 5. Voice over Internet Protocol (VoIP) is considered a key enterprise application for lowering operating costs.900 31 4. 19 Enabling the next wave of telecom growth in India . and national and international data connectivity.7. the financial services sector and the government.169 23 Industry estimates. Enterprise segment revenues23 Activity Private line VPN Ethernet Managed business VoIP Managed IP telephony Hosting services Application services Security Continuity and recovery Managed storage Outsource task Contact center Total (US$ million) FY08 829 423 40 92 51 161 170 110 20 40 1. The other services relevant to this segment are international private leased circuits.027 FY11E 1. With telecom and IT converging. Most large global players have set up operations in India to cater to the connectivity needs of their customers. The growing demand for connectivity is coming primarily from the IT and IT-enabled services sectors (ITeS).064 495 92 125 75 260 370 150 45 61 2.600 20 3.200 510 130 150 80 350 600 180 52 72 2. managed services and network security services are provided by global operators in partnership with Indian IT companies.

As of December 2009.6% in FY 2009-10.3% 25.3% 35. FY10.0 17. accessed 18 October 2010.0% 115. FY10. Enabling the next wave of telecom growth in India 20 .0 144. with its revenues reaching INR176 billion26 in FY10.com/content/vnd100_2010vol-II/110070520. the market slowed in FY10. 26 “India among the Top Few Fastest Growing Telecom Markets. In FY10. 25 “India’s NLD market has grown by 13.2% 150.0% 40% 30% 20% 10% 0% 71.asp.9 FY07 Market size (INR billion) Source: Voice and Data Growth (%) In 2002. Market size of NLD 180 160 140 120 100 80 60 40 20 0 60% 50% 164.25 However. ILD has witnessed steady growth.asp.1 1.0 30.3 13.com/content/vnd100_2010vol-II/110070519.3% 176.7% to reach total revenues of INR164 billion. primarily due to a decline in ARPU across all operators.” Voice & Data. the GoI had issued 29 NLD24 service licenses. Market size of ILD 200 Market size (INR billion) 150 100 50 0 115. accessed 18 October 2010.Department of Telecommunications.NTP 1999 opened up the NLD service for private operators.3 97. As of December 2009. India’s ILD services were opened up for private players. with the sale of the strategic stake in VSNL to the Tata Group. with the annual license fee being reduced to 6% of the AGR.ciol.3 0. the GoI had issued 24 ILD27 service licenses.0% 35% 30% 25% 20% 15% 10% 10% 0% FY07 FY08 FY09 Market size (INR billion) FY10 Growth (%) Source: Voice and Data 24 DoT Annual Report 2009–10.7% FY08 FY09 FY10 Growth (%) Growth (%) Market size (INR billion) 48. the Indian market for NLD grew by 13. http://voicendata. http://voicendata.” Voice & Data. 27 DoT Annual Report 2009–10. without any restriction on the number of operators.Department of Telecommunications.ciol.

0 2.0 100 4. http://www.” India Climate Portal. including routers and switches. accessed 12 October 2010.html. http://www.5 0 FY04 FY05 FY06 Production 236.ciol. DSL and cable modems and networking devices.29 respectively.” LiveMint. Telecom equipment manufacturing The telecom equipment industry comprises products such as cell phones. 29 Ernst & Young analysis.com/News/News/News-Reports/ Time-to-go-local-in-telecom-equipment-purchase/140758/0/.30 and equipment worth INR190 billion was imported in 2009. the demand for telecom equipment is expected to be worth US$70–100 billion28 in 2015. Source: International Trade Centre Although a few Indian mobile operators have a significant presence globally.9 billion FY07 Note: Includes both indigenous and offshore production Source: DoT.8. From 2005-09.2.” CyberMedia India Online.7 81.9 15. The majority of telecom segments are highly dependent on imports. with the exception of telecom towers and cables.7 2006 2007 3.3 200 140. India is a strong market for global telecom equipment vendors.3 518. 21 Enabling the next wave of telecom growth in India . Despite the growth of a localized manufacturing environment in India.3% 3.org/telecomequipment-manufacturing-in-india-needs-help-urgently-21-july-2010-t.2 2008 2009 8.livemint.com/2010/04/01215017/Indian-telecomfirms-may-get-D. 2009 100%=US$8. inadequate tax benefits and competition from low-cost Chinese equipment. 28 “Telecom equipment manufacturing in India needs help urgently.4% China South Korea 59. Ministry of Communications and IT. wireless and landline infrastructure equipment. the market for wireless infrastructure equipment is estimated to be US$8–10 billion. “Policy recommendations to increase domestic telecom growth and exports of telecom equipment and service. 21 July 2010.4% 3. 30 “Time to go local in telecom equipment purchase. the manufacturing and exports of telecom equipment grew at a CAGR of 33. companies in the manufacturing segment are yet to feature in the global telecom landscape.9% 4. accessed 02 August 2010.0 120 100 80 60 40 20 FY08 FY09 Exports 0 Value of telecom equipment imports to India 10 Imports (US$ billion) 8 6 4 2 0 1. Manufacturers in India face challenges such as high logistics costs. “Indian telecom firms may get DoT boost.9 Source: International Trade Centre Share of imports by country of origin. Telecom equipment manufacturing and exports Production (INR billion) 600 500 400 300 178.0 140 Exports (INR billion) 110. according to a leading telecom equipment manufacturer. an unreliable power supply.6 19. Furthermore. accessed 10 October 2020.0 160.1%.” 19.climatechallengeindia.” “Telecom Equipment & Services Export Promotion Council (TEPC). only 40% of the requirement for equipment is met through local sourcing. http://www.7 1.1% Sweden US Singapore Hong Kong Others According to industry estimates. chipsets.4% 3. with the remainder coming from global companies manufacturing in India. GOI.0 412.3 2005 1.9% and 112.5% 6. 02 September 2010.

The radius of each BTS varies from 500 meters to as much as 8-10 km. The components of mobile networks include the electronic infrastructure. The wireless sector has charted an impressive growth trajectory.8 million. the rollout of infrastructure will become easier. However.33 depending upon subscriber usage. Falling prices of telecom services will help to increase their affordability. accessed 28 October 2010. whether it is GSM. it does not play any role in carrying wireless signals. availability. Civil infrastructure includes the complementary elements of a cellular network that ensure that the electronic components are operational. air conditioner.4 to 2. Infrastructure development plays a crucial role in the development of the wireless sector. http://loksabha. price. Telecom infrastructure industry in India.2 Towers and in-building solutions Telecom towers are broadly classified as ground-based and rooftop towers. It connects the electronic infrastructure at the tower site with the BSC and MSC.34 Electronic infrastructure consists of the electronics needed to run a wireless network such as a BTS or cell site. the number of operators providing their services from a particular site influences the extent of civil infrastructure installed at the site.” Lok Sabha. the civil infrastructure and backhaul. competition. diesel generator set  and security cabin. Backhaul consists of the intermediate links between the core of the network and the various sub-networks. cables. However. Rooftop towers (RTTs) are placed on the roofs of high-rise buildings. and safety and aesthetic concerns.45532 telecom towers in the country. steel tower.1 Mobile network Typically. fire extinguisher. Telecom towers and allied infrastructure. Ernst & Young analysis. March 2009. hurdles to the erection of cellular towers and value added tax (VAT) levies on broadband services delivered through fiber media. “Growth of Telecom Sector. page 6. radio antennas. shelter room. while electronic infrastructure forms the remaining 40%. Telecom infrastructure industry in India. The rollout of services by operators takes place only on the back of robust telecom infrastructure. Civil infrastructure includes components such as tower site. as the safety and aesthetic issues related to the setup of towers are addressed. 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.9.in/. Typically. Finally. a mobile network in a circle consists of mobile switching centers (MSCs). so as to facilitate the handing over of signals from one BTS to another like a chain.9. including ROW related issues. feeders.9. civil infrastructure forms about 60% of the cost of setting up a network. It is not influenced by the type of the communication technology being used. radio access network. ICRA Rating Feature.2. GBTs involve a capital expenditure in the range of INR2. growing at a CAGR of more than 75%31 in the past decade in terms of the number of subscribers. core network and other transmission equipment. page 5. on behalf of the licensee. 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. Crisil Research. Enabling the next wave of telecom growth in India 22 . there were 425. Competition will give further impetus to the development of infrastructure. duct space and tower through simple registration without paying any license fee. As of March 2010. March 2009. node B. ICRA Rating Feature. The policy should clearly define the role of the Central Government and the states to help catalyze telecom sector growth. CDMA. The BTSs are installed in a contiguous manner. with each BSC being connected to a base transceiver station (BTS). GBTs can accommodate up to six tenants. Infrastructure The Indian telecom success story is built around the wireless segment. 3G or BWA. battery backup. topography.nic. page 9. 2. frequency band of operation and spectrum 31 32 33 34 35 2. ROW. depending on the height of the tower. power regulation equipment. each of which is connected to base station controllers (BSCs). and the demand for more services will translate into the development of more telecom infrastructure. The development of the telecom infrastructure depends on four key factors: rollout. December 2008. The National Telecom Critical Infrastructure Policy is expected to address these concerns as well as the issues affecting telecom providers on the state level. Infrastructure Provider-I (IP-I) can provide assets such as dark fiber. It can also create active infrastructure.

3 Telecom infrastructure in India Initially.350 28. the leading operators have opted to share their infrastructure.177 41.aspx.rbi.455 Source: “Growth of Telecom Sector.387 5.154 1.322 26. Meghalaya.” Reserve Bank of India. http://loksabha.098 57.611 18.418 Towers 25.008 4.794 369 1. Mizoram and Tripura Kerala and Lakshadweep Total Public sector 2. This constitutes an essential and possibly the most expensive component in the entire telecom service delivery infrastructure. which need reliable communications for efficient incident management and personal safety.nic.090 52. accessed 20 September 2010.55.630 31. 23 Enabling the next wave of telecom growth in India .920 23.428 4. http://www.608 2.634 4. Today. Andaman and Nicobar Assam and Arunachal Pradesh Delhi. Haryana and Chandigarh Uttar Pradesh and Uttarakhand Andhra Pradesh Punjab and Himachal Pradesh Jammu and Kashmir Tamil Nadu and Pondicherry Bihar and Jharkhand Nagaland. over the past few years.in/scripts/BS_ViewMasterCirculardetails.512 488 3.” Lok Sabha. mass transit systems.in/. Coverage is required to meet the needs of both the general public.392 45. operators with towers and operator-owned tower companies. tenancy level for the industry stands at 1. there are an estimated 425. RTTs can accommodate two to three tenants. 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. Manipur. In-building solutions are designed to improve the reception of radio frequency signals indoors to meet the increasing demand for high-quality mobile services. accessed 01 February 2011.271 3. In recent years.371 8. The tax benefit encourages the participation of private sector through investment.9.are shorter than GBTs and are common in urban and highly populated areas.678 425. asp. where there is paucity of real-estate space.708 8. stadiums and office buildings an essential requirement. these involve a capital expenditure of INR1.071 1. and emergency services.242 17.460.396 18. Over the past couple of years. However.614 35.644 17.854 3. 2.184 391.5-2 million.321 20.” TRAI website January 2011.in/Default.207 34.899 6. telecom operators have hived off their telecom towers into separate entities. Sikkim. Daman and Diu Maharashtra and Goa Karnataka Madhya Pradesh and Chhattisgarh West Bengal. State-wise number of towers States Rajasthan Gujarat.028 2.102 26.org. Typically.494 34. shopping malls. 37 “Master Circular . The GoI provides certain benefits specifically to infrastructure companies. Currently. which expects its mobile phones to work at all times.995 25.36 In July 2010. the growth of mobile communications has made the provision of radio coverage within airports.gov. 36 “TRAI: Consultaion paper on issues related to telecommunication infrastructure policy.Exposure norms. http://www.121 41. Orissa. accessed 28 October 2010.494 24.392 22.102 38.577 2. there are three types of tower companies — pure-play tower companies.766 21.455 telecom towers in India.275 23. implying a subscriber-per-tower ratio of 1.037 Private sector 23.trai.337 720 2.323 38. As a result. operators used their tower infrastructure for competitive advantage. telecom towers were accorded Infrastructure Status37 by the RBI.752 1.

0 2.2 81. more groundbased towers will be needed. 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. the industry has pumped in INR1 trillion and another INR400–500 billion is expected to be invested in the next two years. Against this background.5x in the course of this decade. 27 million units of electricity are consumed per day. further increasing capex requirements. This translates to consumption of more than 2 billion liters of diesel per year for cell sites. service providers have strong incentives to share infrastructure.6 557. 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.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).6 Goals of infrastructure sharing The key beneficiary of infrastructure sharing is the subscriber. 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. Due to higher costs of land development. Overall. state electricity boards. In its more complex forms. Enabling the next wave of telecom growth in India 24 . land owners and so on before the tower and electronic infrastructure can be completed. It is estimated that infrastructure sharing in its current form has helped achieve savings of INR557. the concept of infrastructure sharing assumes special importance. It is estimated that tenancy levels will rise to between 2–2. On average. while the tower company earns revenues. energy. which is subsidized by GoI. capital and interest costs. a higher proportion of ground-based towers. it will allow a better use of spectrum.2.6 billion resulting from savings in infrastructure provisioning fee (IPF). and newer operators can build an assetlight model. 2. where mobile teledensity is barely in the double digits. The dependence on diesel could be reduced if the Government utilized that subsidy to support a move toward renewable energy options such as solar. significant investments will be required. insurance costs.4 Savings (INR billion) 476. as the tenant paying a higher rent to the tower company accelerates the time-to-market process. Average diesel consumption per site per hour is about 2. and has a pre-tax margin of 7%–8%. massive amounts of funds can be saved. additional security. superior network quality is a sustainable differentiating factor that helps to reduce customer churn and command premium prices.38 Estimated cost savings resulting from infrastructure sharing39 Component Capex (including interest) Opex saving as a result of infrastructure provisioning fee savings Opex saving as a result of shared energy costs Total opex savings Total savings (capex and opex) 71. investments required and emerging trends The industry faces low profitability.4 Energy requirements Currently.9. A significant part of the network rollout is likely to come in the untapped rural areas.5 liters. Spectrum constraints and network quality: for operators in urban areas. Such an arrangement works well for both partners. With sharing. translating to 6 million liters of diesel per day. unclear land ownership and expensive backhaul connectivity costs in the rural areas. such as land and energy. and infrastructure sharing will act as an important tool to achieve faster rollouts and save operating and capital expenditure in these areas. 39 Industry estimates. 38 Industry estimates.9.9.5 Future growth potential. 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. Rollouts in rural and semi-urban areas: as wireless service providers penetrate rural and semi-urban areas. power shortages. Since many rural areas are far-flung. 10.

power supply and battery backup. Thus. mast and site.” GSMA. For operators who have been awarded 3G licenses and will be launching 3G operations. towers. There are many government initiatives that support infrastructure sharing. radio access network (RAN). This can increase the coverage area and improve the quality of service. Expeditious time-to-market for new players: sharing significantly speeds up the time-to-market. The separation of the core network also allows each service provider to offer differentiated services to its subscribers. which can be reduced by sharing their networks. Commercial considerations appear to be driving the increasing trend to adopt a variety of infrastructure models. Operators have realized that the industry needs significant capital expenditure. feeders. Less negative environmental impact: although environmentalists show limited support for telecom network deployment. The tower business can become a profit center by itself. Node B sharing: in the Node B sharing model. 2. cables. apart from improving capex and opex efficiencies. zoning regulations may start to play an important role in driving service providers to share civil infrastructure. 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. These provide incentives for companies to participate in infrastructure sharing. it provides an opportunity to reduce capital and operational expenditure by sharing infrastructure from the start of the build-out. It helps to expand coverage into previously unserved geographic areas.9. infrastructure sharing typically receives the backing of many conservation groups because less network buildup means fewer negative environmental impacts. The radio network controller (RNC) and core network are not shared in this model. Infrastructure sharing limits duplication and gears investment toward underserved areas. It also provides an additional source of revenue but may be limited by differing strategic objectives. It involves all the access network elements to the point of connection with the core network. freeing up significant resources and management time to focus on their core business. coverage is no longer a source of competitive advantage. This is by far the most common form of infrastructure sharing in India now. operators either establish a joint venture company to operate the shared network or establish an agreement on the use of each other’s networks. Electronic infrastructure sharing: this refers to the sharing of electronic elements such as antennas. including radio equipment. What started off as arrangements between two telecom operators has evolved into the creation of tower companies.Revenue stream for incumbents: sharing enables incumbents to earn revenues from a new source. Usually. buildings. 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. An extended version of RAN can be in the form of intra-circle roaming. rather than just leading to cost savings. masts. 40 “Mobile infrastructure sharing. node B and transmission equipment. 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 reduces operating costs and provides additional capacity in congested areas where space for sites and towers is limited. RAN sharing: this is the simplest type of electronic infrastructure sharing. product innovation and improved customer service. thus contributing to the growth of the industry as a whole. so that each service provider can maintain control of its equipment and spectrum use. Infrastructure sharing can take the following forms40: Civil infrastructure sharing: this refers to the sharing of physical sites. 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. shelters. page 12. Government initiatives on infrastructure sharing: regulators favor faster deployment and investment optimization in the telecom sector.7 Models of infrastructure sharing As India’s mobile networks have expanded over the past few years. 25 Enabling the next wave of telecom growth in India . one physical unit is shared by two distinct nodes B.

Essentially. Exits from such sharing arrangements can easily be provided if warranted due to an increase of traffic or other reasons. DAS technology can be used to boost signal coverage in large buildings. This can be implemented to various levels depending on which platforms operators wish to share. backhaul.Core network: the most complex form of network sharing involves both radio and core network elements. by breaking down the macro cell site into smaller pieces. but required each operator to maintain 30% of its network separately. usually a base station. reducing cost and maintenance efforts. National roaming: mandatory national roaming is a form of infrastructure sharing that allows new operators. A common RF or optical fiber medium can be utilized. especially with the advent of smartphones and 3G. National roaming accelerates competition by allowing new players to launch their services within a shorter time frame. Each consortium has built out a joint network. They typically rely on operator network sharing to get access to subscribers and offer services. Distributed antennae sharing (DAS): over the past few years. radio links. Mobile virtual network operators (MVNOs): these typically do not have their own network and have no rights to spectrum. antenna and transmission equipment. Radio and core sharing: all electronic components in the access and core network as well as civil infrastructure are shared. DAS has emerged as a powerful tool for wireless carriers to bolster their coverage and boost their capacity. permitting one or more partner service providers to access some or all of the mobile network. In Sweden. Backhaul sharing: common backhaul sharing will be very useful in rural environments where traffic from BTS to BSC is very low. including electronic components such as optic and feeder fiber cables. four of whom have formed two consortiums of two operators each. it helps add much-needed capacity to operators’ networks. stadiums and shopping malls as well as for outdoor purposes. The regulator permitted this level of sharing. network elements. there are five operators. DAS is a collection of small antennas spread over a specific geographic area and connected by fiber to a central location or power source. who have yet to complete their network deployment to provide national service coverage through sharing incumbents’ networks in specific areas. The benefits of DAS are twofold — the technology allows carriers to fill in coverage gaps and dead spots in their macro network and. Enabling the next wave of telecom growth in India 26 . to provide wireless service within a geographic area or structure.

July 2010. The rollout of 3G services is expected to drive the mobile VAS market in the future.in/Default. with India being one of the leading mobile markets for the young.” TRAI website. The mobile VAS revenues in the country are driven by the P2P SMS service. the mobile VAS in India was estimated to be worth INR145. followed by technology enablers (10%–20%) and content aggregators (10%–15%). out of the total amount paid by end users (excluding P2P SMS). “TRAI Press Release No. Market size of VAS 160 Market size (INR billion) 140 120 Growth (%) 100 80 60 40 20 0 28.0 145. mobile payments and money transfer.6 75. creating opportunities for both telecom operators and companies engaged in VAS. which provides services such as mobile banking. http://www. technology enablers. The demand for mobile VAS is driven by the increase in the mobile subscriber base. the decline in ARPU has compelled mobile operators to focus on mobile VAS to generate additional revenues.gov. monotones. as well as aggressive marketing efforts by telecom operators to spread awareness about their services such as updates and alerts.10.asp. media companies.trai. Mobile VAS in India: 2010. Entertainment mobile VAS constitutes 57% of the overall revenues followed by information mobile VAS (39%) and m-commerce (4%).0 Revenue distribution of VAS services (%) 100 15 15 60 10 2006 2007 2008 2009 2010F Operator revenue Technology enabler Content aggregator Content owner Total Source: Mobile VAS in India: 2010.5 45. short-code providers. handset manufacturers and content converters. which has exceeded the 700 million44 mark.2. Content owners end up getting approximately 5%–10% of the overall revenues. IAMAI. In terms of revenue distribution among various market participants. games and services such as m–commerce and m–radio.42 The key mobile VAS include person-to-person (P2P) SMS. July 2010 Source: Mobile VAS in India: 2010. IAMAI. The rollout of 3G services in the near future is expected to provide consumers with new and improved services such as highspeed data transfer. polytones and truetones as well as caller ring-back tones (CRBT). IAMAI. 63 /2010. approximately 60%–80%43 is captured by mobile operators. Value-added services (VAS) According to the Internet and Mobile Association of India (IAMAI). July 2010. content aggregators or developers.1 93. The demand for mobile VAS is mostly driven by the youth. The growth of m–commerce. person-to-application (P2A) SMS. IAMAI. The key participants in the mobile VAS market include content owners. Moreover. application-to-person (A2P) SMS. followed by music. Mobile VAS in India: 2010.0 billion41 in 2010. is also expected to drive the market for mobile VAS. July 2010 41 42 43 44 Mobile VAS in India: 2010. July 2010. growing at a CAGR of more than 50% during 2006–10. accessed 10 October 2010. 27 Enabling the next wave of telecom growth in India . IAMAI.

0% 11.049.7% 63. 3G subscribers are expected to reach 142 million by 2015. during the period 2010–15. with a significant number of multiple and inactive Subscriber Identity Module (SIM) owners.217.0% 101. including a host of rich multimedia services such as video calling.11. accounting for 20% of the total wireless subscriber base.March 2010). Teledensity (%) 87. http://www. accessed 16 October 2010.0 5% 0% 20.200 1.3 1. 3G subscribers are expected to be more than 300 million by 2020.9% 8. the number of wireless subscribers in India is expected to increase at a CAGR of 10.trai. Wireless subscribers in India Wireless subscribers (million) 1.9% 95.2 million45 mobile subscribers. According to Ovum.516.46 to reach 1.2% 109.8 80% 1. 3G services will drive the expansion of wireless services in future.2% and 110% in 2015 and 2020.11.1 million47 subscribers in 2015.1%.in/Default.1 1. the ARPU continues to shrink. 3G subscribers forecast 350 300 250 200 150 100 50 0 3. Ernst & Young analysis Teledensity 2. location based services and remote access/ VPN applications.2 3G subscribers 3G subscribers as a percentage of wirless subscribers (%) 3G subscribers (million) 3G is the next generation mobile technology which is capable of delivering broadband content. accessed 10 October 2010.000 800 600 400 200 0 77.9% 97. Outlook 2.217. video on demand. Further.134.2 923. leading to falling profit margins of mobile operators.8 60% 40% 20% 0% 1. Future subscriber growth is likely to hinge upon rural and low-income users.11.0 6.185.9% 120% 100% Enabling the next wave of telecom growth in India 28 . Ernst & Young analysis 45 “TRAI: The Indian Telecom Services Performance Indicators (January .400 1.4 10% 142. respectively. DoT.1 Wireless At the end of December 2010.0 72.1% 92.7% 752.1 525. Ovum. Ovum website.asp. 47 Ovum: Mobile regional and country forecast pack: 2010–15.ovumkc.0 2011F 2012F 2013F 2014F 2015F 2020F 3G subscribers 3G subscribers as a % of wireless subscribers Source: Ovum. 46 Ernst & Young analysis.gov. July 2010.5 1.” TRAI website. accounting for 12% of the total wireless subscriber base. http://www. the country’s wireless teledensity is expected reach 97.2% 44.7% 25% 20% 15% 303.9% 10. 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.600 1. Further. Although the telecom sector is witnessing strong customer additions every month.0 118. there were 752.2.com/.1 2009 2010 2011F 2012F 2013F 2014F 2015F 2020F Wireless subscribers Source: TRAI.8% 35.

there were 10. accessed 10 October 2010. 49 Ernst & Young analysis.in/Default. The wireline market is in decline. the number of wireline subscribers in India is expected to decrease at a CAGR of nearly 4%.1 26.asp.2.11. the broadband connections are estimated to reach 150 million by 2020. http://www. The growth of broadband is expected to increase with uptake of 3G and BWA services.3 2.4 Broadband As of September 2010.11. accessed 10 October 2010.3 million in 2020.1 34. 50 Ovum: Fixed voice connections forecast pack: 2008–15.3 Wireline There were 35.gov. a trend that is expected to continue. Wireline subscribers in India Wire line subscribers (million) 40 35 30 25 20 15 10 5 0 2009 2010 2011F 2012F 2013F 2014F 2015F 2020F Source: TRAI. http://www. Ernst & Young analysis 37. Ernst & Young analysis 48 “TRAI: The Indian Telecom Services Performance Indicators (January . Further.” TRAI website.1 million48 wireline subscribers at the end of December 2010.ovumkc. According to Ovum. Ovum website.asp.com/. accessed 16 October 2010. Ovum.gov.9 33. DoT.1 30.3 million broadband subscribers in India.trai.1 35. http://www.trai.1 million50 by 2015.49 to reach 29.” TRAI website. 29 Enabling the next wave of telecom growth in India . Broadband subscribers forecastc Year 2010 2012 2014 2020 Number of households 236 241 250 275 % of households to be covered for broadband 5% 20% 40% 55% Number of broadband connections (million) 11. Considering increasing broadband demand.5 48 100 150 Source: “TRAI: Consultation Paper on National Broadband Plan.5 29. The growth in the mobile market is seen as the cause of the decline. the wireline subscribers are forecasted to reach 26. July 2010. June 2010.in/Default.March 2010).5 32. during the period 2010–15. page 16.

8 43.11. the increase in mobile penetration in both urban and rural areas.8 45.2 billion and US$ 13.97 billion by 2015. industry revenues and capital expenditure are expected to increase at CAGR of 8. the Indian telecom sector has witnessed an increase in revenues and contribution toward GDP. 2009-2014. The growth in revenues is driven by cheaper mobile handsets. Ovum website.0%.ovumkc. the contribution of non-voice services towards the industry revenues is expected to reach 38% by 2020. during the period 2009–15. Revenue break-up: voice and non-voice 10% 17% 22% 27% 32% 38% 90% 83% 78% 73% 68% 62% 2011F 2012F 2013F Voice 2014F 2015F Non-voice 2020F Source: Pyramid Research. Ernst & Young analysis Over the years.5 7.0 10.2. Enabling the next wave of telecom growth in India 30 . to reach US$51.9 2009 2010F 2011F Revenues 2012F 2013F 2014F Capex 2015F 2020F Source: Ovum.com/.3 38.7 11. Further. NLD and VAS are also expected to drive revenue growth.5 Revenue and capex Over the years. respectively by 2020. with the introduction of 3G and BWA services. including BWA penetration.9 billion.8 51.0452 billion and US$14.0 57. http://www. respectively. and the adoption of VAS. industry revenues and capex are expected to increase to US$57. The future revenue growth and increase in capex is expected to be driven by the rollout of 3G services and the increase in broadband penetration across the country.0 13.4 14.1 48.2 15. lower tariffs.1%51and 7. 52 Ovum: Forecast of service provider revenue and capex. accessed 16 October 2010. Ernst & Young analysis 51 Ernst & Young analysis.1 13.9 15. Revenue and capex forecast Revenue and capex (US$ billion) 70 60 50 40 30 20 10 0 32. Other services such as ILD.0 34. According to Ovum.

3 31 Achievements and setbacks of NTP 1999 Enabling the next wave of telecom growth in India .

and protection of the country’s security interests. global standards in the quality of service. for all cities with a population greater than 200. 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. the emergence of India as a major manufacturing base and a major exporter of telecom equipment. FDI and domestic investment.The NTP 1999 aims at making India competitive in the global telecom market through growth in exports. 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. achieving universal service across all villages. The key objectives of the policy include telecommunication for all and within the reach of all. using technologies including international services digital network (ISDN).4% to 4% by 2010.000 by 2002 • • • • Enabling the next wave of telecom growth in India 32 . 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.

e.5% in 2000 • Creation of jobs across sales and marketing. 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.g. 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. 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.3 million) and in teledensity (61. especially reliability. R&D and customer care.NTP 1999 has been a catalyst for the telecom sector: • Growth in the subscriber base (723.. content creators. providers. especially telecom specialists • Fixed mobile convergence (FMC) 33 Enabling the next wave of telecom growth in India . technology.0%) • Contribution of telecom to overall GDP of almost 3%. mobile value-added services (MVAS) encompass mobile operators. among others • Among the lowest tariffs in the world. up from 1.

.2% 5.8% 5. 55 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010). the teledensity level in the country was 0.0%. by 1998. Key achievements of NTP 1999 3.2% 9. R.7% 37.in/Default.54 Urban teledensity and rural teledensity at the end of September 2010 were 137.in/Default.3% 28.0% FY06 18. which was set at 4% by 2010.9% FY01 14.pdf.1. geographical spread.3.2% 2.0% 24. “The Digital Provide: Information (Technology). The impact of mobile telephony on rural areas has been profound.3% poses a critical challenge due to low population density. Following independence. with rural teledensity being far ahead of the NTP 1999 target.3% 26.gov. the disparity between urban and rural areas in terms of mobile penetration has increased significantly.trai.4%.6% FY04 38. the introduction of mobile telephony in Kerala increased the fishing community’s profits by 8%. Furthermore.6% 1. accessed 15 January 2011.” The Quarterly Journal of Economics.9% 47. page 76.asp. about 70% of the population in India lives in rural areas.” Indian Institute of Kanpur website.” TRAI website. The overall teledensity target of 15% by 2010 was achieved in FY07. there is an uneven distribution of teledensity among Indian states resulting in slow economic development of the states and their surrounding regions. The improvement in rural teledensity Urban and rural teledensity 140% 120% 100% Teledensity (%) 80% 60% 40% 20% 0% 8.2% FY08 14.4% 65.1% 1.4% in rural India. low per capita income and the cost of maintaining phones in rural areas. 63 /2010.3% 4.2% 1.in/3inetwork/html/reports/IIR2007/04-Rural Telecom.1% 1. 2007.trai. FY09 FY10 Sept 10 Urban teledensity Source: TRAI Rural teledensity Total teledensity 53 “Rural Telecom and IT. It has helped reduce the cost and time of transactions and has visibly compensated for the poor infrastructure. January 2010.asp. As a result.4% 61. There is a significant opportunity for service providers to increase penetration in rural areas and generate revenues. accessed 10 December 2010. http://www.2% 9.0% 26. respectively. and mobile penetration stands at a meager 28.1 Teledensity Reforms in the telecom sector have been encouraged by the active participation of the public and private sector.3% 3. the level had increased to only 1.8% FY07 89. a Harvard University economist. 56 Jensen.1.gov.8% FY05 12.7% FY00 10.” TRAI website. http://www. and its targets have been achieved well in advance. Although India has witnessed a steep rise in teledensity over the past few years.9% 0. 54 “TRAI Press Release No. Market Performance and Welfare in the South Indian Fisheries Sector.02%53. According to a study by Robert Jensen.9% 4.56 decreased fish prices by 4% and consumption of fish increased by 6%.5% 12.2% FY02 FY03 20.3%55 and 28.ac. http://www.9% 52.7% 137.3% 0.4% 2.iitk. Enabling the next wave of telecom growth in India 34 . NTP 1999 has been instrumental in the growth of telecom in both urban and rural areas.0% 119. the overall teledensity as of September 2010 stood at 61.9%. Currently.

5% 65. 35 Enabling the next wave of telecom growth in India .and information-based economy.9% 47. private telecom players have considerably expanded their operations.771 14. Employees of private and PSU operators 100%= 436.1% 56. with the majority of these employees being a part of the public sector undertakings (PSU).3% 73. The ratio of the number of subscribers per employee is very high in the case of private operators in India.3 43.110 The development of telephony in India has played an important role in altering the structure of the economy.0% 89.891 9. technology. R&D and customer care. Dun & Bradstreet 3.2 Teledensity and employment Over the past decade.5% 205.7% 300.7% 85.3% FY05 429.089 FY06 158 1.2% Low teledensity: 0%–50% Medium teledensity: 50%–100% High teledensity: 100% and above Source: TRAI FY05 FY06 FY07 FY08 PSU operators FY09 Private operators Source: TRAI.400 11. media. 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. FY10 The Indian telecom industry employs more than 430.7 20.678 FY07 193 2. technology.9 34.00057 direct employees. education.Total teledensity by state in India.7% 90. It has paved the way for a knowledge. by subscriber base 100%= million 98. which augurs well for sectors such as IT/ITES. R&D and financial services. Dun & Bradstreet website.1.0% FY06 432. Mix of private and PSU operators.3% FY07 PSU operators Private operators Subscribers per employee ratio in India FY05 PSU operators Private operators 132 1. The expansion of the Indian BPO industry is a classic example of indirect employment. as well as indirect employment.5% 79.4 140. December 2009. 57 Overview of Telecom Industry.5% 429.8% 52.5 26.

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$35 billion58 in FY09. The growth in revenues has been driven by favorable factors such as the availability of cheaper mobile handsets, lower tariffs, the increase in mobile penetration in both urban and rural areas and the adoption of VAS. In addition, infrastructure sharing has enabled operators to improve margins by bringing down costs significantly. India’s telecom sector is a voice-centric market characterized by high MoU and ARPU. A sharp decline in call charges and the cost of services has enabled the rise of mobile subscribers and revenues. Indian telecom sector gross revenues
40 35 Revenue (US$ billion) 30 25 20 15 10 5
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

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% 2.5% 2.0% 1.5% 1.0% 0.5% FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 1.5% 1.7% 1.6% 1.6% 2.2% 2.2% 2.3% 2.3% 2.6% 2.8% 2.4%

31 25 17 20

Source: TRAI; Ernst & Young estimates

15 7 8 8 9


Source: TRAI; Ernst & Young analysis

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. 59 Ernst & Young analysis. 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.

Enabling the next wave of telecom growth in India






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.

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.

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 • 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 • FDI of up to 49% can be done on the Automatic Route (without prior government approval); beyond that, prior approval is required • 74% FDI is permissible in the case of ISPs with gateways, ISPs not providing gateways, radio paging and end-to-end bandwidth • FDI of up to 49% can be done on the Automatic Route (without prior government approval); beyond that, prior approval is required

Cumulative FDI equity inflow in India, FY00-10


Services sector Computer hardware and software Telecommunications

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 Others FY08 1.3





Source: Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce and Industry 62 Ernst & Young analysis. 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. 65 Ernst & Young analysis.


Enabling the next wave of telecom growth in India

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. 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
600 500 ARPU (INR) 400 300 200 100 0 FY06 FY07 FY08 FY09 395 366 298 264 205 131 FY10 164 Sep10 471 493 484 410 423 600 500 400 300 200 100 0 MoU (minutes)
MoU (minutes)

Source: TRAI


CDMA operators: ARPU and MoU
600 500 ARPU (INR) 400 300 200 100 0 FY06 FY07 FY08 MOU FY09 256 202 550 471 364 159 99 352 600 500 400 308 78 300 200 76 100 0


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.



Source: TRAI

GSM and CDMA operators: RPM
1.0 0.9 0.8 0.7 INR 0.6 0.5 0.4 0.3 0.2 0.1 0.0 FY06 FY07 FY08 GSM
Source: TRAI


0.6 0.5 0.5 0.4 0.4 0.3 0.2 FY09 FY10 Sep10 0.4 0.3 0.4 0.3


66 “One Minute at a Time,” Outlook India, http://business.outlookindia.com/printarticle.aspx?266748, accessed 21 October 2010. 67 Ernst & Young analysis. 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.

Enabling the next wave of telecom growth in India


Average selling price (ASP) of mobile handsets 200 Average selling price (US$) 180 160 140 120 100 80 60 40 20 0 1Q08 Nokia 2Q08 3Q08 Motorola 4Q08 Samsung 1Q09 2Q09 Sony Ericsson 2Q09E 4Q09E Others 1Q10E 2Q10E Source: Company data. enhanced memory. Indian mobile handset market 120 100 Volume (million units) 4. and the ASP of smartphones is expected to drop below US$200. 3G and an improved user interface. India’s FDI outflows (debit) have grown at a CAGR of 47.0 5. the ASP of feature phones is expected to be US$50. 39 Enabling the next wave of telecom growth in India . page 13.in/.4 FY06 FY07 FY08 FY09 FY10 3. Video Graphics Array (VGA) to 8-to-12-megapixel cameras. the price of feature phones is declining at a faster rate than smartphones. from US$0. In line with the change in the pattern of investments. adding numerous features ranging from monochrome screens to touch screens.7 Global outreach of Indian telecom companies In the early 1990s. usually with a minority ownership. Over the next few years. http://dipp. the structure of ownership has also shifted toward majority and full ownership. mobile handsets have evolved rapidly. accessed 10 October 2010.4 7 5. However.5 108 6.1. The market has witnessed investment in the form of greenfield projects. Indian companies have reached overseas destinations to tap new markets and have acquired technologies. monotone ringtones to MP3 ringtones. According to the National Council of Applied Economic Research (NCAER). and the majority of this capital value has been used to acquire companies. greenfield investments were a popular mode of overseas investment among Indian firms. a wider customer base and growth momentum. the average selling price (ASP) of both feature phones and smartphones has been on the decline.6 71. The share of manufacturing in the investment activity has Source: Voice & Data 69 “NCAER: FDI in India and its growth linkages. August 2009. Over the past decade. Globally. email. Global Positioning System (GPS). India has witnessed prominent diversification in the industry composition of overseas activities of Indian firms.2 95.7 80 60 40 20 0 33.6 6 5 4 3 2 1 0 Value (US$ billion) 3.nic.5% to reach a projected US$18. Macquarie Capital In the past decade. new product mix.6 billion69 in FY09.8 billion in FY01. Over the period. FDI by firms belonging to developing countries has gained momentum and has become an integral part of globalization. M&A provide benefits such as expansion of global footprint.8 101.” Department of Industrial Policy & Promotion. and foreign affiliations were formed through joint ventures. access to niche technologies.

0 300. The Indian telecom sector has actively been a part of the global M&A activity. whereas the share of services has increased. Bangladesh FLAG Telecom Group Ltd Teleglobe International Holdings Ltd.700.declined considerably.0 30. leading to the emergence of telecom giants from India. Telecom Seychelles Astratel Nusantara PT Acquirer company Bharti Airtel Ltd Bharti Airtel Ltd Reliance Gateway Net Pvt Ltd TCL Bharti Airtel Ltd CDC Capital Partners Deal value (US$ million) 10.0 194.0 62.8 177. Key overseas M&A by Indian firms Year 2010 2010 2003 2005 2010 2000 Target company Zain Africa BV Warid Telecom.0 Source: Thomson ONE Banker Enabling the next wave of telecom growth in India 40 .

dot. However. Although wireline infrastructure in India has been in place for an extended period.gov. and the number of wireline subscribers has fallen from 41. Globally. cheaper handsets. the affordability and availability of broadband services and inadequate infrastructure. there were 17.3. therefore requiring lesser BTSs density and lower capital and operating expenditure.” TRAI website. January 2010. accessed 10 October 2010. in the absence of a long-term plan to meet future requirements.asp. accessed 15 January 2011.2 Growth of broadband As of September 2010. Currently. However. the advantage of mobility among wireless networks and the inadequate infrastructure of the wireline network.gov. Furthermore. India lags behind in terms of availability of spectrum for commercial use. 71 “Broadband Policy 2004. along with the benefit of VAS such as internet for the urban and rural population and the abolition of the digital divide. page 339. Despite India’s status as an IT superpower. In line with the growth of subscribers. The decline has been due to lower mobile tariffs.72 in comparison with 33% in Brazil.trai. page 7.htm. accessed 10 October 2010. page 18. the growth of wireline phones is not in sync with the rise in the number of wireless subscribers. 73 “TRAI: Spectrum Management and Licensing Framework.2. 3. 3. the need for spectrum to service these subscribers has also increased. The sluggish growth in broadband services is attributable to the absence of low-cost devices.” DoT website. http://www. 72 The Internet’s New Billion. according to TRAI. According to Boston Consulting Group.2.3 Spectrum challenges The Indian telecom industry has witnessed phenomenal growth in the number of subscribers. India has an internet penetration of 7%. The availability of spectrum for commercial services in India is below the required levels.asp. May 2010.2.” TRAI website. the bandwidth required by 2014 may be as high as 800MHz. accessed 10 October 2010. Despite being the second-largest market in terms of the subscriber base. 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.” TRAI website.asp. The Broadband Policy 2004 has failed to keep pace with advances in technology and failed to boost the telecom sector.2.74 Spectrum bands such as the 900MHz band are of great value to mobile operators due to the longer ranges these can support.September 2010). http://www. the advent of new technologies is expected to create conflicts for spectrum.in/Default.9 million70 internet subscribers and 10. the Indian telecom industry is expected to reach 1 billion73 wireless subscribers by March 2014. inadequate content and applications in regional languages. the Broadband Policy 2004 had anticipated 40 million71 internet subscribers and 20 million broadband subscribers by 2010.in/ntp/broadbandpolicy2004. 3. According to TRAI. 74 “TRAI: Spectrum Management and Licensing Framework. 70 “TRAI: The Indian Telecom Services Performance Indicators (July . with a CAGR of 77. Russia and China. broadband penetration is accepted as a measure of a country’s ability to compete as an economic power. wireline and wireless complement each other.gov.trai. 31% in Russia and 28% in China. the telecom sector continues to face various issues that act as impediments to its growth.3 million broadband subscribers in India. Key challenges of NTP 1999 NTP 1999 envisaged the affordability and availability of telecommunication services for the common populace. improved mobile coverage.in/Default. http://www. 41 Enabling the next wave of telecom growth in India .5 million in FY06 to 37 million in FY10.trai. Boston Consulting Group.in/Default. May 2010. broadband penetration levels in India are far below other emerging countries such as Brazil. September 2010.1 Growth of wireline The wireline segment has added just 10 million users since the introduction of the NTP 1999.gov. http://www.5% during the period FY00–10.

the third operator license was awarded.pdf accessed 02 August 2010 Enabling the next wave of telecom growth in India 42 .800MHz was given to the winning bidder: • • In addition to the entry fees. the e–auction of 3G mobile services was concluded after 183 rounds of bidding across all service areas. the fourth operator license was issued using a three-stage auction procedure. in 2001. Including the amount paid by state-owned BSNL and MTNL. the GoI auctioned 2x4.4MHz of start–up spectrum for GSM-based services Two operators were selected for each License Service Area (LSA). All operators were expected to pay higher spectrum usage charges.Spectrum and license allocation timeline in India First stage: 1995–2003 Auctioning scarce spectrum • • • In 1995.nic. in line with TRAI’s recommendations. irrespective of the quantity they held.800MHz band.2MHz per circle in case of GSM players and above 5MHz for CDMA In August 2008.3GHz range in each of the country’s 22 service areas. Start-up spectrum of 2x4. 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.7 billion to the GoI within 10 days of the closing of the auction. The GoI allocated spectrum to new telecom players in service areas across India The defense services agreed to vacate 2x20MHz in the 1. and opted for the auction of a start–up spectrum of 2x5MHz in the 2. All of the 71 blocks up for auction across the 22 service areas were sold: • Third stage: 2006–08 Criterion for allocation of spectrum • • • • Fourth stage: 2008–10 Policy on 3G and 3G auctions • • • • All the winners of the auction were required to pay INR509. licensees were required to pay a percentage of annual revenue as spectrum charges In 2002.4 billion from the broadband wireless auction Source: “A peep into RF spectrum allocation process in India. along with 2x4. 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. and TRAI continued to maintain that there was a shortage of 2G spectrum A new SBN policy was defined.2 billion Following the completion of the 3G auctions.1GHz UMTS band The DoT proposed new 2G spectrum usage charges for all operators.5MHz of spectrum per operator in each LSA Second stage: 2003–06 Unified Access Service (UAS) licenses • • In November 2003. the GoI announced the policy for 3G mobile services.4MHz of start-up spectrum in the 900MHz band. in addition to 25MHz in the 2. 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.4MHz in 1. to the government operator on a pro bono basis In 2001. and incumbents were kept out of fresh allocations. it totalled to INR677.1GHz band with reserve prices for different categories of LSAs In May 2010. Although firms were awarded licenses after paying the required entry fee. It auctioned two 20MHz blocks in the 2. subscriber based norms (SBN) was introduced.” Integrated Defense Staff http://ids. The GoI raised INR385. the bandwidth for broadband services (WiMAX) was auctioned by the GoI. Subsequently.in/tnl_jces_Sep_2009/Spectrum%20allocation%20 procedure. This differed from the earlier strategy of increasing spectrum charges only for those operators who held more than 6. It laid down a roadmap for the allotment of 2x12.

licensees were required to use GSM technology. 43 Enabling the next wave of telecom growth in India . data services and PCOs. the country lags behind in terms of telecom R&D and continues to be reliant on imports. and the biggest barrier to setting up telecom towers and other infrastructure is the wide variation in the approval process adopted by local bodies. The policy made the cellular license technology neutral. In November 2003.gov. Since the introduction of the UAS licensing regime. However.in/Default. page 59. the allocation of spectrum is separate from the grant of license to provide service.trai. others require dealing with multiple agencies. the GoI introduced the UAS licensing regime. Civic issues: there is a need to address civic issues such as zoning regulation. Several demand prohibitive fees. 3.4 Licensing challenges NTP 1999 permitted Cellular Mobile Service Providers (CMSPs) to provide all types of mobile services. Tower companies. including voice and non-voice messages. permitting an access service provider to offer either fixed or mobile services or both. preferential treatment for sharing and incentives in a timely manner. single window clearance. in their service area of operations. incur huge costs and delays because several state agencies are involved in granting approval for setting up towers. 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. therefore.5 Equipment manufacturing The Indian telecom sector has witnessed rapid growth.3. despite being a “key infrastructure.2. licenses are bundled with the allotment of a certain amount of spectrum. the total number of licenses in a circle ranges from 12 to 14.asp. http://www. There are huge gaps in low-income or sparsely populated areas.” TRAI website.75 Globally. some treat infrastructure business in the same way they treat petty commercial undertakings. Moreover.2. However. where telecom companies see poor returns on the expensive investment required in setting up the infrastructure.” is far from ubiquitous. May 2010. and also allowed licensees to migrate from a fixed license regime to a revenue-sharing arrangement starting in August 1999. accessed 10 October 2010. and some look at infrastructure companies as a means to finance deficits. Prior to this. page 59.2. telecom manufacturing in India has not been able to keep pace.6 Infrastructure Telecommunications infrastructure. Telecom infrastructure service providers face several challenges. 75 “TRAI: Spectrum Management and Licensing Framework. Currently. using any type of network equipment that met the International Telecommunication Union (ITU) or Telecommunication Engineering Center (TEC) standards. which are highlighted below: Role played by multiple state agencies: there is no uniform approval process across the states. especially away from cities and towns. in India. 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. 3. 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.

000 tonnes of carbon equivalent. Further. the power connection to telecom towers is treated as one to a “commercial establishment. Utilization of USOF and incentives: since the next level of growth is expected to come from rural areas. citing concerns over alleged health hazards relating to BTS. They do not reflect the fact that USOF subsidies are perhaps most urgently required to defray the cost of infrastructure creation in rural areas. there is no clarity on the rates to be paid by infrastructure companies. the highest tariff is applied to the telecom site. Enabling the next wave of telecom growth in India 44 . Environmental issues: diesel consumed by towers results in about 17. and it is estimated that India as a country consumes more than 2 billion liters of diesel per year for cell sites. the power is either unavailable or erratic. Grievance redressal: there is no clear grievance escalation/ redressal mechanism that infrastructure companies can seek when a conflict arises.76 The thrust in increasing rural telephony will further aggravate the diesel dependence by telecom towers. IS:802 and IS:875. and the load criteria for telecom towers and transmission line towers are different. Energy consumption: cell sites account for most of the energy consumed by mobile networks. The cumulative carbon footprint of telecom towers due to diesel consumption in a year is more than 5. the fund rules are too cumbersome and lack focus. The above IS codes are primarily meant for electric/power transmission line tower design. Safety: the construction of telecom towers is still a self-regulated activity throughout India. namely IS:800. the Municipal Corporation of Delhi (MCD) charges INR100. for the design of towers. Currently all the telecom operators are following IS codes. Without it. which is not only more expensive but also polluting. The site clearance basically requires examination from the point of safety for flight navigation and interference with existing wireless systems. Power consumption: one of the major problems faced is the lack of reliable grid power. and there are other options as well.” and thus. as these are dependent on diesel generators to keep running.000 per tower and the New Delhi Municipal Council (NDMC) charges INR200. In large parts of India. Delays and cumbersome processes for the SACFA clearances: the SACFA gives siting clearance of all wireless installations in the country. there is a need to accelerate the pace of setting up the tower infrastructure in these areas. service providers are forced to use diesel generator sets at tower sites most of the time. while others charge “commercial” rates. Misplaced apprehensions on health hazards of electromagnetic radiation from mobile antennas: many state governments and municipalities have barred towers in residential areas.000 tonnes of CO2 and 24. Although the USOF was created with the sole aim of promoting rural telephony.Taxation on towers: multiple levies and high taxes are imposed for setting up mobile towers. This adds avoidable uncertainity in an already tough business. Diesel fuel is subsidized.000 per tower as a one-off registration fee in Delhi. For instance. 76 Industry estimates. Some agencies charge them “industry” rates. This increases the dependence on diesel. Secondly.5 million tonnes.

transparent. Therefore. The NTP 1999 has served the sector well for more than a decade.4 • • • • Key enablers As we enter the second decade of the 21st century. the time is ripe for a comprehensive review to build a forward-looking. which witnessed significant changes in the socioeconomic environment. 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. This is the appropriate time to look again at the NTP 1999 and customize it to meet current and future needs. It needs to identify and address barriers to growth The functioning of the regulator in an unbiased manner. strong and transparent policy framework that will be the backbone to achieving the India Telecom Vision 2020. and the formulation of a competitively neutral policy that is not discriminatory toward any of the stakeholders 45 Enabling the next wave of telecom growth in India . providing interested parties with concrete opportunities to navigate the growth of the telecom sector The creation of an efficient mechanism to implement regulatory decisions. India’s telecom industry is at a crossroad. technological advancements and business dynamics of telecommunications. India needs a principle and objective-based. efficient. independent and competitively neutral policy that will accelerate the pace of growth in telecom services and manufacturing.

It should be supported by different metrics of quality of services at affordable tariffs meeting the needs of different segments of society. Enabling the next wave of telecom growth in India 46 . 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. video. broadband and internet services delivery to subscribers with high quality of experience. with inclusive participation from rural India to ensure telecom coverage for all. media. data.4.1.

the policy should be able to meet future opportunities. achieve rural penetration of 100% and reach overall wireless penetration of 110% To strengthen broadband penetration to reduce the digital divide. spectrum. the existing challenges faced by various stakeholders need to be addressed. Second. financial inclusion and m-commerce. First. among other things. This involves key enablers such as licensing framework. broadband penetration.4. This will. 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. include the unique identification number (UID) scheme. 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. equipment manufacturing and infrastructure development. M&As. USOF. 47 Enabling the next wave of telecom growth in India .2.

Key enablers under existing scenario 4. which let the provider offer fixed. Fee There should be a uniform license fee across all telecom circles. However. are currently imposed on the industry. should be fixed. subject to its availability and efficient usage. DoT should consider lowering the contribution from 5% of AGR to 1% of AGR. mobile or both services under the same license. Multiple levies. a licensee is entitled to obtain a certain amount of spectrum.1 Licensing77 The telecom sector has evolved from a monopolistic regime in the early 1990s to 12–14 licensees in a circle now. excluding the USOF. In November 2003. Pure internet service providers should continue to be free of any license fees.3. entry tax and levies on towers. stamp duty. Moreover.3. with the allocation of spectrum separate from the allocation of a license. 77 See 5. Since there is a significant cash reserve lying unutilized in the USOF. Globally. VAT. the GoI introduced the UAS licensing regime. Enabling the next wave of telecom growth in India 48 . A uniform revenue share license fee of 1%. Parameters Spectrum and license Recommendations Need to have a single universal license for all telecom services. The GoI has issued many new UAS licenses since the introduction of the UAS regime. states levy additional taxes such as octroi. including service tax and license fees (such as universal service obligation fees and spectrum charges). using any technology. for global practices. in India. which aggregate to 30% of the revenues earned by telecom companies. The policy must preserve competition and ensure that no service is given a price arbitrage over others.4. under the UAS regime.1. the number of incumbent telecom service providers varies from four to six.

if the burden is not kept at a manageable level Amendments Currently. renewal procedures. Service providers should be consulted before provisions in license agreements are amended. 49 Enabling the next wave of telecom growth in India . 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. reasons for refusal to renew and appeals to regulatory decisions • Provide details along with the license. amendments to license agreements are carried out unilaterally.License renewal Ensure regulatory certainty and ease investor concerns: • Provide a clear license renewal regime that includes legislation.

6 78 See 5.6-21.010-2.500-2.” TRAI website.in/Default.880 1.785-1. page 22.4.2. page 22.170 2. for global practices.” TRAI website. A mechanism to ensure transparent and non-discriminatory spectrum management is needed.805-1.805 1.785 1.trai.710-1. accessed 10 October 2010.161 Spectrum available for telecom sector 20 20 18.300-3.900-1.gov. 79 “TRAI: Spectrum Management and Licensing Framework.400 3.400-3. Enabling the next wave of telecom growth in India 50 .161MHz79 of identified spectrum by TRAI. 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 India. the National Frequency Allocation Plan (NFAP) is the basis for spectrum utilization and development and the manufacturing of wireless equipment.trai. accessed 10 October 2010. being a scarce natural resource.8 35-75 35-75 0-20 (after coordination) 0-60 60 40 40 100 (ISPs) 287. May 2010.3.in/Default.6-21.asp. data and other application services.980 2. http://www.025 2. The next five years are going to see the spread of telecom services enabling subscribers to benefit from voice.110-2.900 1. 80 “TRAI: Spectrum Management and Licensing Framework.910 1. plays a critical role in the provision of mobile telecom services.8 18.gov. In line with estimated demand of approximately 500-800MHz spectrum across various bands out of a total 1.asp.920-1. a minimum of 287MHz and a maximum of 454MHz is currently available.600 Total Spectrum available in the band (in MHz) 20 108 18 20 20 25 25 75 20 75 20 10 60 15 60 100 190 100 200 1.2-453. http://www.880-1. An increasing availability of smart-phones with significant processing capacity and a wide array of applications are resulting in higher requirements of spectrum.2 Spectrum78 Spectrum.690 3. May 2010.300-2.400 2. Spectrum available for telecom operators in different frequency bands80 Frequency band (in MHz) 450-470 698-806 806-824 824-844 869-889 890-915 935-960 1.

2 49.4 270. page 22.49 0.8 59. accessed 15 January 2011.5 150.75 13.75 0.2 59.7 0. of operators GSM 12 11 10 12 11 12 12 11 11 12 12 11 11 12 11 10 11 12 11 10 10 10 CDMA 4 4 4 4 4 4 4 4 4 5 4 4 4 4 4 4 4 4 4 4 4 4 Total 16 15 14 16 15 16 16 15 15 17 16 15 15 16 15 14 15 16 15 14 14 14 33. Circle-wise spectrum allocated in India81 Circle Allocated spectrum (MHz) GSM Delhi Mumbai Kolkata Maharashtra Gujarat Andhra Pradesh Karnataka Tamil Nadu Kerala Punjab Haryana Uttar Pradesh — West Uttar Pradesh — East Rajasthan Madhya Pradesh West Bengal Himachal Pradesh Bihar Orissa Assam North East Jammu & Kashmir 53.09 0.25 10 10 10 Total 68.75 15 12.asp.4 72. Ernst & Young analysis.5 11.78 0.11 0.55 70.57 0.Latin America Wireless Roadmap.4 69.63 0.65 65 63.6 37.36 0.6 77.3gamericas.5 31.4 No. Ernst & Young analysis.6 87. MHz (2008) 170 200 265 140 120 120 358 353 294 Wireless subscribers.6 150.8 41.2 78. May 2010.92 Argentina Brazil Canada Chile Colombia Mexico Spain UK US Source: “Digital Dividend Pavilion . accessed 14 January 2011.27 0.” 3g Americas website.in/Default.8 61.6 0.in/Default.trai.accessed 10 October 2010. http://www.pdf. “TRAI: The Indian Telecom Services Performance Indicators (July-September 2010).52 0.4 63.1 24 17.1 44.2 28. http://www.08 Subscriber (million) Subscriber/MHz (million) 81 “TRAI: Spectrum Management and Licensing Framework.trai.35 0.3 31 6.48 0.3 Subscriber/MHz (million/MHz) 0.26 0.5 15 15 12.75 12.2 63.4 60.37 0.3 19.2 4.7 43.63 0.6 10.26 0.7 0.5 13.gov.2 63.4 55 53.5 64.4 CDMA 15 15 13.4 75.3 37.2 76.1 0.15 83.7 18.55 0.” TRAI website.6 72.25 10 13.2 37.4 69.16 0.48 0. gov.3 74.4 74.4 67 61.9 52.4 69.53 0. ITU .14 0.5 76.2 53.49 0.75 15 12.1 62.6 66.8 63 53 57. 51 Enabling the next wave of telecom growth in India .asp.25 67.15 79.9 83.7 38.2 50. February 2009.15 78.4 60. 2008 (million) 46. http://www.6 14.75 11.5 0.75 13.6 80.8 75.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20 Erasmo%20Rojas.2 62.22 0.ICT Statistics 2008.5 13. January 2010.” TRAI website.2 6.31 0.95 76.15 84.22 0.Country-wise spectrum availability Country Total licensed spectrum for mobile services.3 49.

Spectrum allocation to new players Spectrum usage charges Spectrum sharing and trading Enabling the next wave of telecom growth in India 52 . It should be based on market price and not administered pricing. The criteria for levying spectrum usage charges should be identified upfront at the time of allocation of spectrum. National frequency allocation plan should be reviewed every two years. 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.6 138. accessed 14 January 2011.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20 Erasmo%20Rojas.co. Need to bring in additional spectrum for commercial telecom services. 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.communicationstoday. Allocation of spectrum should be based on auctions. Parameters Availability Recommendations Align spectrum bands with globally harmonized bands to achieve interference-free coexistence and economies of scale. based on a transparent auction mechanism to determine the price. http://www. Regular spectrum audits should be carried to oversee the efficient utilization of spectrum.Operator spectrum holdings Country/Region/Operator India Denmark EU average France Germany Italy Spain Sweden UK US Spectrum holding per operator.pdf. timely spectrum reconciliation and enhanced transparency. service flexibility.pdf.7 100. MHz 28-37 118.Latin America Wireless Roadmap. Re-farming Spectrum allocation Spectrum allocation should be based on technology neutrality. http://www.5 65 72.2 75-96 Source: “Digital Dividend Pavilion .in/images/1-pdotfinal. The contacted limit of spectrum will be 6.4 92. 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. February 2009. and to draw up a suitable schedule.2MHz for GSM operators and 5MHz for CDMA operators.  Spectrum allocation to existing players 2G spectrum up to the contracted limit should be ensured as initial spectrum.6 92 82.” Communications Today. Allocation of spectrum beyond the contacted limit should be based on market mechanisms. Identify and vacate new spectrum bands for future use. This roadmap should be made available publicly to ensure transparency.” 3g Americas website. Spectrum should be provided to the highest bidder. accessed 14 January 2011.3gamericas. “Presentation to the DoT committee on spectrum allocation criteria. timely allocation.

at affordable prices.4.2 VPT and RCP: around 570.011 broadband connections out of the proposed 888.0 N/A FY05 Funds collected FY06 Funds disbursed FY07 FY08 FY09 Dec-09 Source: DoT 82 See 5. resulting in a huge digital divide. 40.000 VPTs are currently eligible for financial support for operation and maintenance. rural teledensity is at 28.2 17. (INR billion) 40 30 20 10 0 34. for global practices. 83 “Minister Sachin wants to ‘Pilot’ IT revolution in northeast. The USOF is estimated to hold around INR180 billion. 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.3. especially those in rural and remote areas. Multi access radio relay (MARR)-based VPT: out of 185. As of 31 December 2009. 7 March 2010.4 32. In 2002. As of 31 December 2009.4%.705 rural community phones (RCPs).186 out of 62.121 MARR-based VPTs installed before April 2002.950 towers have been set up under this scheme.3. about 184.694 have been provided as of December 2009. © 2010 HT Media Limited. 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.436 infrastructure sites spread over 500 districts in 27 states.3 Universal Service Obligation Fund (USOF)82 NTP 1999 envisaged access to basic telecom services for all.1 39. whereas urban teledensity is about 137. The USOF has enabled telecom development in rural areas through the following key developments: Disbursement of the USO levy to the operators 60 50 54.5 55. via Dow Jones Factive. BSNL has provided VPTs to 61.7 18. Out of the target of 40. 53 Enabling the next wave of telecom growth in India .6 13. about 6.500 have been replaced as of 31 December 2009. The USOF covers rural and remote areas with public access telephones and individual rural household telephones in net high cost rural and remote areas.9 16.83 at the end of FY10. However. Rural broadband: 95. the Universal Service Support Policy came into effect.” Indo-Asian News Service.302 uncovered villages.0 12. voice mail and email.1 15. Tower infrastructure: provide infrastructure support to set up and manage 7.3%.832 wireline broadband connections have been provided as of 31 December 2009.

Parameters Objectives Recommendations The USOF framework needs to be reviewed regularly to effectively utilize the funds to achieve universal service. There is a significant cash reserve lying unutilized in the USOF. so DoT should lower the contribution from 5% to 1% of AGR.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 Fund collection Subsidies should be distributed through transparent market-oriented allocation methodology. Enabling the next wave of telecom growth in India 54 . 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.

June 2010. accessed 10 October 2010. against the target of 20 million by 2010 set in the Broadband Policy of 2004.gov. 86 “TRAI: Consultation Paper on National Broadband Plan. The net broadband addition per month is just 0.trai. The last mile access issue can be addressed through the deployment of wireless technology. connecting 40% of the households in the country. with a broadband penetration of just 0. for global practices. accessed 10 October 2010.3. 2004. India lags behind in terms of ITU’s ICT Development Index (IDI). cost of device and affordability.asp.asp. lack of vernacular content. http://www. Further. application. June 2010. 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. and skills.4 Broadband84 India trails all developing Asian countries. http://www.in/Default. deployment of wireless access should be given preference and fiber media should be utilized from the already available fiber capacity across nation. page 28. The growth of broadband is restricted by several factors such as its perceived utility. in order to encourage broadband. and 118 out of 154 countries in terms of ICT access.74%.” TRAI website. respectively.trai. Broadband should be redefined and clauses such as ‘’always on’’ and minimum speed should be removed from National Broadband Policy.4.85 There were just 8. economic. page 3. cost and competition — are essential for improving broadband penetration.in/Default.1 to 0. To kick-start the broadband penetration in rural and far-flung areas. 84 See 5.8 million broadband connections at the end of FY10.86 with a ranking of 129.gov. 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. use.” TRAI website.4.2 million. 106. 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. The 3C’s — customer. there should be balanced competition to ensure the quality and affordability of services. social. 85 “TRAI: Consultation Paper on National Broadband Plan. connectivity. as well as its BRIC counterparts. Today. The drivers for broadband services are broadly classified as technological. behavioral and government initiatives. 55 Enabling the next wave of telecom growth in India .

The GoI should consider a differential tax to encourage the private sector to set up common access points. There is a case for private-public partnership (PPP) in broadband along the lines of highway construction in India through the build. Computer usage by government employees should be encouraged. operate and transfer route. driving licenses. Discounts should be provided for online payments. Investments should be made in key content development and services such as e-health and e-education. remote and inaccessible areas. More than two service providers with a rollout obligation should be funded. all national and state highway projects should include the laying of an optic fiber backbone. The Government should foster competition to improve the pace of penetration. Backhaul connectivity and OFC should be provided to all telecom towers. Wireless broadband More spectrum should be made available. which is a part of the National e-Governance Plan (NeGP). high-capacity microwave and satellite connectivity should be extended to rural. Since growth will be through wireless broadband. Fiscal incentives Tariffs need to come down. Similarly. on the lines of water and power connectivity. vehicle registration. This can happen only if there are incentives to build infrastructure and provide broadband services. the government and private sector should collectively work toward developing low-cost mobile applications. BSCs and BTS from the nearest block headquarters. In addition. Broadband connectivity should be made mandatory for all buildings requiring a completion certificate. Enabling the next wave of telecom growth in India 56 . payment of electric and water bills. The tax status for expenditure on connectivity/usage should be similar to policies on other public welfare services such as education and medical allowance.Parameters Infrastructure Recommendations Optic fiber communication (OFC). The support for local access and content delivery to towns should extend beyond the 150 commercially viable towns. Right of way (ROW) ROW procedures should be uniform. 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. and charges for broadband services should be rationalized across all states. The development of the customer premises equipment (CPE) model should be supported for the interoperability of broadband. Online fee payments should be encouraged for land records. Regional content Content and applications in regional languages should be created to promote rural broadband. PC penetration Workshops by local entrepreneurs should be promoted under the common services centers (CSC) scheme.

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. Merger of license(s) shall be permitted in the following category of licenses: cellular mobile telephone service (CMTS) license with CMTS license. CMTS license with UASL. Merged licenses in all the categories above shall be in UASL category only. The share of a merged entity should not be greater than 30% in terms of sub-base or AGR. 57 Enabling the next wave of telecom growth in India . The TRAI recommendations dated 11 May 2010 should be followed to maintain the balance between the interests of consumers and service providers. unified access services license (UASL) with UASL. Parameters Number of operators Service area and license stipulations Recommendations Mergers should not result in less than six operators in the circle.5. for global practices.4. The stipulation regarding the minimum period of three years from the effective date of license for merger or acquisition should be done away with.3. and UASL with UASL.5 Mergers and acquisitions87 At present.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. Market share of merged entity Lock-in period 87 See 5. Merger of licenses shall be restricted to the same circle.

while the dominant purpose for selling these RCVs is provision of telecom services to subscribers. Various states across India have issued show cause notices. It is important to note that currently the industry players are paying service tax on such broadband services. such as to procure merchandise. thereby leading to greater financial burden on the telecom sector.4% of the GSM subscribers and 94. 5% levy for USOF. 89 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010). the revenue share license fee (including the USOF) is prescribed as follows: • • • • 6% to 10% of AGR for access services.” TRAI website. This includes the uniform license fee.” The Economic Times. The classification of tower. custom duty and other taxes. which is 23%–25% higher than their counterparts in other Asian countries. the sector contributes significantly to GDP. there are certain key challenges faced by the sector which are outlined below: Recharge coupon vouchers (RCVs): the Indian telecom sector is also characterized by a large prepaid subscriber base. 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.indiatimes. The Indian telecom sector is subject to numerous taxes and levies. http://economictimes.3. The levy of VAT on the activity of providing broadband connectivity services would lead to double taxation of such services. accessed 10 January 2011. VAT.1% of the CDMA subscribers were prepaid subscribers. The Supreme Court without going into the merits of the case has ordered a relook at the matter by the state VAT authorities. However. http://www. the significance of the telecom sector to the Indian economy has grown immensely. According to TRAI.89 96.asp. or other services. It is important to note that currently industry players are paying service tax on RCVs. accessed 15 January 2011.4. The issue was first taken up in the case of a leading telecom player by the state of Karnataka. The issue whether the sale of RCVs should attract service tax or VAT has been a subject of constant debate and discussion. thereby leading to greater financial burden on the telecom sector.cms. • • Sale of light energy: broadband services also continue to face taxation-related concerns. Enabling the next wave of telecom growth in India 58 . these goods could be treated as “component/ spare/accessories” of “capital goods” (i. with the matter going up to the Supreme Court.trai.e.in/Default. 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 levy of VAT on the sale of RCVs to subscribers would result in double taxation. This position has been adopted by industry players. the bouquet of services has changed. BTS etc. as well as tax.) 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. as the RCVs are witnessing liberalization in the flexibility of their usage. which are used for building transmission towers.. Currently.gov. RCV is one of the most popular ways to pay for telecommunication services. the operators pay up to 30%88 of their total revenues toward different levies. Currently. January 2010.6 Taxation Over the years. As of September 2010. Towers and shelters fall under Chapter 73 and 94 respectively of the Central Excise Tariff Act 1985. 88 “Telecom firms want lower tax burden. Denial of credit on such goods would lead to an increase in the financial burden on telecom operators.com/news/news-by-industry/telecom/telecom-firms-wantlower-tax-burden/articleshow/2753840. Central value-added tax (CENVAT) position on tower materials and shelters: telecom operators are availing CENVAT credit on goods such as angles. 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. which account for 80%–85% of the operator revenues. Over the years. channels and beams.

• 90 Place of supply rules define the place (state) which has the right to tax a service transaction. thus. the state where GST will be paid for different kind of telecom services. GST should not translate into an ambitious target to generate higher service tax revenues from the telecom sector. Further. entertainment tax is not proposed to be subsumed in goods and services tax (GST). 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. in view of the exponential growth witnessed by the telecom sector. In case entertainment tax is levied on VAS products. with all services and goods being taxed at a standard rate. It is important to note that as per the current proposal. The upcoming GST regime should. 59 Enabling the next wave of telecom growth in India . along with the creation of a roadmap for a single unified levy. Upcoming GST regime: according to industry experts..e. ease in statewise compliances. the non-subsumation of entertainment tax in GST could impose a significant financial impact on the telecom industry. The upcoming GST regime should aim to simplify the tax structure for the industry. aim to rationalize the tax structure in the Indian telecom industry. 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.• 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.

globalization has led to a rapid increase in FDI. telecommunication industries are often state-operated and monopolized in many countries. It results in substantial progress in meeting such countries’ basic telecommunication requirements. including the development of new forms of electronic commerce. In the Asia–Pacific region. the telecommunications market reform has continued.3. FDI in developing countries enables the development of a local telecommunication infrastructure and universal access. with countries such as the Philippines. Given the importance of foreign investment. social stability and national security. Together. The telecom sector has a substantial impact on a nation’s economic development. the policy should consider raising the upper limit on foreign investment to encourage more foreign players to invest in the capexintensive telecom sector. The Indian telecom sector needs to foster a suitable environment where investment and entrepreneurship. The WTO aims to promote foreign and domestic investment. many countries control FDI in telecom according to their economic and developmental needs. As a result.4. Globally. However. prosper together. the WTO and the ITU encourage the development of a global telecommunication infrastructure and the formation of an integrated global telecommunication market. Taiwan and Thailand opening their markets to foreign investment. The telecom sector has been among the sectors that have witnessed substantial growth in FDI. 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.7 Foreign direct investment (FDI) In the past decade. Hence. and due to its influence on national security. In Latin America. Enabling the next wave of telecom growth in India 60 . thereby enhancing economic growth in developing countries. the balance between economic gains from foreign investment and national telecommunications sovereignty presents a challenging task. major FDI in the telecom sector is facilitated by two international organizations — the World Trade Organization (WTO) and the International Telecommunication Union (ITU). 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. FDI in telecom brings advanced technological skills and large amounts of funds. several countries that first privatized their domestic operators in the early 2000s are now preparing for a second round of market openings. and enhances market competition.

a leading operator launched the “One India Plan.09 Malaysia 0.19 0.” It was considered affordable. 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.2 0. customer friendly and innovative for both local and long distance calls.04 Pakistan 0. 61 Enabling the next wave of telecom growth in India . Furthermore. This was followed up by incumbent operators introducing cheaper tariffs.8 Consumer affordability and rural penetration The Indian telecom market has some of the lowest tariffs in the world. Mobile tariffs per minute in US$ 0.1 0. the increase in subscriber base and teledensity has enabled telecom companies to achieve economies of scale and. giving India some of the lowest tariffs in the world.2 0. with a large majority of people using low-cost mobile handsets.1 0.05 Thailand 0.11 0.3.17 0.16 0. at the same time.03 China 0.23 0.01 India Phillipines Source: DoT. 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.0 Belgium UK France Brazil 0. India Telecom 2010 brochure In February 2006. It also removed the distinction between fixed-line and cellular tariffs.3 0. provide leading class services.4.

increased usage and highly utilized networks also help lower tariffs. small office. Similarly. 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. For the service provider. home offices and other organized/ unorganized groups in rural and remote areas to serve the needs of the population in a holistic way. This arrangement will allow SMEs. it is important that alternative models such as mobile resale be introduced. The services will be provided only by the underlying access provider who will continue to address the related compliance requirements. reduction in capital expenditure and operational expenditure. easy market entry. and low risk enable the creation of policy and a regulatory approach that helps to drive down tariffs. The entity will not replicate the efforts of service provider. In order to drive penetration in rural and remote areas. the entity buying connections in wholesale will be the customer. Resale of mobile services will allow an entity to resell mobile services after buying connections in wholesale from the underlying service provider. On the other hand. Factors such as transparent regulation. The entity will sell the connections to their end customer and contract and bill them in their own capacity for the services provided. and also allow consumers to transfer airtime between each other and use it as currency. Enabling the next wave of telecom growth in India 62 .Drivers of affordable mobile communication • • • • • Transparent regulation Easy market entry Lower tax burden Low risk License reforms to permit mobile resale Innovative business model Reduction in capex and opex Increased usage Highly utilized networks Policy and regulatory approach Affordable mobile communications Operator strategies • • • • Affordable mobile communication is driven by policy and a regulatory approach and operator strategies. which are available in very small increments. There is a need to create a regulatory framework that enables greater sharing. operator strategies such as innovative business models. operators in Bangladesh have designed products and services such as micro prepaid topups. lower tax burden.

The main funding for a TCOE comes from the sponsoring telecom operators. which is characterized by a dynamic young population base– more than half of which is under 25 years old.000 6. organizations such as the Telecom Centers of Excellence (TCOE).4 30 25 20 15 10 21. COAI.706 17. India possesses a developed higher education system that offers training in many fields. 40 central universities. and AUSPI submitted a report that suggested ways to form seven TCOEs across India in a PPP mode. India lags behind China and the US in terms of student enrollment. 63 Enabling the next wave of telecom growth in India . As of December 2009. 53 state private universities. India has the largest number of higher education institutions. Ernst & Young.92 there were 504 universities and university-level institutions. In terms of size and diversity.9 Human resource India has the benefit of a huge population.3. 2010 0 India US China Source: Making the Indian higher education system future ready. However.213 20. For instance. only 17%91 of those in their mid–20s or older have completed their secondary education. Each TCOE is sponsored by a telecom operating company and is hosted by a premier technical or management institute. 2010 In keeping with the NTP 1999’s R&D objective. FY10.213 5 0 Student enrollment in higher education (million) Number of students by field of study in India 1% 2% 3% 7% 45% 3% Arts Science Commerce/ Management Engineering/ Technology Medicine Law Agriculture 21% Others 18% Source: Making the Indian higher education system future ready. 92 Ministry of Human Resource Development. Such organizations promote R&D and help in creating a talented workforce. World Bank website. page xv. the Center of Excellence in Wireless Technology (CEWIT) and the Broadband Wireless Consortium of India (BWCI) have been established. Ministry of Human Resource Development.4. Ernst & Young. 130 deemed universities and 33 institutions of national importance. followed by the US and China. in May 2007. a committee comprised of the DoT. October 2007. Government of India — Annual Report 2009–10.9 10.8 25.000 Number of higher education institutions 21.000 12. 91 Unleashing India’s Innovation. However. including 243 state universities. Number of higher education institutions and student enrollment 30. while the GoI provides basic and research infrastructure.

page 4. customs clearance for imports and exports should be done on a self-declaration basis. the requirement for telecom equipment in India is expected to be about INR5 trillion95 by 2015.livemint. Fiscal incentives Domestic telecom equipment manufacturers may be allowed to have access to external commercial borrowing for capital expenditure and working capital requirements. The case for a growing telecom electronics and equipment manufacturing industry is as follows: • Significant export potential: according to the Telecom Equipment and Services Export Promotion Council (TEPC).com/2010/04/01215017/Indian-telecom-firms-may-get-D. However.10 Equipment manufacturing93 The production of telecom equipment in India has increased at a CAGR of 29% from FY04 to FY09. In addition. 96 Policy Recommendations to Increase Domestic Telecom Growth and Exports of Telecom Equipment & Services . royalty payments of up to 5% on domestic sales and 8% on exports should be exempted from income tax. accessed 20 October 2010. There should be provision for round-the-clock customs clearance. http://www.3. accessed 02 August 2010. html. 28 February 2010. India needs to position itself as a telecom manufacturing hub in the long term.Telecom Equipment and Services Export Promotion Council (TEPC). In order to encourage technology transfer.net/indian-telecom-a-tale-of-stupendousgrowth/. Increased competitiveness in the global market: a technologically advanced manufacturing ecosystem in India prospectively offers an international platform to telecom manufacturers. 94 “Indian Telecom: A Tale of Stupendous Growth. localized players can expect to compete globally with established manufacturers and make their own mark in foreign markets in the long run.6. 95 “Indian telecom firms may get DoT boost. In order to reduce transaction costs. for global practices. • • Employment generation: given the right impetus.” LiveMint. Enabling the next wave of telecom growth in India 64 . Export promotion The Government could create a sizable export promotion fund for the Telecom Equipment and Services Export Promotion Council (TESEPC). 93 See 5. further strengthening the case for a robust telecom manufacturing industry. 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.” The Viewspaper. The tax on the payment of royalty should be as low as possible. 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.4. According to DoT estimates. the provision of a single window clearance for all state-level approvals would be a vital fiscal measure. the share of locally manufactured equipment has declined to 30% in FY09 from 74% in FY04. growth in the segment holds the potential to triple the country’s current employment base by FY14. Parameters Manufacturing hub Recommendations 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. 01 April 2010. resulting in the significant growth of exports to developing nations. Thus. In addition. 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. http://theviewspaper. There is a need to align product certification with international standards and to facilitate global accreditation for the testing facility. and policy initiatives should be focused on encouraging localized manufacturing. supported by the banking system. Other significant incentives would encompass the removal of withheld tax on the fee for transfer of technology and software import. the segment holds an export potential of INR450-500 billion96 by FY14.

Russia and Eastern Europe. Set up an autonomous body. Taxation Financial support Investments for accessories R&D The current taxation structure for mobile handsets must be maintained for long-term growth. 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. Indian trade missions in these regions should proactively seek opportunities in the telecom electronics and equipment domain and facilitate business interactions. Leading class R&D centers in the PPP mode should be promoted. Latin America. similar to the Telecom Finance Corporation. Service hubs Telecom equipment manufacturers should be encouraged to create service hubs to develop a global network and strengthen their presence across India.Bilateral trade programs Telecom exports from India may be included in bilateral trade agreements with emerging markets in regions such as South Asia. 65 Enabling the next wave of telecom growth in India . A detailed program should be created to attract investment in the manufacturing of accessories such as batteries and chargers for mobile handsets. to assist and provide guidance to those who want to set up a manufacturing facility. A fund for R&D and product development for the segment should be created. R&D should be the key focus. Africa.

The telecom infrastructure service provider needs to apply to the local municipality or panchayats for permission to build a tower. Technological approaches that can potentially reduce the direct and indirect costs of creating telecom infrastructure should be encouraged. stable and predictable cash flow. for global practices.11 Telecom infrastructure97 Infrastructure growth is critical to the rollout of services. the rents charged. a new tower could be awarded through a bidding process. creating a uniform taxation regime. There is also a need for an empowered committee or similar structure to engage with roads and power ministries. Telecom/broadband connectivity should be considered a necessity such as water and power in every housing facility.4. But the lack of guidelines or standard procedures results in enormous delays and huge cost implications. Civic issues Civic issues such as zoning regulation. Moreover. If legislative amendments are needed. GoI should announce a National Telecom Critical Infrastructure Policy (NTCIP). The profitability is dependent on the ability to increase tenancy on the tower. Full utilization of towers— optimum sharing There should be laws governing the rollout of towers.7. then no new tower should be allowed in that zone. At present. For India to achieve 85% teledensity. Every tower should be fully utilized. low working capital requirements and high incremental profitability. 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. it needs 95% coverage. which are directly connected with the growth of tower infrastructure. Parameters State subject Recommendations 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. Such practice is being followed in developed countries such as the US. Also. Given the challenges that the industry faces. they should be adopted in a timely manner. These are not matters of local self-government or municipal departments. The biggest barrier to setting up telecom towers and other infrastructure is the wide variation in the approval process adopted by local bodies. single window clearance and preferential treatment for sharing and incentives need to be addressed in a timely manner. This mandate should be included in bylaws of the local and state governments. Tower infrastructure needs to come under the Indian Telegraph Act. there is no uniform approval process across states for setting up telecom infrastructure. Enabling the next wave of telecom growth in India 66 . 97 See 5. and GoI should declare mobile and tower infrastructure as “Critical Infrastructure Services. and there could be distance guidelines for the same.” Tower infrastructure should be erected in accordance with the NTP and licenses granted by the GoI under the Indian Telegraph Act. There is a need for national ROW policy for rollout of backhaul network. the tower business is characterized by high initial capital investments. which avoids duplication of capex. the scale and spread of the tower portfolio and the ability to raise capital. Once the existing tower is at capacity. If an existing tower is not operating at 100% capacity. The rollout subsidy could be fixed at a flat amount based on the approved tower design for a period of five years. in-building solutions and DAS make it possible to conserve spectrum and reduce the visual impact of towers. 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.3. The march of technology-IP/converged platforms is leading to integrated technology-neutral host platforms. but are matters liable to be governed by the GoI or regulatory authority constituted by it in accordance with the NTP. A 70-meter tower could service an area of 2-3 square kilometers.

Tower specification and standardization requirements should be clearly spelled out. which should be approved by a competent authority. There could be 6-10 standard designs for a tower. Standardized design across operators and geography would further help optimize sharing and potentially reduce cost. Infrastructure companies are akin to players such as equipment vendors and network management companies. fuel cells or wind power. The fee levied on tower companies should not be viewed as a source of income to fund the development of a municipality. The energy used by tower companies should fall under a uniform classification in all states. which would be approved by a “design approving authority.Taxation on towers Rationalize the tax structure across states in the form of tax cuts.000 employees) and BTS manufacturers. The SACFA Committee should be revamped as part of a faster and simpler site clearance process. and treating these efforts as part of the overall effort to reduce greenhouse gases and the country’s carbon footprint. The USOF contribution toward the setup of telecom infrastructure and its role for rural rollouts should be specified. 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. Operators should reduce their existing diesel generator run times by deploying the latest fastcharging batteries and improving their partial-state-of-charge capabilities.” The development of specific IS code of telecom towers will help the industry to follow optimized design parameters. 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. SACFA clearances Telecom service providers coordinate with a variety of departments for site clearances which is a time-consuming process. and the industrial rate structure should be made applicable to towers across all states. which will make towers safer. because they do not interface directly with end users. there is no cess on handset manufacturers. Power tariffs and consumption Telecom services should be treated as a public utility service. a cess should not be levied on them. Time-related incentives ought to be provided to tower infrastructure providers to speed up deployment. Each tower should have a structural certificate. The Central Government should not impose a cess on tower operators. 67 Enabling the next wave of telecom growth in India . The state electricity boards should be advised to place a priority on applications for utility connections from telecom infrastructure service providers. Since tower operators do not  directly serve the end consumer. There is little justification for imposing costs such as lincense fees on these players. The immediate cost of infrastructure creation can be brought down significantly by reducing  government duties and taxes. Utilization of USOF and incentives Grievance redressal Safety concerns A broader framework should be created to handle and settle grievances involving infrastructure companies in the event of a conflict. call centers (with about 40. fiscal incentives and subsidies. USOF subsidies are required to defray the cost of infrastructure creation in rural areas. Currently. which account for 60% of infrastructure companies’ outgo. Grid power supply should be made available. There should be a method to cash in carbon credits.

Furthermore. In fact. Alternative sources of energy need to be developed and deployed wherever found feasible. radio and television broadcast stations have been in operation for the past 50 or more years without any adverse health consequence being established.800MHz) and because a person’s height makes the body an efficient receiving antenna.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. Recent surveys have shown that the radio frequency exposure from base stations ranges from 0. Service providers are using green shelters or deploying outdoor BTS wherever found feasible to reduce power consumption.3 million tonnes. the body absorbs up to five times more of the signal from FM radio and television than from base stations. Misplaced apprehensions on health hazards of electromagnetic radiation from mobile antennae-BTS International institutions like the World Health Organization. Local authorities and consumer groups should be made more aware of this. there should be a joint endeavor between civic agencies and other related departments. depending on a variety of factors such as the proximity to the antenna and the surrounding environment. Operators are also experimenting with the use of non-conventional sources of energy wherever feasible for meeting energy requirements. 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. Enabling the next wave of telecom growth in India 68 . Environmental issues If these BTSs can be run on renewable energy resources.000 renewable energy base stations could reduce annual carbon emissions by up to 6. Further. 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. There should be incentives for tower companies to optimize fuel and power costs. 118. Even for limited camouflaging. The feasibility of using biofuels is also being studied. Operators should be encouraged to use green technologies. These measures have the potential to reduce the carbon footprint significantly. and not for all generic urban areas. due to their lower frequency. a positive public stand by the regulator would be extremely helpful. at similar radio frequency exposure levels. annual carbon emissions could be reduced. there is a need to fix the feed strength to control radiation emissions. While the operators are making their best efforts to educate the general public. increase the energy efficiency of new network equipment and optimize network technology to increase energy efficiency.002% to 2% of the levels of international exposure guidelines. the British Medical Association.

BPO customers need variable per minute usage-based pricing model both for inbound and outbound calls. 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. However.4. Therefore. these licenses do not allow the use of adequate encryption in accordance with current commercial standards to protect confidential information. which imposes double taxation on ILD and NLD license holders. data revenue. telecom licenses are voice-centric. In line with international practice. Therefore. current ILD and NLD licenses were drafted before the development of current GTS services and technologies. Regulatory restrictions related to interconnection of data and public switched voice networks interfere with the realization of these services’ full potential. non-discriminatory and cost-based. the customer should undertake to make its encryption key available to the licensed entity on demand. and are largely premised on the provision of mass market consumer voice services. In the interest of national security. 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. Taxation 98 Enterprise Sector. India does not rank in the top 10 data revenue earning countries. Ranking of subscribers. To promote competition in the IPLC segment. It should be retail minus and avoid vertical price squeeze by the incumbent. most regulations are voice-centric and do not cover issues related to enterprise service providers. should be clarified. a wholesale pricing regime should be introduced. Access charges under new RIOs for accessing new cables should represent only the actual incremental network costs of providing the access services.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%. 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. including lawful interception  and monitoring conditions. with attention given to MPLS and IP-VPN services. Interconnection regime and cable landing station (CLS) access Access charges under existing Reference Interconnect Offers (RIOs) should be fair. Lawful interception The proper treatment of data services under the ILD and NLD licenses. which do not connect to a public network. The security/lawful monitoring and interception requirements applicable to enterprise data services should be specified. Despite the large number of players entering the enterprise data segment. and service revenue98 by country Rank 1 2 3 4 5 6 7 8 9 10 By subscribers China India US Russia Brazil Indonesia Japan Germany Pakistan Italy By data revenue US Japan China UK Italy Germany France Korea Spain Australia By service revenue US China Japan France Italy UK Germany India Spain Brazil Focus area Encryption Recommendations 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. Costing should be in place for RIO charges to ensure proper cost-oriented charges. November 2010. 69 Enabling the next wave of telecom growth in India . specifically LIRC. Need to eliminate the cumulative assessment of licensing fees on the purchase of inputs. Association of Competitive Telecom Operators.

It is essential to create a regulatory framework that addresses the issues arising from both technological and business convergence. a telco provides video. broadcasting and internet-based services by a single operator. Convergence has evolved due to the processes of digitalization and computerization. Today. data and telephone through separate channels. Hence. it poses challenges that need to be addressed from a regulatory perspective. Triple play is also used to define the end result of convergence. impacting both the telecommunications and broadcasting sector as a whole. 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. which refers to the combination of three services — internet. Market-related convergence arises due to consumer expectations of one-stop service availability and bundling of services. As a result. In the US and Hong Kong. taking convergence to a new level.4. or access devices such as the telephone. Convergence has led to increased competition in the marketplace. television and personal computer. commercial power lines have been used to provide telecommunication and internet services.13 Convergence99 The ITU defines convergence as the integration of customer end terminal equipment. for global practices.8.3. At the same time. it is expected that these lines will become an alternate medium for providing information services. In the near future. Technological convergence has made way for business convergence. telecom and telephone. Convergence creates opportunities such as the combination of either equipment or businesses to provide multiple telecommunications. most of the telecom operators provide broadband services in addition to voice communication services. whereas another telco provides triple play through a single channel. with a service provider offering a bundle of services. 99 See 5. Enabling the next wave of telecom growth in India 70 .

the GoI has taken steps regarding telecom infrastructure equipment. Thirdly. 71 Enabling the next wave of telecom growth in India . highly vulnerable. internet service providers and one of the world’s leading internet search engines. 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. In 2009. any suspicious equipment periodic review thereafter.4. with Chinese mobile phones being the major category. The key stakeholders associated with security concerns surrounding telecom equipment include the DoT. virtual private networks (VPNs). with the rapid growth in Further. The key players that have been impacted by the security concerns include one of the world’s leading mobile handset manufacturers. manufacturers. along software and facilities at the time of procurement and with a trained workforce. modern data mining and network mobile operator. As a result. issuing guidelines related to the import of network equipment from foreign telecommunications vendors. with penalties for non-compliance. terabytes and exabytes of data need to be set up. the DoT blocked calls to mobile devices without a 15-digit International Mobile Equipment Identity (IMEI) number. Although the GoI has initiated these steps to enhance security and curb terrorism with the help of mobile telephony. Indian intelligence agencies. This move is expected to have impacted approximately 25 million users. Know Your Customer (KYC) verification process for a mobile connection faces issues The guidelines mandate the sharing and monitoring of such as forged documents. the guidelines put the onus for compliance on the voice and data traffic. leaving the telecom system source code and design along with Indian security agencies. Firstly. which is a unique number allotted to every mobile phone for the identification purposes. The management infrastructure that is able to monitor DoT has also mandated thorough inspection of hardware.3. India has witnessed a series of terrorist attacks. with terrorism being primarily attributable to religious communities and radical movements. The IMIE number helps intelligence agencies track mobile phone users and curb anti–national activities. other issues remain that continue to raise concerns over security.14 Security In the recent past. telecom equipment manufacturers and telecom operators. as the requested information is considered sensitive and proprietary. Secondly. the Ministry of Home Affairs.

. 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 rollout of 3G services m-commerce Mobile banking • Inter–account fund transfer • Account inquiry • Stock trading • Bill payment Mobile payments • Information services. 4. train.g. in India is expected to boost market growth. with each broad category providing an array of services. booking tickets for transportation services such as trains and taxis and online shopping. with synergy existing between e–commerce and m–commerce.e. Enabling the next wave of telecom growth in India 72 .1 m-commerce100 The next revolution that is expected through the use of mobile phones is the emergence of m-commerce. including current affairs. Going forward. the rollout of 3G services and increasing usage of WAP. cinema) • Shopping (i. tourism and search engines • Ticketing (e. It is forecasted to overtake e-commerce in terms of the number of transactions. The m-commerce service umbrella in India has been limited primarily to payment and transfer systems. Mobile phones provide the consumer an opportunity to transact anytime and anywhere. especially in the case of banking and internet-based purchases. purchase of goods and services) Mobile transfer • Prepaid card top-up • Person-to-person transfers • International remittances 100 See 5.9. mobile banking and multimedia messaging service (MMS). driven by the uptake of services such as mobile web browsing. for global practices. the UID scheme and financial inclusion. paying bills for utilities such as power and gas. web-enabled phones and smartphones by mobile subscribers is expected to play an important role in the growth of m-commerce. m–commerce finds its applications across various end markets such as banking and financial institutions.4..4.4.

Mobile payment technology will transform the nature of physical interaction between consumers. mobilized and generated in future.4.3 Mobile money Mobile communication and secure mobile transaction opportunities will bring a transformation in the manner in which money is managed. This will cause a reduction in the cost of transactions. coupons and advertising would pick up. redundancy and coverage. 4. service quality and security. owing to increased volume. health care. the world is expected to witness 50 billion101 connected devices in 2020. M2M is characterized by small amounts of data between the device and network. delivery of health care information to practitioners. to look at account information and transfer small amounts of money between various accounts.4 M-health M-health applications include the use of mobile devices in collecting community and clinical health data. education.4. 4. finance. over a period of time. and will enable networks to support automated machine communications. with mobile money becoming a truly rich and integrated application for consumer convenience. with machine– to–machine (M2M) communication being the key driver behind this exponential increase in connected devices. There are a number of government schemes and other initiatives from medical service providers offering tele-medicine services. Utilities. 73 Enabling the next wave of telecom growth in India . page 2. Ericsson. 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. where the ability to conduct transactions from anywhere and at any time inherently lends itself to real-time 101 The World of 50 billion connections. adoption of other services such as ticketing. It will significantly impact the banking industry. thereafter. disruptive business models and reduced legal and professional fees. December 2010. monetary settlements. bill payment related to utility and others will become a major application. transportation and other emerging industries are expected to be at the forefront in adopting M2M communication. researchers and patients. The key advantages provided by M2M include cost and spectrum efficiency.2 M2M communication According to Ericsson. The initial application will focus on mobile banking. to extend affordable health care to all in the country. government. merchants and banks.4.4.

4. 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.4. and help them earn their daily wages. 4. 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. this data could be transmitted to MNREGA.4. 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. The UID program is critical to improving the delivery of social services. Enabling the next wave of telecom growth in India 74 .4. students and peers through collaboration in a distributed environment.6 Financial inclusion Financial inclusion is central to the overall task of inclusive growth.7 MNREGA and UID MNREGA and UID strive for providing inclusive growth. It aims to bridge the supplydemand gap of high-quality teachers in the country. For instance. subsidies and other government programs while also strengthening national security. The integration of such programs with mobile telephony will benefit the nation. It enables a virtual community to facilitate the learning activities of teachers. 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. about 80% of households do not have bank accounts. In India. 4.5 M-education M-education offers innovative use of mobile and wireless technologies for education. MNREGA achieves twin objectives of rural development and employment. Once workers have logged in.

Global practices 75 Enabling the next wave of telecom growth in India .5.

The pre–qualification criteria included investment. • The three-license limit was driven by a shortage of spectrum. the Government decided to issue four licenses through auctions. • The number of 3G operators was fixed at three per region. the successful bidders were required to pay royalties according to the royalty percentage determined at the time of auction. the Swedish law states that licenses are allocated based on specific criteria. network rollout. Japan • In 1998.5. • The selection of applicants was based on the “beauty contest” criteria (i. In March 2000. 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. • The Government focused on rapid rollout and nationwide coverage. • Successful bidders were expected to pay a minimum royalty fixed by the Government for the first five years of the license. quality of service and financial capability. which is to the advantage of operators and consumers. Sweden • In May 2000. with new as well as incumbent opeartors — but not fixed regional operators — being eligible. 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. the MPT established the technical regulations and publicized the licensing policies.1. with the same royalty percentage applying to all licensees. Further. with a guaranteed minimum payment. • Since the 3G license allocation in Japan was straightforward. Enabling the next wave of telecom growth in India 76 . as operators do not pay expensive fees to the state for the issue of licenses.. Following the pre–qualification exercise. the policy for comparative selection was not invoked. Licensing Hong Kong In February 2001. with the regulator having a total of 60MHz of spectrum for 3G services. • Successful bidders were required to provide a five-year rolling guarantee of the minimum royalty payment for the entire license period. with the number of applicants matching the number of licenses. The Government decided to issue four licenses for up to 31 December 2015. the Japanese Ministry of Posts and Telecommunications (MPT) published the draft for the introduction of 3G services and solicited public comment. allotting licenses to operators who best meet stated pre-set criteria).e. From the sixth year on. the Hong Kong Government released its 3G licensing framework. Sweden issued an invitation to provide network capacity for UMTS mobile telecommunications services.

transparent and participatory renewal process.” National Telecommunications and Information Administration website. In September 2006.ntia. page 1.508.Allocation of 3G mobile licenses102 Country Austria Australia Canada Finland France Germany Italy South Korea Netherlands New Zealand Norway Portugal Spain Sweden Switzerland UK Number of licenses 6 6 5 4 4 6 5 3 5 4 4 4 4 4 4 5 Mobile incumbents 4 4 4 3 3 4 4 2 5 2 2 3 3 3 2 4 Method Auction Auction Auction Beauty contest + nominal fee Beauty contest + nominal fee Auction Auction Beauty contest + fee Auction Auction Beauty contest + fee Beauty contest + fee Beauty contest + fee Beauty contest Auction Auction Date November 2000 March 2001 January 2001 March 1999 July 2001 July 2000 October 2000 End 2000 July 2000 January 2001 November 2000 December 2000 March 2000 December 2000 December 2000 April 2000 Sum paid (US$ million) 610. It is essential to provide details about license renewal or reissue.0 10. which provides a funding mechanism through which federal agencies can recover the costs associated with relocating their radio communications systems from certain spectrum bands. accessed 22 October 2010.pdf.08 116.755MHz band used by federal agencies was reallocated to AWS under the provisions of Commercial Spectrum Enhancement Act (CSEA).103 the Federal Communications Commission (FCC) concluded the auction of Advanced Wireless Services (AWS) in the 1. including the use of the SRF to facilitate relocation of federal communications systems.2.0 35.080.” ITU website.int/osg/spu/ni/3G/casestudies/GSM-FINAL.155MHz band. This is done through the principle of renewal expectancy.710–1.itu. The 1.7 1.0 120. http://www.0 each 44. gov/reports/2008/SpectrumRelocation2008.pdf.0 3. 5. and through promoting regulatory certainty through a fair. Spectrum Re-farming of spectrum • The US Government created the Spectrum Relocation Fund (SRF) in December 2004.520. Policy-makers and regulators should focus on creating interest among providers and providing incentives for long-term investment. Public consultation procedures and the right to appeal also increase the prospects for a successful renewal process.710–1.110– 2. http://www.0 51.390.8 360.0 2.482.755MHz band paired with the 2.0 351.0 Note: The “beauty contest” approach purports to allocate licenses to operators who best meet stated pre-set criteria. 77 Enabling the next wave of telecom growth in India . and ensure sufficient lead times and transitional arrangements in the event of non-renewal or changes in licensing conditions. page 50.070. 103 “1710–1755MHz spectrum band relocation.doc.4 44.0 Nominal 4. which were authorized to be auctioned for commercial purposes. The 102 “3G Mobile Licensing Policy. accessed 12 October 2010.0 45.870.

gov. Enabling the next wave of telecom growth in India 78 .. in consultation with the Office of Communications (Ofcom). bis. page 28. While it is important to ensure that access to spectrum 104 “A Strategy for Management of major Public Sector Public Holdings. Spectrum trading • Spectrum trading gives public and private sector entities the opportunity to decide which spectrum to release or share. and de facto control. the Ministry of Communications and the Ministry of Defense have agreed to make 2x75MHz spectrum available for WiMAX in the 3. The secondary trading of spectrum provided benefits such as economic efficiency. accessed 12 October 2010. the FCC formulated rules for spectrum trading.e. One of the key recommendations of the Independent Review of Government Spectrum Holdings (IRGSH) was a regular review of all defense band allocations.6GHz band. spectrum is needed only in certain geographical areas. and it has begun a program to identify which spectrum can be released and time frame for releasing it. Innovation and Skills website.6GHz band had previously been allocated to multichannel multipoint distribution service (MMDS) operators to support pay-per-view TV services. and facilitates the provision of innovative new wireless services in the commercial market. civil maritime. the possibility exists to use the spectrum for other applications the primary user does not need. The FCC distinguished between de jure rights.” UK Department for Business. Further. i. • • • • • Sharing of spectrum • Time sharing: defense needs to use part of the spectrum only in crisis situations during exercises. and spectrum regulation. The MoD has management rights to 35%104 of the spectrum bands listed in the UK Frequency Allocation Table (UKFAT). In 2010. Spectrum assigned to the maritime sector may need to be used for maritime radio services only near the coastline. as a part of spectrum re–farming. simplifying them in mid-2004. The 2. an inefficient primary mechanism of spectrum allocation that makes it necessary to move to a market-based method of secondary allocation. Such spectrum could be made available for other applications inland.4–3. ANATEL. and innovation in the supply and demand for radio-based technologies. civil aeronautical. 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.. agreed to re-allocate spectrum in the 2. the UK Department of Trade  and Industry’s spectrum strategy committee.6GHz band to support the nationwide deployment of nextgeneration mobile broadband services. The re–allocation benefits the country’s mobile operators. but transfers management control of the spectrum. 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. sharing or reallocation opportunities for spectrum. inland waterways and rivers. is guaranteed the moment it is needed. transferee retains the license and legal responsibilities. The committee formulated the strategic plan for the Ministry of Defense (MoD). • Geographical sharing: in certain situations. • In March 2007. giving them the option to deploy LTE immediately. the FCC proposed the concept of developing smart devices that adjust to the spectrum they use and take advantage of underused spectrum. The critical success factors for spectrum trading include a large number of buyers and sellers. New Zealand was the first country to introduce open market trading of spectrum. promotion of innovation and flexibility. 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. uk/files/file38572. assignment of the license to another party. In 2006. In Italy. the Australian Communications and Media  Authority (ACMA) reviewed government spectrum holdings.7 billion in net winning bids. in 2004. In 2003.AWS auction raised US$13. emergency and public safety services (E&PSS) and science services. the Brazilian telecommunications regulator.pdf. In 1989.e. i. http://www.

In Greece.oecd. In the UK. USO services were provided by incumbent operators.3. the telecom regulator. However.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.org/dataoecd/59/48/36503873.5. 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 105 Organization for Economic Co-operation and Development: Working Party on Telecommunication and Information Services Policies. The Brazilian legal framework uses a variety of tools to achieve universal service. or proposing to expand into high-costs areas. Most European countries. the incumbent operator was required as part of its privatization to install payphones in 20. Brazil has developed a mechanism that achieves universal objectives through obligations imposed on its licensees.pdf. with the aim of increasing overall teledensity. after liberalization of the telecom sector. BT is the designated USO provider. http:// www. Communication service providers are obliged to contribute to this fund in many countries. have not considered the creation of a universal fund. The contribution rate ranges from 0. governments should consider whether they should create a USOF for broadband services. subsidies are granted according to formulas for compensating operators already serving high-cost rural areas within their operating territory.1% in France to 6% in Malaysia. As a result. with a relatively small geographical area and high population density. ANATEL has imposed a coverage obligation rather than a funding mechanism. In most countries. a competitive tender mechanism was used. page 19.5% (plus federal contributions) 1% 1% 1% Considering USOF for rural wireless broadband services With the rising importance of broadband. Universal Service Obligation Fund In many countries. accessed 20 October 2010. On the other hand. In Mexico. countries with large geographic areas and consequently much higher costs to serve rural areas have funds that aim to cater for the rural population. 79 Enabling the next wave of telecom growth in India . Universal service levies by country105 Country Malaysia India Colombia US Russia Canada Peru Uganda Nigeria Contribution by operators 6% 5% of license fee 5% Less than 4% (plus state levies) 2% 1. a separate universal service fund has been set up.

page 19. Japan Developing countries Country Argentina Brazil Telecommunications carriers contribute to the USOF. Subsidies distributed through competitive bidding. The USO provider makes an offer to provide services at specified cost. and additionally 15% for joint and common costs. Compensation for costs incurred by USO provider. Both fixed and mobile operators pay a fixed percentage of eligible telecom revenue. operators invited to submit proposals for universal service provider and to be compensated from the fund through a competitive process.1%. Subsidies mainly awarded to tele–center projects and areas of greatest need. Fixed and mobile network operators contribute 6% of their weighted revenue from designated services to the fund. ISPs and mobile operators.e. Starting in 2002. April 2006. couriers and ISPs. Universal service fund compensates costs estimated on the basis of long run marginal costs. Government budget. Chile Colombia Malaysia Nepal India Peru South Africa Uganda 106 Organization for Economic Co-operation and Development: Working Party on Telecommunication and Information Services Policies. including telecom operators. 5% of national and long distance operators’ revenues. with the lowest bidder being the winner. France Italy Operators contribute a percentage of revenue i. Subsidies distributed through competitive bidding.. Subsidies distributed through competitive bidding. Subsidies distributed through competitive bidding. 2% levy on the revenues of the incumbent operators.16% of all operators’ revenues. Major operators contribute 1% of revenue. Universal service fund supports ICT projects consistent with the Government’s development objectives. 1% of all operators’ gross revenues. Method of allocating funds The Government determines the level of subsidy paid to the USO provider. Subsidies distributed through competitive bidding. Method of allocating funds Government to determine based on its goal to increase wireless and wireline teledensity. with the lowest bidder being the winner. 1% levy on all sector participants.Methods of utilizing USOF across various countries106 Developed countries Country Australia Canada Source of revenue Levy on licensed operators depending on market share of eligible revenue. 5% levy on the revenue of telecommunication operators. 1% of service providers’ gross operational revenues earned from telecom services. with the lowest bidder being the winner. The telecommunication carriers are eligible to receive universal service funds. Subsidies distributed through competitive bidding. with the lowest bidder being the winner. and the regulator decides what part to accept. 0. Enabling the next wave of telecom growth in India 80 . with the lowest bidder being the winner. 0. Source of revenue 1% of all operators’ gross revenues. the postal service. with the lowest bidder being the winner. plus funds from license fees.

108 in comparison with 4% in developing economies.4. during 2005–08. accessed 12 auditing capability and stronger they have embraced cloud October 2010. it declined to just 2%. Intel 37. which covers the overall . content and applications.4 million fixed broadband subscribers. TRAI. if China is excluded from the developing world.1% 33. Investment in information world in terms of broadband penetration.7% 10% 20% 30% 40% Monthly broadband charges on a purchasing power parity basis (US$) 60 50 40 30 20 10 0 56 35 UAE Germany 34 Saudi Arabia 32 China 29 Japan 23 UK 22 Canada 20 US 18 Hong Kong 16 India 7 Israel Source: “Measuring the Information Society.5% 29. regulatory environment. infrastructure. urban–rural divide and other factors that impact broadband penetration are very different in developing nations. the growth rate is much higher in the developed world. increased risks: 3.8 million107 broadband subscriptions across the world. However. Booz & Company analysis There are more than 497. Increased security aware1.3% 7. Eastern Europe added 19. However.4% 23. 61% (46% globally) agreed that their organization will spend more this year in information security than it did last year.com/Assets/PDF/Article/WA-323857001. encourage competitive ecosystems. whereas African countries were able to add 2. invest in infrastructure and latest technology. identity and access management computing. that emerged were increases in the global respondents stated that 108 “Intel: Realizing the benefits of broadband.. page 2. For instance.5% 26.7% 26. The number of organizations currently evaluating the use of virtualization techniques is growing: 81 4. page 4. 23% of 107 World Broadband Statistics: Short report. 23%. form PPPs.7% 0. Furthermore. Indian organizations.” Intel website.” ITU. Broadband services have economic benefits both in developed and developing nations. The broadband ness controls will be implesecurity has increased: penetration rate ingrowth in theeconomies is nearly to mitigate new or The survey revealed developed mented organization’s annual investment in information security. and release spectrum for the sustainable deployment of broadband services. Although the world is witnessing a rise in broadband penetration. as they provide businesses and consumers with fast and continuous access to internet–based services. http://www. Other top trends next 12 months.5. 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. Point Topic Ltd. as against only 8% by systems. a large digital divide exists between the developed and the developing 2. The essential leading practices that enable countries to increase broadband penetration include: adoption of regulations that embraces innovation and competition. Broadband Broadband networks are an essential infrastructure for the global economy. 2010.pdf. Of all participants. Broadband penetration by country 2009 Netherlands Korea UK Finland US Australia China India 0% Source: OECD.5 million fixed broadband subscribers. The firm combination of national objectives toward broadband services with leading practices is expected to enable developing nations to achieve benefits of broadband growth. The trend of actions that organizations have taken to control the leakage of Enabling the next wave of telecom growth in India 5. However.intel. Emerging markets such as India need to adopt leading practices that facilitate rapid and cost-effective deployment of broadband technologies. The Information Security Management System (ISMS).

where all have the confidence to access the new and innovative services delivered by computer. mobile phone. technology demonstration projects. subsidies for purchase of personal computers by low-income citizens • Promote digital literacy • Support e–governance. with each citizen having access to a personal computer. formulated the action plans. The Korean Digital Divide Act created the five–year master plan to close the digital divide. 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. through funding • Financial support for R&D. education and other information and communications technology (ICT) services Priorities 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. focusing on adoption among the more disadvantaged • Provide support to BBC and commercial market for experimentation in broadband content using commissions and partnerships Enabling the next wave of telecom growth in India 82 . and launched the Korean Agency for Digital Opportunity and Promotion (KADO) • Encourage infrastructure investment by incumbents and market entrants  • Support construction of new high-capacity digital broadband backbone. 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 Objectives Action • Create a “digitally rich” UK. e–commerce. 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.South Korea Policy element Objectives Action • The South Korean Government created an action plan for the emergence of a knowledge-based  society. 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.

the parties offered to surrender 15MHz of spectrum. Mexico and Guatemala. the merger of the UK operations of two mobile operators was cleared by the European Commission. In March 2010. 83 Enabling the next wave of telecom growth in India . The combined amount of spectrum held by the two parties — at 1. the cap was raised to 55MHz. In the US. After the elimination of the spectrum cap. After the auction in 700MHz band. 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. such as Australia. 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. which would help overcome the challenges posed by globalization. and it was abolished in 2003. especially in emerging markets. have abstained from the implementation of a spectrum cap.5. As a result. Ofcom. Mergers and acquisitions The telecom sector has evolved at different rates around the world.5. has proposed a cap on the award of spectrum to a mobile operator. However.800MHz — was larger than that of their competitors. with different views on each regulatory issue. the FCC used a cap of 70MHz in deciding mergers. there is a lack of regulatory consistency at the international level. The emergence of new technologies and applications worldwide has forced mobile operators to expand their global footprint through mergers and acquisitions. In 2001. Ofcom has proposed a cap on the amount of spectrum held by any operator in the spectrum range under 1GHz. a spectrum cap has been implemented in Canada. a spectrum cap was in place from 1994 to 2003. allowing other competitors to rollout services. other countries. In the UK. 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. Similarly. The US and the UK have gradually eased their respective spectrum caps. However. the spectrum cap in the US stands at 95MHz. the telecom regulator. In any country.

The mobile telecom cluster. Further. with electronics and electrotechnics accounting for about 25% of the country’s exports. Enabling the next wave of telecom growth in India 84 . mobile network operators. Finland removed the restriction on foreign ownership in Finnish firms and restrictions on capital inflows. These changes were primarily driven by higher education and the emergence of knowledge-based industries. The country has invested in a number of technical universities. the first GSM network was launched in Finland. secondary and tertiary education is free of charge. which has facilitated the emergence of Finland in the telecom sector by providing a large pool of engineers. “Market Openness. consulting firms. From 1987 to 1997. and joined the European Union in 1993. which more than doubled between 1985 and 2005. the Finnish economy was dominated by forest-related industries. including mobile application developers. primarily driven by a robust educational system in which basic. An increase in FDI has resulted in technology transfer and cooperation that has helped to fuel the telecom sector. • Skilled workforce: Finland has a strong skilled workforce. Finland’s state-owned post. • Development of clusters: the development of the Finnish telecom industry is also attributed to the emergence of an ICT cluster. component manufacturers and electronics contract manufacturers.5. Finland lowered the entry barriers through the introduction of reforms. the country’s ICT sector has benefitted from investment in R&D. Equipment manufacturing Finland: Market openness. 29 July 2008. • Foreign direct investment: in 1993. 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. telegraph and telephone (PTT) operator developed the Nordic mobile telephony standard in collaboration with Sweden-. content owners and content providers for mobile applications. particularly in the ICT sector. the economy shifted to ICT and consumer electronics. Finland deregulated the telecom sector by the adoption of the Telecommunications Act and a new Radio Act. networks were opened to free competition. the country redirected its trade to the West. Strategic initiatives 109 Caroline Lesser. After the collapse of the Soviet Union in 1991. which is also known as Finland’s Wireless Valley. • First-mover advantage: in the 1970s. However.6. Norway-. with telecom equipment manufacturing accounting for 90% of the ICT manufacturing in 2003. In 1991. and Denmark based PTTs. public certification and standardization authorities and financial service providers. liberalization and innovation drive the telecom equipment industry109 Background • Prior to the 1990s.” OECD Publishing.000 firms in 2000. It employed more than 80. Trade Liberalisation and Innovation Capacity in the Finnish Telecom Equipment Industry. academic and research institutions. and in 1991. • Specialization in telecom: Finland’s ICT sector has developed specialization in the manufacturing and export of telecom equipment. in the late 1990s. includes a wide range of stakeholders. which encourages cooperation among a wide range of manufacturers and suppliers.000 people in over 4. equipment manufacturers. The country witnessed more than fivefold growth in FDI from 1990 to 2000.

5. with the emergence of Chinese firms that have successfully competed in the global marketplace. The regulator permitted this level of sharing. China implemented policies that favored the inflow of FDI. • Research and development: during the late 1990s. operators have commercially negotiated for 3G site and RAN sharing. • Over the years. In Sweden. Initially. Each consortium has built a joint network. the tariffs reached less than 15%. • Export processing: in the late 1970s and 1980s. National roaming was permitted in rural areas for a longer period than for urban areas. This has led to greater opportunities for operators to engage in infrastructure sharing. • • • 110 Behzad Kianian and Kei-Mu Yi. “China’s Emergence as a Manufacturing Juggernaut: Is It Overstated?” Federal Reserve Bank of Philadelphia. Additionally. The implementation of the export processing regime facilitated the reduction of tariff rates. there are five operators. and the country joined the WTO in 2001. In the EU. 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. • 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.7. Chinese manufacturers have evolved from producing cheap and low-quality imitations to products that use high-end advanced technology. worldwide. as long as they are used to produce export goods. Under the policy. despite the presence of multinationals. Telecom infrastructure • • Brazil is split into 11 licensing areas with 4 operators in each licensing area. China has implemented numerous reforms that have boosted the country’s  manufacturing and trade. 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. four of whom have formed two separate consortiums of two operators each. In the 1980s. The European Court of First Instance ruled in favor of the operators and stated that the EU had overplayed the competition concerns. Infrastructure sharing has been well accepted globally. These operators are encouraged to share both civil and electronic infrastructure. the US granted China the most favored nation status in 1980. R&D led to the emergence of Chinese manufacturers that spend a significant portion of their revenues on R&D. the country reduced its tariff barriers drastically. China established an export processing policy. This helped the country to produce products rapidly. The operators challenged the Commission’s decision. along with technological expertise. Other European NRAs followed the Commission’s approach and as such active infrastructure sharing was limited. This enabled the country’s domestic and foreign-owned firms to compete. individual national regulatory authorities are required to notify the EU Commission of decisions regarding infrastructure sharing. some of its tariff rates were above 50%. although national roaming was permitted for new entrants. reduction in tariff barriers and development of an enabling environment to attract FDI. As a result. 85 Enabling the next wave of telecom growth in India . Strategic initiatives Since 1978.China: Emergence of a global manufacturer and innovator110 Background • China’s telecom sector has witnessed rapid growth in the last two decades. raw materials such as parts and components and other intermediate imported goods do not have any duty imposed. • Tariff barriers: during the 1980s and early 1990s. leading global telecom manufacturers launched their R&D centers in China. Furthermore. In Australia. government support to domestic telecom enterprises and the presence of a well–qualified technical workforce. • Foreign direct investment: in 1979. These centers have helped global players to understand the local market and helped in the overall development of the telecom sector. 2009. In 2001. it was often time limited. The key reforms undertaken by the country include development of a trade policy. An administrative group has been established to own and operate existing RAN and fund future network rollout plans as agreed with operators. particularly in rural areas that may be costly to serve otherwise.

Countries such as Sudan. subject to an individual consideration. All transmission routes (i. as well as to regulate telecom common carriers and service providers. with responsibilities across television.7% during the same period. the mobile switching center (MSC) may not be shared. cable TV services require approvals at the municipal level.. Radio Authority and Radio Communications Authority were combined to form Ofcom. Mobile networks in North America witnessed growth in data services that were also driven by the introduction of smartphones. It is the regulator of the telecommunications and the broadcasting sectors. but operators must retain logical control over their networks and spectrum. Ghana. the Philippines and South Africa have been the largest adopters of this service. For core networks. satellite and cable and content. In July 2000. allow fulfillment of the coverage requirements through roaming in networks based on other technologies than Universal Mobile Telecommunications System (UMTS). There are commercial agreements between the main operators. m-commerce is very popular in countries where most of the population is unbanked.e. and Mexico have also implemented m-commerce successfully. 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. publish tariffs and reference offers. cables. accessed 16 October 2010. Argentina. the Canadian Radio-television and Telecommunications Commission (CRTC) is an independent public authority to regulate and supervise all aspects of the Canadian broadcasting system. and took over the functions of two previous regulators – the South African Telecommunications Regulatory Authority and the Independent Broadcasting Authority. • • • 5. Office of Telecommunications. It is also the regulator of the UK communications industries. Venezuela. 111 Ovum: Mobile regional and country forecast pack: 2010–15. Independent Television Commission. • • In Norway. the Australian Broadcasting Authority and the Australian Communications Authority merged to form the Australian Communications and Media Authority.but required each operator to maintain 30% of its network separately. implement accounting separation and is subject to price and accounting controls for national roaming. Paraguay. However. Convergence • In the US. the state of Texas passed a bill deregulating the telecom markets. After smartphones were released. Latin American countries such as Uruguay. http://www. P-P radio lines) may be shared. Brazil. The Ministry of Transport and Communications may. the rollout of 3G has provided the required impetus to drive widespread adoption of m-commerce services. The main operator is obliged to provide national roaming and MVNO access. provided such networks can offer sufficient capacity and that the arrangement is without substantial disadvantage to subscribers. Radio network controllers (RNC) may be shared physically. In July 2005. All operators may share sites and masts. The cable industry has opposed this demand. wire. In India.ovumkc. networks’ packet data grew nine times larger than voice services. radio. television.9. optic fiber. the Federal Communications Commission (FCC) is an independent agency that regulates interstate and international communications by radio. as the cable industry underwent the time-consuming and expensive process to secure city-by-city franchises over the last three decades. telecommunications and wireless communications services.com/. Recently. Ovum website. In Canada. m-commerce Globally. the regulatory functions of the Broadcasting Standards Commission. This has made it possible for telephone companies to receive a statewide franchise to provide video services that compete with cable. Enabling the next wave of telecom growth in India 86 . the Independent Communications Authority  of South Africa was established. In Canada in 2002.1% to reach US$19. a number of commercially negotiated and regulated agreements exist between the two main operators and the MVNOs. 5. voice revenues are expected to decline at a CAGR (2008–15) of 1.8.5 billion111 in 2015. but data revenues are expected to increase at a CAGR of 16.

Multiple reforms in the Indian telecom sector have coalesced to produce a remarkable decade of continued success. 87 Enabling the next wave of telecom growth in India . progressive policies will become increasingly important to guide unparalleled growth and transformation in the sector. Looking ahead.

Future policy should encourage identifying and vacating spectrum bands for future use. The share of a merged entity should not be greater than 30% in terms of subscriber base or AGR. 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. Broadband infrastructure — OFC. There should be uniform fee structure across all telecom circles. HMCP should be set up across the country. information services. M&A. and fiscal incentives should be provided to promote local manufacturing. high-capacity microwave and satellite connectivity — must be extended to rural. Spectrum sharing and trading should be allowed. timely spectrum reconciliation and enhanced transparency. remote and inaccessible areas. R&D initiatives should be encouraged. and inducting new technological developments in rural and remote areas. Enabling the next wave of telecom growth in India 88 . This approach has helped the sector grow by leaps and bounds. household telephones and broadband connectivity in rural and remote areas. security concerns and consumer affordability. with which the regulatory authorities make industry information public and accessible. Operators must be allowed to merge intra-circle while being allowed to combine spectrum. convergence. The best feature of India’s regulatory regime has been its open and transparent approach. service flexibility. spectrum. 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. timely allotment. a uniform taxation regime. Content and applications in regional languages should be created to promote rural broadband. USOF. A National Telecom Critical Infrastructure Policy on the lines of NTP 1999 should establish uniform procedures for land acquisition. The distribution of funds should be through transparent market-oriented allocation methodology. equipment manufacturing and infrastructure sharing. and encourage a healthy level of consultation with stakeholders. DoT should also consider lowering the contribution to 1% of AGR toward the fund. The key recommendations for improving the existing scenario focus on licensing framework.Conclusion The telecom sector in India has witnessed a series of fundamental structural and institutional reforms over the past decade. • • • The key recommendations for advancing the sector to the next level of growth focus on financial inclusion. broadband. Spectrum allocation should be based on technology neutrality. It should be used for creating infrastructure for the provision of mobile services and development of telecommunication facilities. • The USOF should be utilized for the provision of public telecom. m-commerce. • • • A single license should cover all telecom services.

Glossary AWS A2P ACMA ACTO ADC AGR ARPU AUSPI BSCs BTS BWA BWCI CAGR CDB CEWIT CLS CMRS CMSPs CMTS CMTS COAI CPE CPP CRBT CRTC CSC CSEA CVD DAS DoT DSL Advanced Wireless Services Application-to-person Australian Communications and Media Authority Association of Competitive Telecom Operators Access deficit charge Adjusted Gross Revenue Average Revenue Per User Association of Unified Telecom Service Providers of India Base Station Controllers Base Transceiver Stations Broadband Wireless Access Broadband Wireless Consortium of India Compound annual growth rate Cut-out Distance Band Center of Excellence in Wireless Technology Cable Landing Station Commercial Mobile Radio Spectrum Cellular Mobile Service Providers Cellular Mobile Telephone Service Cable Modem Termination System Cellular Operators Association of India Customer Premises Equipment Calling party pays Caller Ring Back Tones Canadian Radio-television and Telecommunications Commission Common Services Centers Commercial Spectrum Enhancement Act Countervailing Duty Distributed Antennae Sharing Department of Telecommunications Digital Subscriber Lines 89 Enabling the next wave of telecom growth in India .

E&PSS FCC FDI FICCI FY G2B G2C G2E G2G GBT GMPCS GoI GST HMCP IAMAI IBA ICASA ICNIRP ICRIER ICT IDI ILD IMEI IPF IP-I IPLC IP-VPN ISPAI IT ITeS ITU Emergency & Public Safety Services Federal Communications Commission Foreign direct investment Federation of Indian Chambers of Commerce and Industry Financial Year Government-to-business Government-to-citizen Government-to-employee Government-to-government Ground-Based Towers Global Mobile Personal Communications Services Government of India Goods and Services Tax Hardware Manufacturing Cluster Parks Internet & Mobile Association of India Independent Broadcasting Authority IBA Independent Communications Authority of South Africa International Commission on Non Ionizing Radiation Protection Indian Council for Research on International Economic Relations Information and Communications Technology ICT Development Index International long distance International Mobile Equipment Identity Infrastructure Provisioning Fee Infrastructure Provider-I International Private Leased Circuit IP-based Virtual Private Network Internet Service Providers Association of India Information Technology IT-enabled Services Sectors International Telecommunication Union 90 .

Telephone and Telegraph Rural Community Phones Recharge Coupon Voucher Reference Interconnect Offer 91 Enabling the next wave of telecom growth in India .KADO kbps KYC MARR MCD MMDS MMS MNP MNREGA MoD MoU MPLS MSCs MTNL NCAER NDMC NeGP NFAP NLD NRAs NTCIP NTP OFC P2A P2P PAN PCOs PMRTS POPs PPP PSU PTT RCP RCV RIOs Korean Agency for Digital Opportunity and Promotion kilobit per second Know Your Customer Multi Access Radio Relay Municipal Corporation of Delhi Multichannel Multipoint Distribution Service Multimedia Messaging Service Mobile number portability Mahatama Gandhi National Rural Employment Guarantee Act Ministry of Defense Minutes of usage Multiprotocol Label Switching Mobile Switching Centers Mahanagar Telephone Nigam Limited National Council of Applied Economic Research New Delhi Municipal Council National e-Governance Plan National Frequency Allocation Plan National long distance National Regulatory Authorities National Telecom Critical Infrastructure Policy National Telecom Policy Optic fiber communication Person-to-application Person-to-person Permanent Account Number Public Call Offices Public Mobile Radio Trunked Services Point of Presence Private-public Partnership Public Sector Undertakings Posts.

RKM RNC ROW RPM RTT SACFA SATRA SIM SRF TCOE TDSAT TEC TEMA TESEPC TRAI UAS UID UIDAI UKFAT UMTS USOF VAS VoIP VPNs VPTs VSNL WMO WPC WTO Route Kilometer Radio Network Controllers Right of way Rate per minute Roof-top tower Standing Advisory Committee on Radio Frequency Allocation South African Telecommunications Regulatory Authority Subscriber Identity Module Spectrum Relocation Fund Telecom Centers of Excellence Telecommunications Dispute Settlement and Appellate Tribunal Telecommunication Engineering Center Telecom Equipment Manufacturers Association Telecom Equipment and Services Export Promotion Council Telecom Regulatory Authority of India Unified Access Service Unique identification number Unique Identification Authority of India UK Frequency Allocation Table Universal Mobile Telecommunications System Universal Service Obligation Fund Value-added services Voice over Internet Protocol Virtual Private Network Village Public Telephones Videsh Sanchar Nigam Limited Wireless Monitoring Organization Wireless Planning & Coordination Wing World Trade Organization 92 .



Enabling the next wave of telecom growth in India

Enabling the next wave of telecom growth in India




Enabling the next wave of telecom growth in India

Enabling the next wave of telecom growth in India 96 .

000 business units. conferences.500 corporates and over 500 chambers of commerce. 97 Enabling the next wave of telecom growth in India . seminars and meets for promoting business. interactions at the highest political level and global networking. set up in 1927. FICCI espouses Indian businesses and speaks directly and indirectly for over 250.About Federation of Indian Chambers of Commerce and Industry (FICCI) FICCI. is the largest and oldest apex organization of Indian business. With a nationwide membership of over 1. FICCI maintains the lead as the proactive business solutions provider through research. FICCI organizes a large number of exhibitions.

Operating from Paris. to help our clients address the challenges of today — and tomorrow. transaction and advisory needs.com/telecommunications Enabling the next wave of telecom growth in India 98 . outsourcing. Our clients benefit from our insights on key trends and emerging issues. operational efficiency. revenue assurance. business transformation. tax. regulations.Ernst & Young’s Global Telecommunications Center Telecommunications operators are facing the challenges of growth. Beijing and San Antonio. Riyadh. infrastructure sharing. These may relate to the economic downturn. Cologne. What gives us this understanding is our Global Telecommunications Center. Johannesburg. 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.ey. They know that they have much to gain from our clear understanding of the opportunities. convergence. Learn more about our approaches and services by visiting our website: www. next-generation services. 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. complexities and commercial realities of the telecommunications industry — wherever in the world they’re operating. Delhi. the Center brings together people and ideas from across the world.

stoltz@ey.Contacts Vincent de La Bachelerie Global Telecommunications Center Global Telecommunications Leader vincent.ey.com Wasim Khan Global Telecommunications Center — Riyadh wasim.ey.ey.com Jonathan Dharmapalan Global Deputy Telecommunications Leader jonathan.ey.bachelerie@fr.khan@sa.ey.lo@cn.la.thiemele@ci.chaya@fr.ey.com Steve Lo Global Telecommunications Center — Beijing steve.ey.singhal@in.com Serge Thiemele Global Telecommunications Center — Johannesburg serge.dharmapalan@ey.com Marc Chaya Global Telecommunications Markets Leader marc.com 99 Enabling the next wave of telecom growth in India .com Holger Forst Global Telecommunications Center — Cologne holger.com Adrian Baschnonga Global Telecommunications Senior Analyst abaschnonga@uk.ey.de.com Prashant Singhal Global Telecommunications Center — Delhi prashant.com Mike Stoltz Global Telecommunications Center — San Antonio michael.forst@de.

Enabling the next wave of telecom growth in India 100 .

On any specific matter. our 141. FICCI espouses Indian businesses and speaks directly and indirectly for over 250. FICCI organizes a large number of exhibitions. Worldwide.Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance. please visit www.000 business units. seminars and meets for promoting business. . each of which is a separate legal entity. set up in 1927. For more information about our organization.000 people are united by our shared values and an unwavering commitment to quality. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited. 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. It is not intended to be a substitute for detailed research or the exercise of professional judgment. interactions at the highest political level and global networking. this document has been printed on paper with a high recycled content. transaction and advisory services. EH0091 In line with Ernst & Young’s commitment to minimize its impact on the environment. a UK company limited by guarantee. With a nationwide membership of over 1. tax. Ernst & Young Global Limited. reference should be made to the appropriate advisor.ey.500 corporates and over 500 chambers of commerce. conferences. 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. FICCI maintains the lead as the proactive business solutions provider through research. This publication contains information in summary form and is therefore intended for general guidance only. is the largest and oldest apex organization of Indian business. our clients and our wider communities achieve their potential.com © 2011 EYGM Limited. All Rights Reserved. We make a difference by helping our people. EYG no. About Federation of Indian Chambers of Commerce and Industry (FICCI) FICCI. does not provide services to clients.

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