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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
recognizing the need to overhaul its policy framework. resulted in an improved business climate and in an increase in investment across the country. iv Enabling the next wave of telecom growth in India . with the market evolving into the world’s second largest in terms of subscribers. Government. promoting India’s emergence as a major manufacturing and export base of telecom equipment and universal availability of basic telecom services to all villages. 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. In 1999. The announcement of the National Telecom Policy (NTP) in 1994 marked the first steps toward the new model. issued the NTP 1999. Liberalization initiatives. which had played a key role in shaping the sector. especially in the 1990s. 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. India has reached the goals set in NTP 1999 far ahead of time. centralized economic model for four decades. After embracing a closed. With plenty of strong potential value remaining. 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.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. and the overall teledensity has reached more than 60%.” the provision of leading class services at reasonable prices. Presently. boosting the industrial growth over the past decade. India shifted to a market-oriented model. It aimed at making available “telephone on demand. Indian telecom is an economic miracle in the making.
m-commerce and convergence. infrastructure segment. The opportunities around which the policy initiatives need to be designed include financial inclusion. reasons for refusal to renew and appeals to regulatory decisions Enabling the next wave of telecom growth in India v . 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. taxation and aspects of foreign direct investment (FDI). Universal Service Obligation Fund (USOF) structure.The present challenges include the spectrum and licensing framework. renewal procedures. mergers and acquisitions scenario. broadband.
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. 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 .
e. which imposes double taxation on ILD and NLD license holders FDI Given the importance of foreign investment. m-commerce. 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. there is no unique. perfect model accepted globally which can be implemented in India and leading practices across the globe should be adopted for transforming the Indian telecom sector into the greatest possible success story. 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. Enabling the next wave of telecom growth in India vii .. However. security concerns and consumer affordability. 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. the state where GST will be paid for different kind of telecom services. convergence. 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.
equipment manufacturing.Methodology In 2010. consumer affordability and the role of the regulator. The study gives a detailed perspective on the telecom sector in India. wireline. Ernst & Young conducted a research study on the Indian telecom sector in collaboration with one of the leading business organizations in India — FICCI. licensing framework. outlining the phenomenal growth witnessed by the sector and recommendations for the existing policy framework that will enable the next level of growth. broadband. Ernst & Young conducted comprehensive interviews with senior executives in the Indian telecom sector. These interviews provided a firsthand perspective on the opportunities and challenges faced by various stakeholders in the sector. It examines the NTP 1999. security. These findings have been combined with secondary research. infrastructure. It identifies and evaluates the critical success factors that are applicable across all telecom segments such as spectrum. This report reflects the key conclusions of that wider study. ILD. NLD. analysis and insights provided by Ernst & Young. value-added services (VAS). FDI. The research program studies in detail all the key segments of the telecom landscape — wireless. which is used by the Government of India (GoI) as a decisionmaking guide for the Indian telecom sector. infrastructure and convergence. USOF. As a part of the research program. viii .
Ltd. Ltd. List of participants Virat Bhatia President. Corporate Affairs & Business Development. Sanjay Kapoor Chief Executive Officer Bharti Airtel (India & South Asia) Mahesh Uppal Director Com First (India) Pvt. HS Bedi. Col. Ltd. Ltd. Ashok Sharma National Head — Regulatory Aircel Ltd. TV Ramachandran Resident Director Vodafone Essar Rajan S. Mahendra Nahata Managing Director Himachal Futuristic Communication Shamik Das Chief Executive Officer S Tel Pvt. Lt.Syed Safawi President Reliance Communications Ltd. Parag Kar Senior Director — Government Affairs Qualcomm India Pvt. Rajiv Mehrotra Chief Executive Officer Vihaan Networks Ltd. Mathews Director General Cellular Operators Association of India Rajat Mukarji Chief Corporate Affairs Officer Idea Cellular Ltd. External Affairs. Ltd. B S Shantharaju Chief Executive Officer Indus Towers Ltd. Brijendra K Syngal Senior Principal Dua Consulting Pvt. South Asia AT&T Communication Services India Pvt. India Ericsson India Vsevolod Rozanov President and Chief Executive Officer Sistema Shyam TeleServices 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 . VSM Chairman and Managing Director Tulip Telecom Ltd. Anil Sardana Managing Director Tata Teleservices Ltd. P Balaji Head of Communications.
FICCI is one of the largest and oldest apex business organizations in India. Association of Unified Telecom Service Providers of India (AUSPI): constituted in 1997. non-governmental society dedicated to the advancement of modern communication through the establishment of a world-class cellular infrastructure. It provides a forum for discussion and exchange of the ideas between these bodies and service providers. AUSPI is a registered society that works as a non-profit organization with the aim of delivering improved access. nonprofit. financial institutions and technical bodies. economic and political change. coverage and teledensity in India. Over the years. Home to 400 professionals. and its stand on policy issues is sought after by think tanks.Industry associations Federation of Indian Chambers of Commerce and Industry (FICCI): established in 1927. It plays a leading role in policy debates that are at the forefront of Indian social. regulators. COAI is a registered. governments and academia. fixed–line services and VAS across the country. FICCI is active in 39 sectors of the economy. Cellular Operators Association of India (COAI): established in 1995. The organizations’ publications are widely read for their in-depth research and policy prescriptions. . AUSPI is the representative industry body of unified access service licensees providing CDMA and GSM mobile services. policy-makers. it has joint business councils with 79 countries across the world. COAI has emerged as the official voice for the Indian GSM industry and interacts directly with ministries. who share a common interest in the development of cellular mobile telephony.
creating platforms for its members. It has helped in shaping telecom policies for ISPs and internet entrepreneurs to grow their services in a supportive and enabling environment. financial services. communicating on behalf of the industry and helping to create a favorable business environment for the industry. TEMA is an industry association for telecom equipment manufacturers as well as component and cable manufacturers. . Internet & Mobile Association of India (IAMAI): founded in January 2004.Association of Competitive Telecom Operators (ACTO): established in 2008. The association’s activities include promoting the digital economy. business process outsourcing. tele-education. knowledge process outsourcing. billing services and network operating centers. It plays an active role in the dissemination and exchange of information among the GoI. ISPAI acts as a collective voice of the ISP community. tele-trading. Internet Service Providers Association of India (ISPAI): founded in 1998. ACTO is an industry body that focuses on policies that enhance enterprise telecommunications in India. conducting research. evaluating and recommending industry standards and practices. Telecom Equipment Manufacturers Association (TEMA): established in 1990. tele-medicine. information technology (IT). foreign agencies. The association was formed by several leading non-integrated long-distance carriers that provide service to the enterprise market segment. medical transcription. It acts as an interface with government bodies for the growth of all services covered under the registration of other service providers. business process outsourcing and multinational company segments. which includes IT-enabled services. embassies. IAMAI is an industry body representing the interests of online and mobile VAS industry. Indian missions abroad and leading national and international trade associations. with the mission of promoting internet for the benefit of all. functioning as an association of companies operating in areas such as domestic and international call centers. Other Service Providers Association of India (OSPAI): established in 2008. trade missions. OSPAI is the representative industry body.
Telecom equipment manufacturing in India 2. Key enablers under existing scenario 4. Value-added services 2. Wireline 2.Contents 1.3. History of the Indian telecom industry 2.3. Overview of the Indian telecom industry 2. Infrastructure 220.127.116.11 4.6. Regulatory framework 2. Indian telecom sector 18.104.22.168.2.2. Overview 1.1. Connected India: telecom vision 2020 22.214.171.124.10.2. Evolution of the telecom sector in India 2. National long distance and international long distance 2.1. Internet and broadband subscribers 2. Key achievements of NTP 1999 3. Connected Indian: telecom mission 2020 4.7. Achievements and setbacks of NTP 1999 3. Wireless 2.8. Key challenges of NTP 1999 31 34 41 4 Key enablers 4. Outlook 9 10 12 14 15 16 17 19 21 22 27 28 3.2 Licensing Spectrum 45 46 47 48 48 50 1 Enabling the next wave of telecom growth in India . Importance of telecom 3 3 5 2.9.
6 126.96.36.199.4.3 4.1 4.11 Telecom infrastructure 4.3.13 Convergence 188.8.131.52.3. Key enablers for potential opportunities 184.108.40.206.9 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 4.4.6 4.8 4.10 Equipment manufacturing 4.14 Security 4.7 4.12 Enterprise data 220.127.116.11 4.4.3 4.4 4.3.2 4.4 18.104.22.168 4.3.7 m-commerce M2M communication Mobile money M-health M-education Financial inclusion MNREGA and UID 5.3. Global practices Conclusion Glossary 75 87 89 Enabling the next wave of telecom growth in India 2 .
India’s service sector was estimated to account for 56. accounting for nearly 3. page 8.5%2 annually from 1950 to 1980. compared with 3. In less than a decade. accessed 10 October 2010. to GDP.” The Financial Express.eximbankindia. 13 October 2010. DBS Group Research. http://www. Ernst & Young report. Overview Over the past two decades. “India’s Macroeconomic Indicators. The easy access to mobile services is the outcome of positive regulatory changes. India has grown rapidly from a “command and control” economy to a market-based economy.6%. the telecom sector has been the major contributor to India’s growth.1. As a result of liberalization. respectively. Within the services sector. low-priced handsets. “Redefining The Hindu Rate Of Growth. intense competition among multiple operators.6%4 of total GDP in FY10.9%3 of GDP. while the industrial sector and agriculture sector contributed 28.com/news/redefining-the-hindu-rate-ofgrowth/104268/0.financialexpress. http://www. India is now closely integrated with the global economy and is considered one of the pillars of global economic growth.pdf.” Export-Import Bank of India website. In FY10 (financial year ended 31 March 2010).com/ind-eco. November 2008. low tariffs and significant investments in telecom infrastructure and networks. with the further opening of the economy and the creation of regulatory institutions to march toward fully competitive markets.12 April 2004. accessed 19 October 2010. The Indian economy maintained a growth rate of more than 5% even during the global recession. 1 2 3 4 India: Rising growth potential. 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.1 Indian telecom sector 1. India’s GDP has been rising by more than 7%1 annually in the past decade. 26 August 2010.5% and 14. 3 Enabling the next wave of telecom growth in India . India 2012: telecom growth continues. The process of liberalization started in the mid-1980s and gathered momentum in the 1990s.
Indian telecom model Outsourcing non-core activities like IT.telecomcircle.com/2009/02/carriers-ebidta/. accessed 25 October 2010. network Infrastructure sharing Paradigm shift from average revenue per user (ARPU) to revenue per min Focus on prepaid Low cost distribution.” http://www. Enabling the next wave of telecom growth in India 4 . e-Charge Economies of scale Low acquisition cost (no handset subsidy) Source: “How can carriers make 40% EBIDTA margin at 2 cents/min tariff?.
” LiveMint.2. business communication. By virtue of being a carrier and disseminator of information. security. Narrowing access gaps and removing barriers to information dissemination are prerequisites for promoting equitable and sustainable development as well as political and social cohesion. 19 January 2009.1 Economic growth Indian telecom has emerged as one of the greatest economic success stories.2.1. creates efficient information flows. a 1% increase in mobile subscribers is estimated to increase per capita GDP by about US$200. lowers transaction costs and is an effective substitute for infeasible physical transport. along with free access to information service. mobile telephony has made the rural and underdeveloped markets much more efficient. a 10%5 increase in teledensity is known to boost GDP growth by 0. States with 10%6 higher teledensity have grown 1. Bihar could have witnessed 4% faster growth if it had enjoyed the same teledensity as Punjab.2% faster. Samar Srivastava. Increasing connectivity is highly instrumental in improving governance. The MS Swaminathan Research Foundation (MSSRF). and have helped those who catch the fish communicate with merchants and transporters in an efficient and effective manner.” through which fishermen are provided free mobile handsets. There is a substantial relationship between increase in teledensity and the economic development of a region. a government organization. reduced business risk and made those involved with fishing feel much safer at sea. Mobile telephony had a profound impact on the fishing community in the southern state of Kerala. Mobiles have helped to co–ordinate demand and supply.http://www. In other words. says study. accessed 10 October 2010. The advantages of the advent of telecommunications are manifold and explicitly verifiable from the phenomenal success of the sector. Importance of telecom Telecommunication is pivotal to a country’s socioeconomic growth.html. page 17. response to emergencies and in the overall strengthening of the sociocultural ethos of the country. “High-teledensity states grew faster. has partnered with a leading telecom equipment and service provider to provide “Fisher friend.6% points. registering a consistent overall growth rate of more than 35% over the past decade in terms of subscribers. According to a World Bank study. shared on a rotating basis. September 2010. 1. states with a higher teledensity have grown faster than those with lower teledensity.com/2009/01/19224316/ Highteledensity-states-grew-f. It is one of the main architects of the accelerated growth and progress of different segments of the economy.livemint. World Bank. It has helped to reduce the time spent by agents and owners waiting for boats. 5 6 Unfinished Business: Mobilizing new efforts to achieve the 2015 millennium development goals. According to a study by the Indian Council for Research on International Economic Relations (ICRIER). The well-distributed network of telecommunication services results in widening markets. 5 Enabling the next wave of telecom growth in India . for instance. The usage of mobile phones has enabled fishermen to respond quickly to market demand and prevent wastage.
health and increased citizen participation in civil society.4 Rural development According to FICCI and Nielsen study. Telecommunication helps provide access to health care and allied services. As a result. the spread of telecom and information services to rural areas is enabling the setup of rural business process outsourcing (BPO). revenue accounting. Nielsen. Enabling the next wave of telecom growth in India 6 . employment and a strong socio-cultural ethos Open rural areas to foreign investment. low employee attrition and the potential for scalability. generating awareness.Rural Divide. page 13. However. Indian villages account for 70%7 of the country’s total population. Operations such as data entry.2. processing of insurance claims.2. resulting in the organized aggregation of supply and demand Providing enhancement of microfinancing. and establishing the mobile testing of diseases. including improved education.1. It helps combat epidemics such as HIV/AIDS and malaria by supplying information on treatment and control. RuralShores is an initiative that aims to reverse the trend. a committed workforce and business continuity. 64% of consumption expenditure and 33% of national savings. human resource services. leading to the inclusion of rural India in the global economic milieu and reducing the rural-urban divide. the quality of life in rural area improves. This represents an innovative approach in providing quality health care whenever and wherever needed. 1. Further. It aims to introduce rural youth to BPO and to provide employment in their village. it ensures complete information protection. call center operations. technology transfer and entrepreneurship Facilitating national and regional integration. 56% of the country’s income. creating an atmosphere of economic diversification. • • • 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. RuralShores: bringing jobs to rural India Over the years. Moreover. systems engineering and systems design and integration are popular examples.2. Communication facilities in rural areas are critical for the development of rural India. telecom is also a major creator of jobs. the hitherto dormant economic potential is being increasingly tapped. August 2010. Participation in the initiative is an act of corporate social responsibility. improving access to and connectivity with health centers. The telecom sector has led to the growth of a range of communication technology-enabled activities and services. The provision of telecom services in rural areas and the obscure hinterland has made previously abandoned areas highly accessible. the lack of employment opportunities in rural India has forced people belonging to villages to move to the cities. The current synergy between health reform initiatives and advantages in technologies has resulted in the proliferation of e-medicine projects. thus reducing the pressure of urban migration 1. With more untapped territories being connected through telecom. In return. providing the following advantages: • • • 7 Challenges Before An Integrated India: Bridging The Urban .2 Job creation Besides being one of the largest revenue generators. guaranteed service levels.3 Social development Connectivity fosters social development. customer support centers. software development. corporations benefit through cost-effectiveness due to the lower costs associated with a rural ecosystem.
quality and the cost-effectiveness of public services has been made possible by the telecom revolution. Between FY00 and FY10. and between the departments and their agencies and bureaus. 1. accessed 10 October 2010.in/. http://dipp. Government to business (G2B): this entails services between government and the business community. Simplifying the application and approval procedures process for SME requests would encourage business development. allocation of the Permanent Account Number (PAN) to income tax payers. 1. • Government to citizen (G2C): this comprises information dissemination to the public.8 accounting for more than 8% of approved FDI. specifically the development of small and medium enterprises (SMEs).1 billion (US$8. the inflow of FDI into India’s telecom sector was approximately INR407. and can be used as an instrument of international relations and diplomacy. conduct of public examination and customs clearance. downloading application forms. 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. 7 Enabling the next wave of telecom growth in India . 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. It is facilitating women’s participation in the political and economic processes of the country. Government to employee (G2E): this includes G2C services as well as specialized services that cover only government employees.1. obtaining permits and the payment of taxes. rules and regulations. The services offered through G2B transactions also assist in business development. Achieving gender equality and empowering women is crucial because of its cross-cutting influence.” 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. G2G services are transactions between governments. G2G services are transactions between the central/national and local governments. as well as citizen assistance for basic services such as education. renewing licenses. health care. Delivering literacy and education to women wherever they live or work: this opens up new avenues and allows for flexible learning times. Business services offered include obtaining current business information. Since the advent of IT and communication technology. Most relevant information about these entities is now available on their websites.2. processing of passport application.7 Gender equality The advent of communications technology has helped overcome institutional and social barriers of mobility. ordering of birth/death/marriage certificates and filing of income taxes.9 billion). high illiteracy and negative social norms. and creating new economic opportunities for women through digital empowerment.nic.” Department of Industrial Policy & Promotion. It is an irreplaceable component for achieving most developmental goals.5 E-governance E-governance that helps exploit the power of information and communication technology to transform accessibility. On a global footing. as well as basic citizen services such as license renewals.2. 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. including the dissemination of policies. Indian ministries and government departments are working to computerize their operations to make them simpler and increasingly accessible for Indian citizens.6 Strengthening investments Attractive trade and investment policies have transformed the Indian telecom sector into one of the most investorfriendly markets. Significant progress has been made in the computerization of railway bookings. hospital information and libraries.2. including the “Millennium Development Goals. memos. registering businesses. making it easily accessible and increasing transparency. among others.
making sure the worker is paid for the day. there is a significant focus on technology with the potential to improve rural connectivity. • Helping lower child mortality and improve maternal health: this is done by providing information on nutrition.2.ciol. (R&D). leading class services and a global presence. taking relevant education that is well aligned to the needs of the communities to their doorstep. Once a worker has logged in. Efforts are constantly being made to devise more affordable technology for the masses.2. the generation of intellectual property right (IPR).” CyberMedia India Online Ltd. The challenges surrounding these programs include job cards for those demanding work. the TCOEs have focused on the technological and management challenges that Indian operators face in reaching all sections of society while offering affordable solutions. transfer funds. wage payments and the authorization of wages electronically..com/News/News/News-Reports/Nokia-to-rollout-mobile-banking-in-India/134910/0/. the elimination of ghost workers. the introduction of GPS-enabled biometric systems at the grass-roots level continues to remain a challenge. For instance. According to Cybermedia India Online Limited. For instance.2. 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. formulated by the GoI. thus overcoming cultural and language barriers. the introduction of electronic muster rolls. This is one of the most befitting instances of the telecom and internet revolution. In pursuance of the NTP 1999’s objective toward R&D.9 1. Mobile banking enables customers of banks and other financial institutions to access their account information. places great emphasis on research and development 9 “Nokia to rollout mobile banking in India. as these become a tool for commerce. the telecom industry and the Government for the creation of new services and applications. These organizations have helped to create synergy among academia. Furthermore.and the Indira Gandhi National Open University. strengthening health networks.9 Facilitating research and development The growth in high-speed communication and advances in internet technology are making India a major R&D hub. Mobile phones provide consumers an opportunity to transact anytime and anywhere. the development of manufacturing capability.3 billion by 2013. 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. organizations such as Telecom Centers of Excellence (TCOE). 14 April 2010. this data could be transmitted to MNREGA. NTP 1999. trade stocks and purchase financial products such as insurance.8 m–commerce This is the next revolution that is expected to emerge through the use of mobile phones. which aim to provide inclusive growth. m-commerce finds its applications across various end markets such as banking and financial institutions. The integration of such programs with mobile telephony is expected to benefit such programs of national importance. booking tickets for transportation services such as trains and taxis and online shopping. paying bills for utilities such as power and gas. accessed 12 October 2010.10 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). monitoring health trends and provisioning primary health care. 1. http://www. In India. the Center of Excellence in Wireless Technology (CEWIT) and the Broadband Wireless Consortium of India (BWCI) have been established. 1. Enabling the next wave of telecom growth in India 8 . 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.
2 9 Evolution of the telecom sector in India Enabling the next wave of telecom growth in India .
In January 2000. the Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) was established to take over the adjudicatory and disputes functions from TRAI. and were under government control. Its history begins with the laying down of the first experimental electric telegraph line in Kolkata. The introduction of the New Industrial Policy 1991 initiated the liberalization process in India. 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 . in 1986. In 1881. telephone services were introduced. However. Karachi and Ahmedabad. universal licensing regime. and calling party pays (CPP) • 2004: Broadband policy.1. Further. NTP 1999 enabled the telecom sector to reach an average subscriber growth rate of more than 35%. respectively. with exchanges being opened in Kolkata. growth in the initial years was very slow due to high mobile handset prices as well as the high tariff structure of service providers. 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. which is now known as Tata Communications. The formulation of NTP 1994 was followed by the launch of mobile telephony in India in 1995. two wholly government-owned companies — Videsh Sanchar Nigam Limited (VSNL). The liberalization of the sector resulted in the need for a regulator. all foreign telecommunication companies in India were nationalized to constitute the Posts. Telecom equipment manufacturing was also de–licensed in 1991. Telephone and Telegraph (PTT). In the early 1980s. and Mahanagar Telephone Nigam Limited (MTNL) were formed. 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). The introduction of NTP 1999 heralded pro-consumer policies. 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. the sector underwent its first wave of change. and the TRAI was established in 1997. Following independence. Chennai. Interconnect Usage Charges (IUC). DoT was established in 1985 to provide domestic and long-distance services in India. Mumbai.2. and the NTP was announced in 1994. VSNL and MTNL aimed at providing services to international and metropolitan areas. primarily due to initiatives taken by the regulator and service providers.
11 Enabling the next wave of telecom growth in India . through which all local incoming calls were made free. entertainment. mobile services had outpaced fixed-line services with nearly 45 million mobile subscribers. Operators were allowed to share infrastructure in their tower installations. BSNL. as these constitute an essential and possibly the most expensive component in the entire telecom service delivery infrastructure. The fund was introduced to provide access to telegraph services to people in rural and remote areas at affordable prices. the amount payable by BSNL and MTNL for 3G services pushed the total auction revenue to INR677. In 2004. new UASL guidelines were issued. the GoI raised in excess of INR1 trillion from the auction of 3G and BWA services. March 2007 and January 2008. reaching the final stage in May 2010.6 billion). ADC was the fee paid by private mobile operators to the state-owned BSNL. which permitted an access service provider to offer both fixed and/or mobile services under the same license. which witnessed fierce bidding for spectrum.3GHz range in each of the country’s 22 circles. During the same year. Following the auction of 3G mobile services. the TRAI abolished the access deficit charge (ADC). Additionally. December 2006. the DoT issued guidelines for the intra-circle merger of cellular mobile telephone service (CMTS)/UAS licenses. January 2004. The GoI commenced the auction for 2x5MHz in the 2100MHz band for 3G services in April 2010. among others. raising INR385. The Broadband Policy 2004 specified targets in terms of subscribers. In February 2008. the Government concluded the auction of BWA services across India. which recognized the ubiquitous potential of broadband services and their contribution toward the GDP growth and improved quality of life through e–governance. and INR300 million for the rural C circles. 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. In March 2008. which covered the levy paid by mobile operators to the state–run operator. telecom towers were accorded “Infrastructure Status” by the Reserve Bank of India (RBI). which mainly used the proceeds of ADC to develop rural telephony services. e–commerce. The auction aimed at allotting three to four 3G licenses for each of the 22 regional circles. In May 2003. The reserve price for 3G services was categorized on the basis of circles — INR3.In 2002.2 billion (US$14. Allocation of spectrum and grant of wireless license was subject to availability and. In July 2010. in case UASL was not allocated spectrum due to non-availability. the DoT approved the sharing of infrastructure among mobile operators. The bidding process continued for 34 days. INR1. providing statutory status to the USOF in December 2003.4 billion (US$8. The GoI also introduced the Broadband Policy 2004. FDI limit in the telecom sector was increased from 49% to 74%. The bidding process continued for a period of 16 days. the licensee was required to endeavor to rollout services using wireline technology.7 billion to the GoI.2 billion) in auction revenues. Thus.2 billion for the B circles. in February 2004. In November 2005. The GoI offered two 20MHz blocks in the 2. using any technology. The seven winners were required to pay INR509. education and medicine. the Universal Service Support Policy came into effect. the GoI introduced the Unified Access Service (UAS) licensing regime.2 billion for the more populated A and Metro circles. the calling party pays (CPP) regime was introduced. The GoI subsequently issued licenses in November 2003. Further.
Its key responsibilities include: • • • • Policy. 1933. 1997 DoT • The DoT is a part of the MICT. wireless.2. administrative monitoring of public sector undertakings (PSUs). Department of Telecommunications (DoT). an open approach and encouragement of consultation with stakeholders. post. wireless spectrum management. the Telecom Commission. and the Department of Posts The MICT formulates policies with respect to telecom. Regulatory framework A number of positive regulatory changes have driven growth in the sector. data. and the Telecom Regulatory Authority of India Act. The key departments of the ministry include the Department of Telecommunications. The key stakeholders as a part of the regulatory environment in the telecom ecosystem include the Ministry of Communications & Information Technology (MICT). licensing. telegraph and other means of communication The laws governing the telecom sector include the Indian Telegraph Act. the Indian Wireless Telegraphy Act. 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. among other matters Enabling the next wave of telecom growth in India 12 . telephones. 1885. MICT • • • The MICT is part of the Indian Government. the Department of Information Technology. and four part-time members that are secretaries to the GoI of the concerned departments The Telecom Commission is responsible for policy formulation.2. R&D and standardization and validation of equipment. The key feature of India’s regulatory regime is transparency in industry information. the Telecom Regulatory Authority of India (TRAI) and the Telecom Dispute Settlement & Appellate Tribunal (TDSAT). licensing and coordination matters relating to telegraphs.
TRAI • TRAI was established as an independent statutory regulatory authority under the TRAI Act in 1997. 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. 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. and between a service provider and a group of consumers. between two or more service providers. such as administrative and financial functions. or as may be necessary to carry out the provisions of the TRAI act TDSAT • • • In April 2000. 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. The key powers and functions of the authority include: • • • • • • • • • • • • • • • Recommending the need for a new service provider. the GoI established the Telecom Dispute Settlement & Appellate Tribunal (TDSAT).
page 4. accessed 12 October 2010. Subscriber base and teledensity (wireless and wireline) 800 Total subscribers (million) 700 600 500 400 300 200 100 0 2.9% 28. 30 May 2010.3% 45.9% 140.0% 52.6% 36.3% FY01 4.7% Source: TRAI 10 “TRAI Press Release No. com/2010/05/30230743/Telcos-to-recoup-3G-bid-money.1% to reach 621. As of September 2010. wireless subscribers constitute the majority of the total subscriber base.5 FY00 61. Overview of the Indian telecom industry India is the world’s second-largest telecom market.3 million10 in September 2010.” Department of Economic Affairs – Ministry of Finance. The total subscriber base (including wireline and wireless) reached 723. with the mobile segment leading this growth. accessed 10 December 2010. leading toward a huge urban–rural digital divide. The capital cost to provide mobile service varies in the range of US$50–US$90 per subscriber.com/ pdf/ppp_position_paper_telecom_122k9.9%.” LiveMint. 63 /2010.in/Default. In the past decade. reduced tariffs. The wireless segment has been registering monthly mobile additions of about 15 to 2011 million subscribers. Urban and rural subscriber base.1% 54. the total subscriber base grew from FY00 through FY10 at a compound annual growth rate (CAGR) of 36. Enabling the next wave of telecom growth in India 14 .3. http://pppinindia.4 FY05 300.gov. Lower costs and the additional benefit of mobility that is associated with wireless subscribers have led to the stagnation of the wireline subscriber base.html. 13 “Position paper on the Telecom sector in India. 12 Ernst & Young analysis. The telecom revolution in the country has impacted both the urban and rural population. accounting for 95. However.3% Urban 67. high economic growth.5 429.12 whereas wireline subscribers account for 4.7% 37. September 2010 100%= 723. http://www.trai. accessed 10 October 2010.pdf. affordable handsets.3 40% 30% 20% 10% 18. “Telcos to recoup 3G bid money in 5-6 years: Analysys Mason.asp.3 million Teledensity (%) 50% Rural 32. hypercompetition in the sector.2% 12. December 2009.0% 98.7 FY08 FY09 FY10 Sep-10 0% Total subscribers Source: TRAI Teledensity According to TRAI.2% 205.13 in comparison with US$200–US$350 per subscriber for wireline. http://www.5 FY04 9.3 million subscribers.0% 26.livemint.2. the total teledensity has risen above 50%.6 FY03 7. infrastructure sharing and the introduction of positive and enabling regulatory reforms. urban subscribers account for more than 65% of the overall subscriber base. Such phenomenal growth can be attributed primarily to the country’s large population.0% 76.9 FY07 3.3 621.3 FY06 70% 60% 723.0 FY02 5.”TRAI website.1%. 11 Shauvik Ghosh.
7 million CDMA 15. with average monthly subscriber additions in the range of 0.” Zinnov Research and Consulting. accessed 15 October 2010.2 14.8% 52.8 165. http://www. the gap between GSM and CDMA has widened as the GSM subscriber base has grown more rapidly.pdf. http://www. In the initial years of mobile telephony. 84.6% 9. VAS. 16 “Penetration of Mobile Telephony in India & Value added services in Indian Mobile Telephony market. The wireless subscriber base in India grew from FY00 through FY10 at a compound annual growth rate (CAGR) of 77. CDMA.8% 391. The road ahead for the Indian telecom sector is expected to be more eventful.2. September 2010 100% = 687.0 33. Over an extended period. October 2006.3 49. FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Sep-10 Wireless subscribers Teledensity Source: TRAI Wireless subscribers: GSM vs.0% 98. India’s mobile market is the second largest in terms of subscribers in the world after China.” TRAI website.9 0. July 2010. 15 Enabling the next wave of telecom growth in India .2% 3.4. page 2.05–0. accessed 10 October 2010. 15 “TRAI: The Indian Telecom Services Performance Indicators (January .6 0.5 13.trai.zinnov. primarily due to the advent of new services such as 3G.1 22.7 584.March 2010).6% 1.7 4.7% 687. Wireless India has emerged as one of the world’s fastest-growing telecom markets. The advent of NTP 1999 paved the way for aggressive growth in the wireless subscriber base.0% 70% 60% 50% Teledensity (%) 40% 30% 20% 10% 0% FY10. mobile number portability (MNP) and the growth of manufacturing.8 33.in/Default. the growth in the number of subscribers was very low.5%14 to reach 584. Mobile services were commercially launched in India in 1995.asp.3 million15 subscribers in Wireless subscribers in India 800 700 Wireless subscribers (millions) 600 500 400 300 200 100 0 1.4% 3.2% 6.gov.1 million16 subscribers. and this growth is primarily attributed to the growth in wireless services.1% of the total wireless subscriber base.9% GSM GSM subscribers constitute about 84.1% Source: TRAI 14 Ernst & Young analysis.6% 58.com/presentation/Mobile_VAS.1 261.
DoT In FY00.5.September 2010). in FY10.3% 0.18 with a teledensity of 3. July 2010.3%17 during the period between FY00 and FY10.7 18. 17 Ernst & Young analysis.5 40.4% 5. In the future. Over the years. Enabling the next wave of telecom growth in India 16 . January 2010. Wireline The Indian wireline market grew at a CAGR of 3. the wireline subscriber base has declined due to lower mobile tariffs.2. the major wireline operators in India also operate mobile networks.0 37.9% 94.4% of the subscribers.3% 41.9% 32.0% 26.6 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.in/Default. cheaper handsets.gov. the wireline market accounted for 93.1% Source: TRAI.1 41.6% FY00 Wireless FY10 Wireline 93. video on demand and videoconferencing. wireline service continues to face stiff competition from wireless services.in/Default.9% 3. http://www. 18 “TRAI: The Indian Telecom Services Performance Indicators (January .9%.gov.” TRAI website.trai.6 million village public telephones (VPTs) in India. http://www.3% -1.6% 40.March 2010). In FY10. the advantage of mobility among wireless networks and inadequate infrastructure of the wireline network.asp. Furthermore. the emergence of new technologies such as fiber to the home is expected to drive the growth of the wireline market in India. Apart from these two players.8 39.1%.asp. the urban market has dominated the wireline subscriber base.” TRAI website.5 million19 public call offices (PCOs) and 0.1% of the subscribers in FY10. Although fixed-line operators are trying to offer VAS such as high-speed internet access. 19 “TRAI: The Indian Telecom Services Performance Indicators (July . besides other new technologies.3% -3. there were 3. additional private players have also ventured into the fixed-line market. Although wireline infrastructure in India is not as extensive as wireless infrastructure. the wireline subscriber base was 37 million.7% -2.0 25% 20% 35. where they see higher revenue growth and continue to invest extensively. improved mobile coverage. it accounted for 5. driven by the immense potential for data growth.7% 38. The wireline market is dominated by the governmentcontrolled incumbent players. In the recent past.trai.9% -3.7 17. accessed 10 October 2010. As of September 2010.1% 22.3 7. there is a significant opportunity for future growth. 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. accounting for 73. accessed 15 January 2011.4 41.4 38.
Broadband brings a number of benefits.6 5 0 0. governance.3 13. This falls short of a Broadband Policy’s goals of 40 million internet subscribers and 20 million broadband subscribers by the end of 2010. From FY05 through FY10. such as opportunities for education.9 16. Although the internet is a function of various factors such as literacy. 17 Enabling the next wave of telecom growth in India . The DoT formulated the Broadband Policy 2004. org/2010/10/09/international-insights-%E2%80%93-september/. whereas traditional internet connections have a speed of less than 256 kbps. Broadband infrastructure plays a vital role in a country’s achievement across domains such as social progress and economic development. Also. Internet and broadband The internet has revolutionized the lifestyle of many Indians by creating a new means of communication.8 million.5 10. access to personal computers and electricity.2 million and 8.2 FY05 9. a 10%22 increase in broadband penetration leads to a 1.5% to reach 16. FY06 FY07 Internet subscribers FY08 FY09 Broadband subscribers FY10 Sep 10 Source: TRAI 20 Ernst &Young analysis. it is estimated that a 10%21 increase in broadband penetration translates to a 1.9 11. which envisions the creation of a framework through various access technologies such as optical fiber. 21 Bringing Mass Broadband to India: Roles for Government and Industry. terrestrial wireless and future technologies. Further. The minimum threshold speed for a broadband connection is 256 kilobits per second (kbps) or more. the evolution of technology and increase in bandwidth has given rise to internet connections at speeds faster than traditional dial–up connections.2. The opportunities hold a much larger promise for India’s large low-income population and a growing economy.9%20 and 117. the number of internet and Internet and broadband subscribers (million) 20 15 10 5.5% increase in labor productivity in a country. employment and the delivery of services. September 2010.3 6. satellite media.6. governance. Booz & Company.1 8. According to Booz & Company. respectively in FY10.” International Telecommunications Users Group website.3 17. cable television networks. it has made significant inroads in the urban market. entrepreneurship and services. accessed 25 October 2010. knowledge sharing.3% increase in GDP.8 6.2 broadband subscribers has increased at a CAGR of 23.4 2. http://intug. June 2010. digital subscriber lines (DSL) on copper loop.9 1.3 3. 22 “Broadband Commission Presents Report to United Nations.
8% 4.6% Source: TRAI Source: TRAI Digital subscriber line (DSL) is the preferred technology among service providers for both internet access and broadband services.9% of the market share in broadband access.5% 31. As of September 2010.5% DSL Cable modem Ethernet Wireless Others 86. The share of wireless technology continues to be negligible and remains to be fully exploited. despite a structured framework that included ambitious goals to be met in 2010. primarily in business districts or high–end residential areas of the larger cities. and 86. September 2010 1.Market share by subscribers of technologies in internet access.0% 10.6% 4. September 2010 3. The key factors responsible for the widespread adoption of broadband include affordability and availability.0% Market share by subscribers of technologies in broadband.5% 6. Broadband penetration continues to be very low in India.5% DSL Dial-up Wireless Cable modem Ethernet Others 50. broadband users are concentrated in urban areas. Currently. . DSL constituted 50. especially in the case of broadband services.3% 0.6% 0.5% of the market share in internet access.
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$10 billion mark in the next five years. managed services and network security services are provided by global operators in partnership with Indian IT companies. It has spurred the demand for IP-based virtual private network (IP-VPN) services in India. Enterprise segment revenues23 Activity Private line VPN Ethernet Managed business VoIP Managed IP telephony Hosting services Application services Security Continuity and recovery Managed storage Outsource task Contact center Total (US$ million) FY08 829 423 40 92 51 161 170 110 20 40 1.2. network storage and enterprise voice solutions. and national and international data connectivity. With telecom and IT converging. network integration.262 FY10 1. Most large global players have set up operations in India to cater to the connectivity needs of their customers. Voice over Internet Protocol (VoIP) is considered a key enterprise application for lowering operating costs.900 31 4.027 FY11E 1.7. internet connectivity.600 20 3.064 495 92 125 75 260 370 150 45 61 2. multiprotocol label switching (MPLS) based IP-VPN services. The growing demand for connectivity is coming primarily from the IT and IT-enabled services sectors (ITeS).800 45 6. The other services relevant to this segment are international private leased circuits.200 510 130 150 80 350 600 180 52 72 2.169 23 Industry estimates. network management. the financial services sector and the government.556 FY09 930 480 70 110 65 210 250 130 30 56 1. 19 Enabling the next wave of telecom growth in India . A majority of global operators in this space are also offering VAS such as network security.251 39 5.
1 1. accessed 18 October 2010. with the sale of the strategic stake in VSNL to the Tata Group.Department of Telecommunications.3 97.com/content/vnd100_2010vol-II/110070520. ILD has witnessed steady growth.3% 176.7% to reach total revenues of INR164 billion. http://voicendata.2% 150.25 However. with its revenues reaching INR176 billion26 in FY10.3% 35. As of December 2009.asp.com/content/vnd100_2010vol-II/110070519. India’s ILD services were opened up for private players. FY10. Enabling the next wave of telecom growth in India 20 . the Indian market for NLD grew by 13.NTP 1999 opened up the NLD service for private operators.” Voice & Data. accessed 18 October 2010. Market size of ILD 200 Market size (INR billion) 150 100 50 0 115.ciol.3% 25. the GoI had issued 24 ILD27 service licenses.asp. the GoI had issued 29 NLD24 service licenses.3 13.ciol.3 0.0% 40% 30% 20% 10% 0% 71.7% FY08 FY09 FY10 Growth (%) Growth (%) Market size (INR billion) 48.0% 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 2009–10.9 FY07 Market size (INR billion) Source: Voice and Data Growth (%) In 2002.0 17. without any restriction on the number of operators.0 30. the market slowed in FY10. 27 DoT Annual Report 2009–10.6% in FY 2009-10.” Voice & Data. In FY10. Market size of NLD 180 160 140 120 100 80 60 40 20 0 60% 50% 164. 25 “India’s NLD market has grown by 13.0 144. 26 “India among the Top Few Fastest Growing Telecom Markets. As of December 2009. http://voicendata. with the annual license fee being reduced to 6% of the AGR.0% 115. FY10.Department of Telecommunications. primarily due to a decline in ARPU across all operators.
9% and 112.30 and equipment worth INR190 billion was imported in 2009.2 2008 2009 8. 2009 100%=US$8. with the remainder coming from global companies manufacturing in India.8. 21 July 2010. The majority of telecom segments are highly dependent on imports.0 140 Exports (INR billion) 110.29 respectively.climatechallengeindia.” “Telecom Equipment & Services Export Promotion Council (TEPC). the market for wireless infrastructure equipment is estimated to be US$8–10 billion.5 0 FY04 FY05 FY06 Production 236. 02 September 2010. Despite the growth of a localized manufacturing environment in India.0 2. From 2005-09.2.0 160.9 Source: International Trade Centre Share of imports by country of origin.” CyberMedia India Online.html. Manufacturers in India face challenges such as high logistics costs.6 19.3 2005 1. “Policy recommendations to increase domestic telecom growth and exports of telecom equipment and service. accessed 02 August 2010. wireless and landline infrastructure equipment. only 40% of the requirement for equipment is met through local sourcing. accessed 12 October 2010. GOI. 21 Enabling the next wave of telecom growth in India .9 billion FY07 Note: Includes both indigenous and offshore production Source: DoT.3 518. “Indian telecom ﬁrms may get DoT boost.0 100 4.7 1.5% 6.1%.com/News/News/News-Reports/ Time-to-go-local-in-telecom-equipment-purchase/140758/0/. 30 “Time to go local in telecom equipment purchase.” India Climate Portal. the manufacturing and exports of telecom equipment grew at a CAGR of 33. http://www.ciol.7 81. chipsets. companies in the manufacturing segment are yet to feature in the global telecom landscape.3% 3. according to a leading telecom equipment manufacturer. Telecom equipment manufacturing The telecom equipment industry comprises products such as cell phones.” LiveMint.livemint.” 19. inadequate tax benefits and competition from low-cost Chinese equipment.1% Sweden US Singapore Hong Kong Others According to industry estimates.com/2010/04/01215017/Indian-telecomﬁrms-may-get-D. accessed 10 October 2020.7 2006 2007 3.0 412. Ministry of Communications and IT. http://www. 28 “Telecom equipment manufacturing in India needs help urgently.3 200 140.4% 3.4% 3. Furthermore. including routers and switches.9% 4. the demand for telecom equipment is expected to be worth US$70–100 billion28 in 2015.9 15.0 120 100 80 60 40 20 FY08 FY09 Exports 0 Value of telecom equipment imports to India 10 Imports (US$ billion) 8 6 4 2 0 1. DSL and cable modems and networking devices. Telecom equipment manufacturing and exports Production (INR billion) 600 500 400 300 178. Source: International Trade Centre Although a few Indian mobile operators have a significant presence globally. an unreliable power supply. http://www.4% China South Korea 59.org/telecomequipment-manufacturing-in-india-needs-help-urgently-21-july-2010-t. 29 Ernst & Young analysis. India is a strong market for global telecom equipment vendors. with the exception of telecom towers and cables.
as the safety and aesthetic issues related to the setup of towers are addressed. Rooftop towers (RTTs) are placed on the roofs of high-rise buildings. node B. topography. The BTSs are installed in a contiguous manner. Infrastructure The Indian telecom success story is built around the wireless segment. Civil infrastructure includes the complementary elements of a cellular network that ensure that the electronic components are operational. cables. CDMA. March 2009. 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. The policy should clearly define the role of the Central Government and the states to help catalyze telecom sector growth. air conditioner. so as to facilitate the handing over of signals from one BTS to another like a chain. steel tower. radio antennas. radio access network. power regulation equipment. http://loksabha. March 2009.8 million.1 Mobile network Typically. GBTs involve a capital expenditure in the range of INR2. 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. a mobile network in a circle consists of mobile switching centers (MSCs). However. The rollout of services by operators takes place only on the back of robust telecom infrastructure. the rollout of infrastructure will become easier. Crisil Research. and safety and aesthetic concerns. “Growth of Telecom Sector. The radius of each BTS varies from 500 meters to as much as 8-10 km. It connects the electronic infrastructure at the tower site with the BSC and MSC. Telecom infrastructure industry in India. while electronic infrastructure forms the remaining 40%. ICRA Rating Feature. December 2008. whether it is GSM. However. The National Telecom Critical Infrastructure Policy is expected to address these concerns as well as the issues affecting telecom providers on the state level.34 Electronic infrastructure consists of the electronics needed to run a wireless network such as a BTS or cell site. the civil infrastructure and backhaul. Telecom towers and allied infrastructure. price. civil infrastructure forms about 60% of the cost of setting up a network. duct space and tower through simple registration without paying any license fee.in/. Competition will give further impetus to the development of infrastructure.9. 3G or BWA. diesel generator set and security cabin. ICRA Rating Feature.45532 telecom towers in the country. frequency band of operation and spectrum 31 32 33 34 35 2. 2.33 depending upon subscriber usage. Backhaul consists of the intermediate links between the core of the network and the various sub-networks. the number of operators providing their services from a particular site influences the extent of civil infrastructure installed at the site. ROW.2 Towers and in-building solutions Telecom towers are broadly classified as ground-based and rooftop towers. and the demand for more services will translate into the development of more telecom infrastructure. there were 425. including ROW related issues. Infrastructure Provider-I (IP-I) can provide assets such as dark fiber. GBTs can accommodate up to six tenants. As of March 2010. with each BSC being connected to a base transceiver station (BTS).9. The wireless sector has charted an impressive growth trajectory. Finally. It is not influenced by the type of the communication technology being used. Ernst & Young analysis. each of which is connected to base station controllers (BSCs). The development of the telecom infrastructure depends on four key factors: rollout. depending on the height of the tower. Telecom infrastructure industry in India. availability. Enabling the next wave of telecom growth in India 22 . Typically. competition. Civil infrastructure includes components such as tower site. core network and other transmission equipment.2. page 5. Infrastructure development plays a crucial role in the development of the wireless sector. shelter room. it does not play any role in carrying wireless signals. Falling prices of telecom services will help to increase their affordability. accessed 28 October 2010. hurdles to the erection of cellular towers and value added tax (VAT) levies on broadband services delivered through fiber media.nic.4 to 2.9. It can also create active infrastructure. page 6. feeders. battery backup. growing at a CAGR of more than 75%31 in the past decade in terms of the number of subscribers. on behalf of the licensee. The components of mobile networks include the electronic infrastructure.” Lok Sabha. fire extinguisher. page 9.
766 21.630 31.9. which need reliable communications for efficient incident management and personal safety.” TRAI website January 2011.455 telecom towers in India.5-2 million.207 34. Mizoram and Tripura Kerala and Lakshadweep Total Public sector 2.” Lok Sabha. Coverage is required to meet the needs of both the general public.460. The GoI provides certain benefits specifically to infrastructure companies.008 4.371 8.nic.494 24. 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.154 1. telecom operators have hived off their telecom towers into separate entities.323 38. State-wise number of towers States Rajasthan Gujarat.418 Towers 25.322 26. http://www.708 8. which expects its mobile phones to work at all times.102 38. operators with towers and operator-owned tower companies. Meghalaya.392 45. operators used their tower infrastructure for competitive advantage. 23 Enabling the next wave of telecom growth in India . Haryana and Chandigarh Uttar Pradesh and Uttarakhand Andhra Pradesh Punjab and Himachal Pradesh Jammu and Kashmir Tamil Nadu and Pondicherry Bihar and Jharkhand Nagaland.55.in/Default. As a result. Today.242 17. telecom towers were accorded Infrastructure Status37 by the RBI. This constitutes an essential and possibly the most expensive component in the entire telecom service delivery infrastructure.455 Source: “Growth of Telecom Sector. these involve a capital expenditure of INR1. Over the past couple of years. http://loksabha. However.396 18.392 22. tenancy level for the industry stands at 1.494 34. RTTs can accommodate two to three tenants. Andaman and Nicobar Assam and Arunachal Pradesh Delhi.aspx. Currently. 36 “TRAI: Consultaion paper on issues related to telecommunication infrastructure policy. Daman and Diu Maharashtra and Goa Karnataka Madhya Pradesh and Chhattisgarh West Bengal.678 425.36 In July 2010. 2.org. Typically. Orissa. stadiums and office buildings an essential requirement.920 23.gov. the growth of mobile communications has made the provision of radio coverage within airports.337 720 2. over the past few years. asp. accessed 01 February 2011.275 23.177 41. accessed 28 October 2010. there are three types of tower companies — pure-play tower companies.512 488 3.271 3. the leading operators have opted to share their infrastructure.577 2.321 20.in/scripts/BS_ViewMasterCirculardetails. 37 “Master Circular .071 1.090 52.899 6. The tax benefit encourages the participation of private sector through investment. there are an estimated 425.trai.794 369 1. shopping malls.Exposure norms.in/.634 4. and emergency services. http://www. Sikkim. In-building solutions are designed to improve the reception of radio frequency signals indoors to meet the increasing demand for high-quality mobile services.102 26.614 35.184 391.854 3.028 2. Manipur.098 57.350 28.995 25.3 Telecom infrastructure in India Initially.387 5. implying a subscriber-per-tower ratio of 1.611 18.608 2.428 4.rbi.037 Private sector 23. mass transit systems.644 17.121 41. In recent years.are shorter than GBTs and are common in urban and highly populated areas.” Reserve Bank of India.752 1. accessed 20 September 2010. where there is paucity of real-estate space.
superior network quality is a sustainable differentiating factor that helps to reduce customer churn and command premium prices.5 liters. 27 million units of electricity are consumed per day. In its more complex forms. 10. a higher proportion of ground-based towers. A significant part of the network rollout is likely to come in the untapped rural areas.4 Savings (INR billion) 476. Such an arrangement works well for both partners. insurance costs. 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. more groundbased towers will be needed. power shortages. such as land and energy. capital and interest costs. Enabling the next wave of telecom growth in India 24 . investments required and emerging trends The industry faces low profitability. significant investments will be required. Tower sharing could help operators maintain quality network coverage throughout the city. The dependence on diesel could be reduced if the Government utilized that subsidy to support a move toward renewable energy options such as solar. further increasing capex requirements. It is estimated that infrastructure sharing in its current form has helped achieve savings of INR557.6 Goals of infrastructure sharing The key beneficiary of infrastructure sharing is the subscriber. This translates to consumption of more than 2 billion liters of diesel per year for cell sites.9. 39 Industry estimates.4 Energy requirements Currently. 38 Industry estimates. unclear land ownership and expensive backhaul connectivity costs in the rural areas. as the tenant paying a higher rent to the tower company accelerates the time-to-market process.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).2. land owners and so on before the tower and electronic infrastructure can be completed. Overall.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) 71.6 billion resulting from savings in infrastructure provisioning fee (IPF). additional security. Capital expenditure (capex) and operating expenditure (opex) savings: the setting up of a countrywide cellular network requires substantial capex. it will allow a better use of spectrum. the industry has pumped in INR1 trillion and another INR400–500 billion is expected to be invested in the next two years.9. Since many rural areas are far-flung. where mobile teledensity is barely in the double digits. Average diesel consumption per site per hour is about 2.6 557. which is subsidized by GoI. With sharing. massive amounts of funds can be saved. while the tower company earns revenues.5 Future growth potential. and newer operators can build an assetlight model. and has a pre-tax margin of 7%–8%. translating to 6 million liters of diesel per day.0 2. service providers have strong incentives to share infrastructure.5x in the course of this decade. and infrastructure sharing will act as an important tool to achieve faster rollouts and save operating and capital expenditure in these areas. 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. 2. the concept of infrastructure sharing assumes special importance. Due to higher costs of land development. Rollouts in rural and semi-urban areas: as wireless service providers penetrate rural and semi-urban areas. It is estimated that tenancy levels will rise to between 2–2. Against this background.9.2 81. Spectrum constraints and network quality: for operators in urban areas. state electricity boards. On average. 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. energy.
shelters. This is by far the most common form of infrastructure sharing in India now. Less negative environmental impact: although environmentalists show limited support for telecom network deployment. node B and transmission equipment.9. Electronic infrastructure sharing: this refers to the sharing of electronic elements such as antennas. The separation of the core network also allows each service provider to offer differentiated services to its subscribers. Usually. towers. The tower business can become a profit center by itself. radio access network (RAN). zoning regulations may start to play an important role in driving service providers to share civil infrastructure.” GSMA. RAN sharing: this is the simplest type of electronic infrastructure sharing. Infrastructure sharing can take the following forms40: Civil infrastructure sharing: this refers to the sharing of physical sites. Commercial considerations appear to be driving the increasing trend to adopt a variety of infrastructure models. It also provides an additional source of revenue but may be limited by differing strategic objectives. thus contributing to the growth of the industry as a whole. There are many government initiatives that support infrastructure sharing. For operators who have been awarded 3G licenses and will be launching 3G operations. masts. It helps to expand coverage into previously unserved geographic areas. infrastructure sharing typically receives the backing of many conservation groups because less network buildup means fewer negative environmental impacts. These provide incentives for companies to participate in infrastructure sharing. An extended version of RAN can be in the form of intra-circle roaming. 25 Enabling the next wave of telecom growth in India . cables. which can be reduced by sharing their networks. It involves all the access network elements to the point of connection with the core network. 40 “Mobile infrastructure sharing. one physical unit is shared by two distinct nodes B. Infrastructure sharing limits duplication and gears investment toward underserved areas. Operators have realized that the industry needs significant capital expenditure. What started off as arrangements between two telecom operators has evolved into the creation of tower companies. 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. coverage is no longer a source of competitive advantage.Revenue stream for incumbents: sharing enables incumbents to earn revenues from a new source. Government initiatives on infrastructure sharing: regulators favor faster deployment and investment optimization in the telecom sector. page 12. mast and site. so that each service provider can maintain control of its equipment and spectrum use. apart from improving capex and opex efficiencies. freeing up significant resources and management time to focus on their core business. The radio network controller (RNC) and core network are not shared in this model. Expeditious time-to-market for new players: sharing significantly speeds up the time-to-market. The level of sharing among wireless service providers varies depending on the complexity of the arrangements and the interdependence of the wireless service providers. 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. rather than just leading to cost savings. power supply and battery backup. This can increase the coverage area and improve the quality of service. it provides an opportunity to reduce capital and operational expenditure by sharing infrastructure from the start of the build-out. 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. product innovation and improved customer service. buildings. Node B sharing: in the Node B sharing model. including radio equipment. Thus. 2. feeders.7 Models of infrastructure sharing As India’s mobile networks have expanded over the past few years. infrastructure sharing reduces operating costs and provides additional capacity in congested areas where space for sites and towers is limited. operators either establish a joint venture company to operate the shared network or establish an agreement on the use of each other’s networks.
DAS has emerged as a powerful tool for wireless carriers to bolster their coverage and boost their capacity. 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. four of whom have formed two consortiums of two operators each. Backhaul sharing: common backhaul sharing will be very useful in rural environments where traffic from BTS to BSC is very low. This can be implemented to various levels depending on which platforms operators wish to share. there are five operators. Each consortium has built out a joint network. Distributed antennae sharing (DAS): over the past few years. stadiums and shopping malls as well as for outdoor purposes. DAS is a collection of small antennas spread over a specific geographic area and connected by fiber to a central location or power source. The benefits of DAS are twofold — the technology allows carriers to fill in coverage gaps and dead spots in their macro network and. it helps add much-needed capacity to operators’ networks. Exits from such sharing arrangements can easily be provided if warranted due to an increase of traffic or other reasons. who have yet to complete their network deployment to provide national service coverage through sharing incumbents’ networks in specific areas. Mobile virtual network operators (MVNOs): these typically do not have their own network and have no rights to spectrum. especially with the advent of smartphones and 3G. usually a base station. antenna and transmission equipment. by breaking down the macro cell site into smaller pieces. They typically rely on operator network sharing to get access to subscribers and offer services. In Sweden.Core network: the most complex form of network sharing involves both radio and core network elements. network elements. Essentially. Enabling the next wave of telecom growth in India 26 . but required each operator to maintain 30% of its network separately. The regulator permitted this level of sharing. backhaul. to provide wireless service within a geographic area or structure. Radio and core sharing: all electronic components in the access and core network as well as civil infrastructure are shared. including electronic components such as optic and feeder fiber cables. reducing cost and maintenance efforts. radio links. DAS technology can be used to boost signal coverage in large buildings. permitting one or more partner service providers to access some or all of the mobile network. National roaming accelerates competition by allowing new players to launch their services within a shorter time frame.
followed by technology enablers (10%–20%) and content aggregators (10%–15%). http://www. technology enablers. short-code providers. the mobile VAS in India was estimated to be worth INR145. accessed 10 October 2010. Value-added services (VAS) According to the Internet and Mobile Association of India (IAMAI). followed by music.2.trai.6 75. creating opportunities for both telecom operators and companies engaged in VAS. which provides services such as mobile banking. out of the total amount paid by end users (excluding P2P SMS). July 2010 Source: Mobile VAS in India: 2010. growing at a CAGR of more than 50% during 2006–10. media companies.0 billion41 in 2010. which has exceeded the 700 million44 mark. Market size of VAS 160 Market size (INR billion) 140 120 Growth (%) 100 80 60 40 20 0 28.asp. approximately 60%–80%43 is captured by mobile operators. July 2010. The mobile VAS revenues in the country are driven by the P2P SMS service. Moreover. handset manufacturers and content converters.10. The key participants in the mobile VAS market include content owners. 63 /2010. July 2010. IAMAI.42 The key mobile VAS include person-to-person (P2P) SMS. IAMAI.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. IAMAI. Entertainment mobile VAS constitutes 57% of the overall revenues followed by information mobile VAS (39%) and m-commerce (4%).5 45. July 2010. person-to-application (P2A) SMS. July 2010 41 42 43 44 Mobile VAS in India: 2010. games and services such as m–commerce and m–radio. 27 Enabling the next wave of telecom growth in India . application-to-person (A2P) SMS. IAMAI. The rollout of 3G services is expected to drive the mobile VAS market in the future. with India being one of the leading mobile markets for the young. The demand for mobile VAS is driven by the increase in the mobile subscriber base. mobile payments and money transfer. the decline in ARPU has compelled mobile operators to focus on mobile VAS to generate additional revenues. The demand for mobile VAS is mostly driven by the youth. as well as aggressive marketing efforts by telecom operators to spread awareness about their services such as updates and alerts. IAMAI. “TRAI Press Release No. The growth of m–commerce.in/Default. The rollout of 3G services in the near future is expected to provide consumers with new and improved services such as highspeed data transfer.0 145. Mobile VAS in India: 2010. In terms of revenue distribution among various market participants. is also expected to drive the market for mobile VAS. content aggregators or developers.1 93. monotones. Content owners end up getting approximately 5%–10% of the overall revenues.” TRAI website. polytones and truetones as well as caller ring-back tones (CRBT).gov. Mobile VAS in India: 2010.
http://www.1 525.217. 3G subscribers are expected to reach 142 million by 2015. 47 Ovum: Mobile regional and country forecast pack: 2010–15.0 2011F 2012F 2013F 2014F 2015F 2020F 3G subscribers 3G subscribers as a % of wireless subscribers Source: Ovum.2% 44. accessed 16 October 2010. the ARPU continues to shrink.0 118.8% 35. with a significant number of multiple and inactive Subscriber Identity Module (SIM) owners. July 2010.200 1. 3G subscribers forecast 350 300 250 200 150 100 50 0 3. accounting for 20% of the total wireless subscriber base.2% and 110% in 2015 and 2020.9% 8.2 923. location based services and remote access/ VPN applications.8 80% 1.217.3 1. 3G subscribers are expected to be more than 300 million by 2020.516.0 72. Teledensity (%) 87.5 1.2.9% 97. Although the telecom sector is witnessing strong customer additions every month.trai.9% 10.asp. leading to falling profit margins of mobile operators.ovumkc. Future subscriber growth is likely to hinge upon rural and low-income users.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.9% 120% 100% Enabling the next wave of telecom growth in India 28 .600 1. Wireless subscribers in India Wireless subscribers (million) 1.7% 752.March 2010).049.in/Default.400 1. respectively. Ovum.2% 109.1 2009 2010 2011F 2012F 2013F 2014F 2015F 2020F Wireless subscribers Source: TRAI. including a host of rich multimedia services such as video calling. 46 Ernst & Young analysis.7% 25% 20% 15% 303. Ovum website. accounting for 12% of the total wireless subscriber base.11. there were 752.1 million47 subscribers in 2015. accessed 10 October 2010.1 Wireless At the end of December 2010.134. 3G services will drive the expansion of wireless services in future.46 to reach 1. video on demand. http://www.0 6. DoT.1 1.000 800 600 400 200 0 77.gov. 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.185.0% 11.9% 95. during the period 2010–15.1% 92.1%. the number of wireless subscribers in India is expected to increase at a CAGR of 10.2 million45 mobile subscribers. Outlook 2.11.” TRAI website.0 5% 0% 20. According to Ovum. Further.com/. Ernst & Young analysis Teledensity 2.0% 101.11. Ernst & Young analysis 45 “TRAI: The Indian Telecom Services Performance Indicators (January .7% 63. Further.4 10% 142.8 60% 40% 20% 0% 1. the country’s wireless teledensity is expected reach 97.
page 16.March 2010).1 million48 wireline subscribers at the end of December 2010. the broadband connections are estimated to reach 150 million by 2020.49 to reach 29. June 2010.trai. Ovum website.ovumkc. The growth of broadband is expected to increase with uptake of 3G and BWA services. According to Ovum. The wireline market is in decline.gov.9 33.” TRAI website.com/. http://www.3 million in 2020. accessed 10 October 2010.11. Ernst & Young analysis 48 “TRAI: The Indian Telecom Services Performance Indicators (January . the number of wireline subscribers in India is expected to decrease at a CAGR of nearly 4%.3 Wireline There were 35.4 Broadband As of September 2010. Considering increasing broadband demand.3 2. a trend that is expected to continue. during the period 2010–15.11. the wireline subscribers are forecasted to reach 26. 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. 29 Enabling the next wave of telecom growth in India . DoT.1 million50 by 2015.1 35.3 million broadband subscribers in India. 50 Ovum: Fixed voice connections forecast pack: 2008–15.1 34. 49 Ernst & Young analysis. Ernst & Young analysis 37. 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. there were 10.1 26.1 30. accessed 10 October 2010. Further.2. Ovum. The growth in the mobile market is seen as the cause of the decline.in/Default.5 48 100 150 Source: “TRAI: Consultation Paper on National Broadband Plan.in/Default. accessed 16 October 2010.trai.” TRAI website. http://www.5 29. http://www.gov.asp.asp. July 2010.5 32.
industry revenues and capital expenditure are expected to increase at CAGR of 8. industry revenues and capex are expected to increase to US$57. Ernst & Young analysis 51 Ernst & Young analysis. Revenue break-up: voice and non-voice 10% 17% 22% 27% 32% 38% 90% 83% 78% 73% 68% 62% 2011F 2012F 2013F Voice 2014F 2015F Non-voice 2020F Source: Pyramid Research. and the adoption of VAS.com/. Revenue and capex forecast Revenue and capex (US$ billion) 70 60 50 40 30 20 10 0 32.97 billion by 2015. respectively. the increase in mobile penetration in both urban and rural areas. The future revenue growth and increase in capex is expected to be driven by the rollout of 3G services and the increase in broadband penetration across the country. including BWA penetration.0 10.3 38.5 Revenue and capex Over the years.0 57. According to Ovum. the contribution of non-voice services towards the industry revenues is expected to reach 38% by 2020. http://www. accessed 16 October 2010.9 15.1%51and 7.9 2009 2010F 2011F Revenues 2012F 2013F 2014F Capex 2015F 2020F Source: Ovum.4 14. during the period 2009–15.8 45.2 billion and US$ 13.5 7.ovumkc.0 13. NLD and VAS are also expected to drive revenue growth.2 15. lower tariffs.1 22.214.171.124 11. Ovum website.0452 billion and US$14.9 billion. respectively by 2020. Ernst & Young analysis Over the years. Other services such as ILD. 2009-2014. 52 Ovum: Forecast of service provider revenue and capex. to reach US$51.0%.8 51. with the introduction of 3G and BWA services.1 13. Further.0 34. Enabling the next wave of telecom growth in India 30 . The growth in revenues is driven by cheaper mobile handsets. the Indian telecom sector has witnessed an increase in revenues and contribution toward GDP.8 43.
3 31 Achievements and setbacks of NTP 1999 Enabling the next wave of telecom growth in India .
for all cities with a population greater than 200. using technologies including international services digital network (ISDN).The NTP 1999 aims at making India competitive in the global telecom market through growth in exports. the emergence of India as a major manufacturing base and a major exporter of telecom equipment.4% to 4% by 2010. 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. 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. 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. global standards in the quality of service. FDI and domestic investment. The key objectives of the policy include telecommunication for all and within the reach of all.000 by 2002 • • • • Enabling the next wave of telecom growth in India 32 . achieving universal service across all villages. and protection of the country’s security interests.
content creators. mobile value-added services (MVAS) encompass mobile operators.5% in 2000 • Creation of jobs across sales and marketing.NTP 1999 has been a catalyst for the telecom sector: • Growth in the subscriber base (723. up from 1. among others • Among the lowest tariffs in the world.. especially telecom specialists • Fixed mobile convergence (FMC) 33 Enabling the next wave of telecom growth in India . e. 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. 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. 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. providers. technology.3 million) and in teledensity (61. R&D and customer care. especially reliability.0%) • Contribution of telecom to overall GDP of almost 3%.g.
in/3inetwork/html/reports/IIR2007/04-Rural Telecom.2% FY08 14. the disparity between urban and rural areas in terms of mobile penetration has increased significantly.0% 24.3% 28. with rural teledensity being far ahead of the NTP 1999 target. http://www. geographical spread. Key achievements of NTP 1999 3.02%53. about 70% of the population in India lives in rural areas. It has helped reduce the cost and time of transactions and has visibly compensated for the poor infrastructure.8% FY05 12. The improvement in rural teledensity Urban and rural teledensity 140% 120% 100% Teledensity (%) 80% 60% 40% 20% 0% 8.8% FY07 89. January 2010..” TRAI website.9% 4. http://www.asp. the introduction of mobile telephony in Kerala increased the fishing community’s profits by 8%. the teledensity level in the country was 0.pdf.asp.4% 61. Furthermore. Although India has witnessed a steep rise in teledensity over the past few years.9% 47. “The Digital Provide: Information (Technology). Market Performance and Welfare in the South Indian Fisheries Sector. Following independence.1% 1. the level had increased to only 1. which was set at 4% by 2010. 63 /2010.gov.2% 9.56 decreased fish prices by 4% and consumption of fish increased by 6%. http://www. page 76.7% 37.0% 26.4% in rural India.2% 5.2% FY02 FY03 20.0% FY06 18.1 Teledensity Reforms in the telecom sector have been encouraged by the active participation of the public and private sector.in/Default.4% 65.9% 52. a Harvard University economist. and mobile penetration stands at a meager 28.3% 26. Enabling the next wave of telecom growth in India 34 . The overall teledensity target of 15% by 2010 was achieved in FY07.0%.2% 1.2% 2. and its targets have been achieved well in advance.1. 55 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010). There is a significant opportunity for service providers to increase penetration in rural areas and generate revenues. Currently.6% FY04 38. respectively.1% 1.trai. FY09 FY10 Sept 10 Urban teledensity Source: TRAI Rural teledensity Total teledensity 53 “Rural Telecom and IT.8% 5.0% 119.iitk.9% 0. As a result. low per capita income and the cost of maintaining phones in rural areas.3% 3.4% 2. accessed 10 December 2010.4%. The impact of mobile telephony on rural areas has been profound. the overall teledensity as of September 2010 stood at 61.5% 12.2% 9.1.3% poses a critical challenge due to low population density. by 1998. 2007. accessed 15 January 2011. 54 “TRAI Press Release No.9%.3%55 and 28. 56 Jensen.trai.” The Quarterly Journal of Economics.ac.in/Default.” TRAI website. According to a study by Robert Jensen.6% 1.7% FY00 10.7% 137. R. NTP 1999 has been instrumental in the growth of telecom in both urban and rural areas. there is an uneven distribution of teledensity among Indian states resulting in slow economic development of the states and their surrounding regions.” Indian Institute of Kanpur website.3.gov.54 Urban teledensity and rural teledensity at the end of September 2010 were 137.9% FY01 14.3% 4.3% 0.
by subscriber base 100%= million 98.2% 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.7% 85.1. Dun & Bradstreet website. Mix of private and PSU operators.5% 65. which has resulted in an increase in employment opportunities in the telecom sector. media.400 11.089 FY06 158 1. The ratio of the number of subscribers per employee is very high in the case of private operators in India.00057 direct employees. Dun & Bradstreet 3. The expansion of the Indian BPO industry is a classic example of indirect employment. education.7% 300.9 34.5% 429.3% FY07 PSU operators Private operators Subscribers per employee ratio in India FY05 PSU operators Private operators 132 1.0% FY06 432. It has paved the way for a knowledge. 57 Overview of Telecom Industry.891 9.9% 47. Employees of private and PSU operators 100%= 436. December 2009.8% 52.110 The development of telephony in India has played an important role in altering the structure of the economy.0% 89.771 14.3% FY05 429.678 FY07 193 2.Total teledensity by state in India. The sector has created direct employment across various business areas such as sales and marketing. technology. R&D and financial services. as well as indirect employment. which augurs well for sectors such as IT/ITES. 35 Enabling the next wave of telecom growth in India . FY10 The Indian telecom industry employs more than 430.1% 56.7 20.2 Teledensity and employment Over the past decade. R&D and customer care.3% 73. technology.7% 90.4 140.3 43.5 26.5% 79.5% 205. with the majority of these employees being a part of the public sector undertakings (PSU). private telecom players have considerably expanded their operations.and information-based economy.
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)
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.
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
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
2 95. usually with a minority ownership. FDI by firms belonging to developing countries has gained momentum and has become an integral part of globalization. a wider customer base and growth momentum. M&A provide benefits such as expansion of global footprint. Indian mobile handset market 120 100 Volume (million units) 4. http://dipp. 3G and an improved user interface. In line with the change in the pattern of investments.6 billion69 in FY09. email. the ASP of feature phones is expected to be US$50.5 108 6. access to niche technologies.5% to reach a projected US$18. from US$0. monotone ringtones to MP3 ringtones.6 6 5 4 3 2 1 0 Value (US$ billion) 3.in/.0 5. Over the next few years. and foreign affiliations were formed through joint ventures. greenfield investments were a popular mode of overseas investment among Indian firms.” Department of Industrial Policy & Promotion. page 13. Globally.7 Global outreach of Indian telecom companies In the early 1990s. enhanced memory. India has witnessed prominent diversification in the industry composition of overseas activities of Indian firms. Global Positioning System (GPS). Over the period. and the ASP of smartphones is expected to drop below US$200. According to the National Council of Applied Economic Research (NCAER).6 71. The market has witnessed investment in the form of greenfield projects. and the majority of this capital value has been used to acquire companies. the structure of ownership has also shifted toward majority and full ownership.8 101.8 billion in FY01. August 2009.nic.4 7 5.1. 39 Enabling the next wave of telecom growth in India . adding numerous features ranging from monochrome screens to touch screens. Video Graphics Array (VGA) to 8-to-12-megapixel cameras. the price of feature phones is declining at a faster rate than smartphones. Macquarie Capital In the past decade. India’s FDI outflows (debit) have grown at a CAGR of 47.7 80 60 40 20 0 33. The share of manufacturing in the investment activity has Source: Voice & Data 69 “NCAER: FDI in India and its growth linkages. new product mix. the average selling price (ASP) of both feature phones and smartphones has been on the decline. accessed 10 October 2010. mobile handsets have evolved rapidly.4 FY06 FY07 FY08 FY09 FY10 3. Over the past decade. However.Average selling price (ASP) of mobile handsets 200 Average selling price (US$) 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. Indian companies have reached overseas destinations to tap new markets and have acquired technologies.
declined considerably.0 30. whereas the share of services has increased. The Indian telecom sector has actively been a part of the global M&A activity. leading to the emergence of telecom giants from India.0 Source: Thomson ONE Banker Enabling the next wave of telecom growth in India 40 . Bangladesh FLAG Telecom Group Ltd Teleglobe International Holdings Ltd. Key overseas M&A by Indian firms Year 2010 2010 2003 2005 2010 2000 Target company Zain Africa BV Warid Telecom.700.0 300.0 62.0 194.8 177. 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.
” DoT website.2.72 in comparison with 33% in Brazil. September 2010.5% during the period FY00–10.1 Growth of wireline The wireline segment has added just 10 million users since the introduction of the NTP 1999. Globally.9 million70 internet subscribers and 10. Boston Consulting Group. India has an internet penetration of 7%.asp. 3.2. page 339. 73 “TRAI: Spectrum Management and Licensing Framework.in/Default.gov. the affordability and availability of broadband services and inadequate infrastructure.3 Spectrum challenges The Indian telecom industry has witnessed phenomenal growth in the number of subscribers.gov.” TRAI website. 74 “TRAI: Spectrum Management and Licensing Framework.74 Spectrum bands such as the 900MHz band are of great value to mobile operators due to the longer ranges these can support. the bandwidth required by 2014 may be as high as 800MHz. 3. accessed 10 October 2010.dot. in the absence of a long-term plan to meet future requirements.5 million in FY06 to 37 million in FY10. The decline has been due to lower mobile tariffs. page 7. In line with the growth of subscribers. Despite being the second-largest market in terms of the subscriber base.trai. May 2010. January 2010. http://www. Despite India’s status as an IT superpower.trai. 70 “TRAI: The Indian Telecom Services Performance Indicators (July .in/Default.” TRAI website. accessed 10 October 2010. The sluggish growth in broadband services is attributable to the absence of low-cost devices. Key challenges of NTP 1999 NTP 1999 envisaged the affordability and availability of telecommunication services for the common populace. and the number of wireline subscribers has fallen from 41. accessed 10 October 2010.asp. broadband penetration levels in India are far below other emerging countries such as Brazil. according to TRAI. there were 17. the telecom sector continues to face various issues that act as impediments to its growth. According to TRAI. India lags behind in terms of availability of spectrum for commercial use. the Broadband Policy 2004 had anticipated 40 million71 internet subscribers and 20 million broadband subscribers by 2010. 3.asp. Although wireline infrastructure in India has been in place for an extended period. The availability of spectrum for commercial services in India is below the required levels. accessed 15 January 2011. page 18. The Broadband Policy 2004 has failed to keep pace with advances in technology and failed to boost the telecom sector.2. the growth of wireline phones is not in sync with the rise in the number of wireless subscribers. According to Boston Consulting Group. the need for spectrum to service these subscribers has also increased.2 Growth of broadband As of September 2010. broadband penetration is accepted as a measure of a country’s ability to compete as an economic power. Furthermore. Russia and China. 72 The Internet’s New Billion. 71 “Broadband Policy 2004. http://www.htm. http://www.3 million broadband subscribers in India. wireline and wireless complement each other. 41 Enabling the next wave of telecom growth in India . 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.gov. inadequate content and applications in regional languages.September 2010). http://www.3. the advent of new technologies is expected to create conflicts for spectrum. cheaper handsets. Currently. therefore requiring lesser BTSs density and lower capital and operating expenditure.in/Default.2. the Indian telecom industry is expected to reach 1 billion73 wireless subscribers by March 2014. 31% in Russia and 28% in China. improved mobile coverage.gov.in/ntp/broadbandpolicy2004.trai. May 2010. with a CAGR of 77. along with the benefit of VAS such as internet for the urban and rural population and the abolition of the digital divide. However. the advantage of mobility among wireless networks and the inadequate infrastructure of the wireline network. However.” TRAI website.
licensees were required to pay a percentage of annual revenue as spectrum charges In 2002.4MHz of start–up spectrum for GSM-based services Two operators were selected for each License Service Area (LSA). irrespective of the quantity they held. Start-up spectrum of 2x4.Spectrum and license allocation timeline in India First stage: 1995–2003 Auctioning scarce spectrum • • • In 1995. 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. All operators were expected to pay higher spectrum usage charges. in addition to 25MHz in the 2.1GHz band with reserve prices for different categories of LSAs In May 2010. in line with TRAI’s recommendations.3GHz range in each of the country’s 22 service areas. the e–auction of 3G mobile services was concluded after 183 rounds of bidding across all service areas. the GoI announced the policy for 3G mobile services.4MHz of start-up spectrum in the 900MHz band.2 billion Following the completion of the 3G auctions. the fourth operator license was issued using a three-stage auction procedure.in/tnl_jces_Sep_2009/Spectrum%20allocation%20 procedure. The GoI allocated spectrum to new telecom players in service areas across India The defense services agreed to vacate 2x20MHz in the 1. the third operator license was awarded.” Integrated Defense Staff http://ids.800MHz band. and incumbents were kept out of fresh allocations. The GoI raised INR385. 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. and opted for the auction of a start–up spectrum of 2x5MHz in the 2. along with 2x4. it totalled to INR677. It laid down a roadmap for the allotment of 2x12. It auctioned two 20MHz blocks in the 2. GoI announced UASL that allowed basic service license holders to provide full mobility-based services with a stipulated entry fee based on the bid price paid by the fourth operator in 2001 The fixed fee-based license allowed any number of mobile licenses to be provided and implicitly de-linked spectrum allocation from licensing. Although firms were awarded licenses after paying the required entry fee.4 billion from the broadband wireless auction Source: “A peep into RF spectrum allocation process in India. the bandwidth for broadband services (WiMAX) was auctioned by the GoI. in 2001.4MHz in 1.5MHz of spectrum per operator in each LSA Second stage: 2003–06 Unified Access Service (UAS) licenses • • In November 2003. and TRAI continued to maintain that there was a shortage of 2G spectrum A new SBN policy was defined. the GoI auctioned 2x4. Including the amount paid by state-owned BSNL and MTNL.800MHz was given to the winning bidder: • • In addition to the entry fees.2MHz per circle in case of GSM players and above 5MHz for CDMA In August 2008.1GHz UMTS band The DoT proposed new 2G spectrum usage charges for all operators.pdf accessed 02 August 2010 Enabling the next wave of telecom growth in India 42 . 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. to the government operator on a pro bono basis In 2001.nic. Subsequently. subscriber based norms (SBN) was introduced. This differed from the earlier strategy of increasing spectrum charges only for those operators who held more than 6.7 billion to the GoI within 10 days of the closing of the auction.
single window clearance.5 Equipment manufacturing The Indian telecom sector has witnessed rapid growth. some treat infrastructure business in the same way they treat petty commercial undertakings. accessed 10 October 2010. especially away from cities and towns. Moreover. in India. The policy made the cellular license technology neutral. May 2010.trai. Civic issues: there is a need to address civic issues such as zoning regulation. licensees were required to use GSM technology. the allocation of spectrum is separate from the grant of license to provide service. Currently. using any type of network equipment that met the International Telecommunication Union (ITU) or Telecommunication Engineering Center (TEC) standards.2.6 Infrastructure Telecommunications infrastructure. and also allowed licensees to migrate from a fixed license regime to a revenue-sharing arrangement starting in August 1999. including voice and non-voice messages. 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. and the biggest barrier to setting up telecom towers and other infrastructure is the wide variation in the approval process adopted by local bodies.2. telecom manufacturing in India has not been able to keep pace. In November 2003. However. others require dealing with multiple agencies. permitting an access service provider to offer either fixed or mobile services or both. Prior to this. 3. despite being a “key infrastructure. in their service area of operations. There are huge gaps in low-income or sparsely populated areas. page 59.” is far from ubiquitous. page 59. Telecom infrastructure service providers face several challenges. 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. data services and PCOs. the country lags behind in terms of telecom R&D and continues to be reliant on imports. licenses are bundled with the allotment of a certain amount of spectrum.in/Default. the GoI introduced the UAS licensing regime.gov. incur huge costs and delays because several state agencies are involved in granting approval for setting up towers.3. where telecom companies see poor returns on the expensive investment required in setting up the infrastructure. 75 “TRAI: Spectrum Management and Licensing Framework. 3. 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.asp. Since the introduction of the UAS licensing regime.4 Licensing challenges NTP 1999 permitted Cellular Mobile Service Providers (CMSPs) to provide all types of mobile services. preferential treatment for sharing and incentives in a timely manner. Tower companies.” TRAI website.75 Globally. However. which are highlighted below: Role played by multiple state agencies: there is no uniform approval process across the states. http://www. Several demand prohibitive fees.2. and some look at infrastructure companies as a means to finance deficits. the total number of licenses in a circle ranges from 12 to 14. 43 Enabling the next wave of telecom growth in India . therefore.
as these are dependent on diesel generators to keep running. They do not reflect the fact that USOF subsidies are perhaps most urgently required to defray the cost of infrastructure creation in rural areas.000 tonnes of CO2 and 24.000 per tower as a one-off registration fee in Delhi. Further. Power consumption: one of the major problems faced is the lack of reliable grid power. the Municipal Corporation of Delhi (MCD) charges INR100. there is a need to accelerate the pace of setting up the tower infrastructure in these areas. there is no clarity on the rates to be paid by infrastructure companies.76 The thrust in increasing rural telephony will further aggravate the diesel dependence by telecom towers.000 per tower and the New Delhi Municipal Council (NDMC) charges INR200. Although the USOF was created with the sole aim of promoting rural telephony. and the load criteria for telecom towers and transmission line towers are different. IS:802 and IS:875. This increases the dependence on diesel. citing concerns over alleged health hazards relating to BTS. Grievance redressal: there is no clear grievance escalation/ redressal mechanism that infrastructure companies can seek when a conflict arises. and it is estimated that India as a country consumes more than 2 billion liters of diesel per year for cell sites. Utilization of USOF and incentives: since the next level of growth is expected to come from rural areas. 76 Industry estimates. The above IS codes are primarily meant for electric/power transmission line tower design.Taxation on towers: multiple levies and high taxes are imposed for setting up mobile towers. Misplaced apprehensions on health hazards of electromagnetic radiation from mobile antennas: many state governments and municipalities have barred towers in residential areas. Safety: the construction of telecom towers is still a self-regulated activity throughout India. the fund rules are too cumbersome and lack focus. while others charge “commercial” rates. In large parts of India.” and thus. Enabling the next wave of telecom growth in India 44 . Delays and cumbersome processes for the SACFA clearances: the SACFA gives siting clearance of all wireless installations in the country.5 million tonnes. Secondly.000 tonnes of carbon equivalent. Diesel fuel is subsidized. The site clearance basically requires examination from the point of safety for flight navigation and interference with existing wireless systems. Environmental issues: diesel consumed by towers results in about 17. Currently all the telecom operators are following IS codes. This adds avoidable uncertainity in an already tough business. Without it. Some agencies charge them “industry” rates. namely IS:800. the highest tariff is applied to the telecom site. which is not only more expensive but also polluting. and there are other options as well. For instance. service providers are forced to use diesel generator sets at tower sites most of the time. the power connection to telecom towers is treated as one to a “commercial establishment. for the design of towers. The cumulative carbon footprint of telecom towers due to diesel consumption in a year is more than 5. the power is either unavailable or erratic. Energy consumption: cell sites account for most of the energy consumed by mobile networks.
This is the appropriate time to look again at the NTP 1999 and customize it to meet current and future needs. strong and transparent policy framework that will be the backbone to achieving the India Telecom Vision 2020. India’s telecom industry is at a crossroad.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. technological advancements and business dynamics of telecommunications. It needs to identify and address barriers to growth The functioning of the regulator in an unbiased manner.4 • • • • Key enablers As we enter the second decade of the 21st century. India needs a principle and objective-based. The NTP 1999 has served the sector well for more than a decade. A principle. independent and competitively neutral policy that will accelerate the pace of growth in telecom services and manufacturing. providing interested parties with concrete opportunities to navigate the growth of the telecom sector The creation of an efficient mechanism to implement regulatory decisions. Therefore. the time is ripe for a comprehensive review to build a forward-looking. efficient. which witnessed significant changes in the socioeconomic environment. 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 . transparent.
with inclusive participation from rural India to ensure telecom coverage for all.1. Enabling the next wave of telecom growth in India 46 . broadband and internet services delivery to subscribers with high quality of experience. data. media.4. 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. It should be supported by different metrics of quality of services at affordable tariffs meeting the needs of different segments of society.
47 Enabling the next wave of telecom growth in India . M&As. among other things. USOF. This involves key enablers such as licensing framework. financial inclusion and m-commerce. broadband penetration. spectrum. Connected India: telecom mission 2020 Connected India: telecom mission 2020 should aim to achieve the following objectives: • To recognize and treat telecom infrastructure as critical infrastructure to accelerate the pace of growth of the sector and increase its contribution to the Indian economy To connect the unconnected at affordable prices to ensure 100% telecom coverage of the country. achieve rural penetration of 100% and reach overall wireless penetration of 110% To strengthen broadband penetration to reduce the digital divide. First. Second. include the unique identification number (UID) scheme. This will.4. the policy should be able to meet future opportunities. 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.2. the existing challenges faced by various stakeholders need to be addressed.
VAT. the GoI introduced the UAS licensing regime. The policy must preserve competition and ensure that no service is given a price arbitrage over others.1. Since there is a significant cash reserve lying unutilized in the USOF. using any technology. Parameters Spectrum and license Recommendations Need to have a single universal license for all telecom services. Key enablers under existing scenario 4.3.4. Fee There should be a uniform license fee across all telecom circles. with the allocation of spectrum separate from the allocation of a license. are currently imposed on the industry. In November 2003. which aggregate to 30% of the revenues earned by telecom companies. A uniform revenue share license fee of 1%. Moreover. should be fixed. stamp duty.1 Licensing77 The telecom sector has evolved from a monopolistic regime in the early 1990s to 12–14 licensees in a circle now. Pure internet service providers should continue to be free of any license fees. subject to its availability and efficient usage. for global practices. including service tax and license fees (such as universal service obligation fees and spectrum charges). a licensee is entitled to obtain a certain amount of spectrum. DoT should consider lowering the contribution from 5% of AGR to 1% of AGR. Enabling the next wave of telecom growth in India 48 . Multiple levies. mobile or both services under the same license. which let the provider offer fixed. However. The GoI has issued many new UAS licenses since the introduction of the UAS regime. 77 See 5. under the UAS regime. Globally.3. the number of incumbent telecom service providers varies from four to six. entry tax and levies on towers. in India. states levy additional taxes such as octroi. excluding the USOF.
if the burden is not kept at a manageable level Amendments Currently. 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. amendments to license agreements are carried out unilaterally. Service providers should be consulted before provisions in license agreements are amended. renewal procedures.License renewal Ensure regulatory certainty and ease investor concerns: • Provide a clear license renewal regime that includes legislation. reasons for refusal to renew and appeals to regulatory decisions • Provide details along with the license. 49 Enabling the next wave of telecom growth in India .
6-21. a minimum of 287MHz and a maximum of 454MHz is currently available.in/Default. May 2010.400 3. 79 “TRAI: Spectrum Management and Licensing Framework.910 1.4. 80 “TRAI: Spectrum Management and Licensing Framework.980 2.880-1.710-1. Enabling the next wave of telecom growth in India 50 .025 2.” TRAI website. accessed 10 October 2010.161 Spectrum available for telecom sector 20 20 18. for global practices.400 2. In India. In line with estimated demand of approximately 500-800MHz spectrum across various bands out of a total 1. May 2010. accessed 10 October 2010.asp. The next five years are going to see the spread of telecom services enabling subscribers to benefit from voice. An increasing availability of smart-phones with significant processing capacity and a wide array of applications are resulting in higher requirements of spectrum. data and other application services. 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. being a scarce natural resource.6 78 See 5.900-1. 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.3.6-21.2-453.600 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 Spectrum78 Spectrum.asp.785-1.” TRAI website.2. http://www.300-2.trai.trai.161MHz79 of identified spectrum by TRAI.in/Default.500-2.170 2. the National Frequency Allocation Plan (NFAP) is the basis for spectrum utilization and development and the manufacturing of wireless equipment.400-3.300-3. page 22.900 1.785 1.690 3.8 18.920-1. A mechanism to ensure transparent and non-discriminatory spectrum management is needed.805-1.110-2.gov. page 22.8 35-75 35-75 0-20 (after coordination) 0-60 60 40 40 100 (ISPs) 287.010-2. plays a critical role in the provision of mobile telecom services.gov.805 1.880 1. http://www.
27 0.22 0.in/Default.48 0. 2008 (million) 46.4 55 53.1 0.35 0.5 0.” TRAI website.2 63.4 67 61.6 87.6 150.15 83.4 60.3 37.asp. “TRAI: The Indian Telecom Services Performance Indicators (July-September 2010).2 6.15 78.2 62.5 64.3gamericas.4 63.7 0.8 41.26 0. February 2009.in/Default.6 80.8 75.63 0.2 63.4 74.55 70.49 0.9 52.3 74.7 38.2 37.Country-wise spectrum availability Country Total licensed spectrum for mobile services.2 59.4 72.5 150.2 50.63 0. May 2010.57 0. January 2010.92 Argentina Brazil Canada Chile Colombia Mexico Spain UK US Source: “Digital Dividend Pavilion .25 10 13.9 83.5 76.75 13.6 37.6 14.08 Subscriber (million) Subscriber/MHz (million) 81 “TRAI: Spectrum Management and Licensing Framework.” TRAI website. http://www.52 0. ITU .1 24 17.1 44.25 67.75 15 12. accessed 15 January 2011. 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 33.31 0.6 66.8 59.14 0.15 84.25 10 10 10 Total 68.4 60.48 0.5 13.7 0.55 0.36 0.4 69.5 31.09 0.75 13. 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 53.3 31 6.7 18.49 0.78 0.53 0.2 78.2 53.6 77.2 28. http://www.5 15 15 12. page 22.pdf.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20 Erasmo%20Rojas.3 49.22 0.65 65 63.2 49.accessed 10 October 2010.asp.4 69. http://www.11 0.2 4.75 12.37 0.4 CDMA 15 15 13.16 0.4 No.4 270.75 0. accessed 14 January 2011.3 19.26 0.75 15 12.15 79.5 11.4 69. Ernst & Young analysis.8 61.ICT Statistics 2008.8 63 53 57.5 13.trai.4 75. gov.gov.trai.7 43.95 76.6 0.6 72. MHz (2008) 170 200 265 140 120 120 358 353 294 Wireless subscribers. 51 Enabling the next wave of telecom growth in India .Latin America Wireless Roadmap.2 76.6 10.3 Subscriber/MHz (million/MHz) 0.1 62.75 11. Ernst & Young analysis.” 3g Americas website.
Operator spectrum holdings Country/Region/Operator India Denmark EU average France Germany Italy Spain Sweden UK US Spectrum holding per operator. http://www. and to draw up a suitable schedule. Allocation of spectrum beyond the contacted limit should be based on market mechanisms.7 100. 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. timely spectrum reconciliation and enhanced transparency.4 92. accessed 14 January 2011. http://www.org/documents/MWC%202009%20Digital%20Dividend%20Pavilion-3G%20Americas%20 Erasmo%20Rojas. 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. This roadmap should be made available publicly to ensure transparency.pdf.6 92 82.6 138.Latin America Wireless Roadmap. accessed 14 January 2011.pdf. “Presentation to the DoT committee on spectrum allocation criteria. It should be based on market price and not administered pricing. National frequency allocation plan should be reviewed every two years.” Communications Today. Regular spectrum audits should be carried to oversee the efficient utilization of spectrum. Identify and vacate new spectrum bands for future use. The criteria for levying spectrum usage charges should be identified upfront at the time of allocation of spectrum. timely allocation. The contacted limit of spectrum will be 6. MHz 28-37 118. Re-farming Spectrum allocation Spectrum allocation should be based on technology neutrality.5 65 72. Need to bring in additional spectrum for commercial telecom services. February 2009.in/images/1-pdotfinal. Spectrum should be provided to the highest bidder. Parameters Availability Recommendations Align spectrum bands with globally harmonized bands to achieve interference-free coexistence and economies of scale. Allocation of spectrum should be based on auctions. Spectrum allocation to new players Spectrum usage charges Spectrum sharing and trading Enabling the next wave of telecom growth in India 52 .2MHz for GSM operators and 5MHz for CDMA operators.3gamericas. based on a transparent auction mechanism to determine the price.2 75-96 Source: “Digital Dividend Pavilion .” 3g Americas website.co. service flexibility. Spectrum allocation to existing players 2G spectrum up to the contracted limit should be ensured as initial spectrum. 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.
1 15. rural teledensity is at 28. Tower infrastructure: provide infrastructure support to set up and manage 7.694 have been provided as of December 2009.436 infrastructure sites spread over 500 districts in 27 states. The USOF covers rural and remote areas with public access telephones and individual rural household telephones in net high cost rural and remote areas.186 out of 62.0 N/A FY05 Funds collected FY06 Funds disbursed FY07 FY08 FY09 Dec-09 Source: DoT 82 See 5. 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. about 184. whereas urban teledensity is about 137.3 Universal Service Obligation Fund (USOF)82 NTP 1999 envisaged access to basic telecom services for all.705 rural community phones (RCPs). voice mail and email. As of 31 December 2009.500 have been replaced as of 31 December 2009. © 2010 HT Media Limited.3. Out of the target of 40.4%.3. Multi access radio relay (MARR)-based VPT: out of 185. via Dow Jones Factive.000 VPTs are currently eligible for financial support for operation and maintenance.3%. However. 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. 7 March 2010. In 2002.1 39. at affordable prices.” Indo-Asian News Service.2 17. As of 31 December 2009. The USOF is estimated to hold around INR180 billion.7 18. BSNL has provided VPTs to 61.9 16.011 broadband connections out of the proposed 888. 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.6 13.83 at the end of FY10.121 MARR-based VPTs installed before April 2002.832 wireline broadband connections have been provided as of 31 December 2009.0 12. 53 Enabling the next wave of telecom growth in India . resulting in a huge digital divide.4.950 towers have been set up under this scheme.302 uncovered villages. about 6. 83 “Minister Sachin wants to ‘Pilot’ IT revolution in northeast. the Universal Service Support Policy came into effect. Rural broadband: 95. for global practices.4 32.2 VPT and RCP: around 570. (INR billion) 40 30 20 10 0 34. especially those in rural and remote areas. 40.
There is a significant cash reserve lying unutilized in the USOF.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. 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. so DoT should lower the contribution from 5% to 1% of AGR. Enabling the next wave of telecom growth in India 54 .Parameters Objectives Recommendations The USOF framework needs to be reviewed regularly to effectively utilize the funds to achieve universal service.
4. use. 106. Broadband should be redefined and clauses such as ‘’always on’’ and minimum speed should be removed from National Broadband Policy. 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. socioeconomic growth is dependent on the spread of broadband services across the country. economic. accessed 10 October 2010. 84 See 5. 85 “TRAI: Consultation Paper on National Broadband Plan. and skills. application.2 million.3. 2004. connectivity.” TRAI website.74%. there should be balanced competition to ensure the quality and affordability of services. deployment of wireless access should be given preference and fiber media should be utilized from the already available fiber capacity across nation. as well as its BRIC counterparts.86 with a ranking of 129.” TRAI website. Further. 55 Enabling the next wave of telecom growth in India .4. The 3C’s — customer.asp. for global practices. against the target of 20 million by 2010 set in the Broadband Policy of 2004. page 28.4 Broadband84 India trails all developing Asian countries. connecting 40% of the households in the country. Today.in/Default.85 There were just 8. The growth of broadband is restricted by several factors such as its perceived utility. in order to encourage broadband. India lags behind in terms of ITU’s ICT Development Index (IDI). and 118 out of 154 countries in terms of ICT access. lack of vernacular content.1 to 0. This calls for a critical review of the Broadband Policy 2004 and the creation of appropriate infrastructure to support broadband growth. The drivers for broadband services are broadly classified as technological. with a broadband penetration of just 0. behavioral and government initiatives. 86 “TRAI: Consultation Paper on National Broadband Plan.trai. accessed 10 October 2010. To kick-start the broadband penetration in rural and far-flung areas.trai. India has set a target of 100 million broadband connections by 2014. June 2010. http://www.8 million broadband connections at the end of FY10. 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.gov. social. respectively. cost and competition — are essential for improving broadband penetration.asp. The net broadband addition per month is just 0.in/Default. cost of device and affordability.gov. page 3. http://www. June 2010. The last mile access issue can be addressed through the deployment of wireless technology.
payment of electric and water bills. Computer usage by government employees should be encouraged. More than two service providers with a rollout obligation should be funded. Enabling the next wave of telecom growth in India 56 . PC penetration Workshops by local entrepreneurs should be promoted under the common services centers (CSC) scheme. The GoI should consider a differential tax to encourage the private sector to set up common access points. high-capacity microwave and satellite connectivity should be extended to rural. In addition. The development of the customer premises equipment (CPE) model should be supported for the interoperability of broadband. Backhaul connectivity and OFC should be provided to all telecom towers. The support for local access and content delivery to towns should extend beyond the 150 commercially viable towns. BSCs and BTS from the nearest block headquarters. the government and private sector should collectively work toward developing low-cost mobile applications. Wireless broadband More spectrum should be made available. There is a case for private-public partnership (PPP) in broadband along the lines of highway construction in India through the build. which is a part of the National e-Governance Plan (NeGP). The Government should foster competition to improve the pace of penetration. Similarly. The tax status for expenditure on connectivity/usage should be similar to policies on other public welfare services such as education and medical allowance. Since growth will be through wireless broadband. vehicle registration. Broadband connectivity should be made mandatory for all buildings requiring a completion certificate.Parameters Infrastructure Recommendations Optic fiber communication (OFC). and charges for broadband services should be rationalized across all states. 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. Discounts should be provided for online payments. driving licenses. operate and transfer route. remote and inaccessible areas. Investments should be made in key content development and services such as e-health and e-education. Regional content Content and applications in regional languages should be created to promote rural broadband. This can happen only if there are incentives to build infrastructure and provide broadband services. on the lines of water and power connectivity. Online fee payments should be encouraged for land records. Right of way (ROW) ROW procedures should be uniform. all national and state highway projects should include the laying of an optic fiber backbone. Fiscal incentives Tariffs need to come down.
3. CMTS license with UASL. and UASL with UASL. for global practices. Merger of license(s) shall be permitted in the following category of licenses: cellular mobile telephone service (CMTS) license with CMTS license. 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. The stipulation regarding the minimum period of three years from the effective date of license for merger or acquisition should be done away with. unified access services license (UASL) with UASL. The share of a merged entity should not be greater than 30% in terms of sub-base or AGR. Parameters Number of operators Service area and license stipulations Recommendations Mergers should not result in less than six operators in the circle. Merger of licenses shall be restricted to the same circle.4.5 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. 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. Merged licenses in all the categories above shall be in UASL category only.5. Market share of merged entity Lock-in period 87 See 5.
asp. According to TRAI. Various states across India have issued show cause notices. As of September 2010. 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. Over the years.. such as to procure merchandise. the sector contributes significantly to GDP. Towers and shelters fall under Chapter 73 and 94 respectively of the Central Excise Tariff Act 1985. The Indian telecom sector is subject to numerous taxes and levies.” The Economic Times. 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. Denial of credit on such goods would lead to an increase in the financial burden on telecom operators. accessed 10 January 2011.trai. The issue whether the sale of RCVs should attract service tax or VAT has been a subject of constant debate and discussion. 89 “TRAI: The Indian Telecom Services Performance Indicators (July – September 2010). http://www.indiatimes. 5% levy for USOF. It is important to note that currently industry players are paying service tax on RCVs. However. which are used for building transmission towers. or other services. It is important to note that currently the industry players are paying service tax on such broadband services.gov. the bouquet of services has changed. thereby leading to greater financial burden on the telecom sector. The classification of tower.89 96.cms. as the RCVs are witnessing liberalization in the flexibility of their usage.4. This position has been adopted by industry players. The issue was first taken up in the case of a leading telecom player by the state of Karnataka. 88 “Telecom firms want lower tax burden. http://economictimes. as well as tax. which is 23%–25% higher than their counterparts in other Asian countries. the significance of the telecom sector to the Indian economy has grown immensely. custom duty and other taxes.e. with the matter going up to the Supreme Court. 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. Currently.” TRAI website.3. • • Sale of light energy: broadband services also continue to face taxation-related concerns. channels and beams. 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.6 Taxation Over the years. accessed 15 January 2011. The levy of VAT on the activity of providing broadband connectivity services would lead to double taxation of such services. thereby leading to greater financial burden on the telecom sector. RCV is one of the most popular ways to pay for telecommunication services. which account for 80%–85% of the operator revenues. The levy of VAT on the sale of RCVs to subscribers would result in double taxation.) 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.in/Default.com/news/news-by-industry/telecom/telecom-firms-wantlower-tax-burden/articleshow/2753840. the operators pay up to 30%88 of their total revenues toward different levies. these goods could be treated as “component/ spare/accessories” of “capital goods” (i. Currently.1% of the CDMA subscribers were prepaid subscribers. Enabling the next wave of telecom growth in India 58 . while the dominant purpose for selling these RCVs is provision of telecom services to subscribers. the revenue share license fee (including the USOF) is prescribed as follows: • • • • 6% to 10% of AGR for access services. January 2010. This includes the uniform license fee. Central value-added tax (CENVAT) position on tower materials and shelters: telecom operators are availing CENVAT credit on goods such as angles.4% of the GSM subscribers and 94. VAT. BTS etc. The Supreme Court without going into the merits of the case has ordered a relook at the matter by the state VAT authorities.
In case entertainment tax is levied on VAS products. The upcoming GST regime should. 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. the state where GST will be paid for different kind of telecom services. 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. along with the creation of a roadmap for a single unified levy. • 90 Place of supply rules define the place (state) which has the right to tax a service transaction. the non-subsumation of entertainment tax in GST could impose a significant financial impact on the telecom industry.• 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. thus. Upcoming GST regime: according to industry experts. in view of the exponential growth witnessed by the telecom sector. ease in statewise compliances.. The upcoming GST regime should aim to simplify the tax structure for the industry. 59 Enabling the next wave of telecom growth in India .e. entertainment tax is not proposed to be subsumed in goods and services tax (GST). Further. aim to rationalize the tax structure in the Indian telecom industry. GST should not translate into an ambitious target to generate higher service tax revenues from the telecom sector. with all services and goods being taxed at a standard rate. It is important to note that as per the current proposal.
including the development of new forms of electronic commerce. Together. In Latin America. with countries such as the Philippines. many countries control FDI in telecom according to their economic and developmental needs. the WTO and the ITU encourage the development of a global telecommunication infrastructure and the formation of an integrated global telecommunication market. 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. prosper together. Given the importance of foreign investment. thereby enhancing economic growth in developing countries.4. FDI in telecom brings advanced technological skills and large amounts of funds. social stability and national security. the balance between economic gains from foreign investment and national telecommunications sovereignty presents a challenging task. Globally. The Indian telecom sector needs to foster a suitable environment where investment and entrepreneurship. Enabling the next wave of telecom growth in India 60 . telecommunication industries are often state-operated and monopolized in many countries. Hence. FDI in developing countries enables the development of a local telecommunication infrastructure and universal access. As a result.3. major FDI in the telecom sector is facilitated by two international organizations — the World Trade Organization (WTO) and the International Telecommunication Union (ITU). and enhances market competition. The telecom sector has been among the sectors that have witnessed substantial growth in FDI. It results in substantial progress in meeting such countries’ basic telecommunication requirements. However. The WTO aims to promote foreign and domestic investment. In the Asia–Pacific region. the policy should consider raising the upper limit on foreign investment to encourage more foreign players to invest in the capexintensive telecom sector. the telecommunications market reform has continued. Taiwan and Thailand opening their markets to foreign investment. The telecom sector has a substantial impact on a nation’s economic development. and due to its influence on national security. several countries that first privatized their domestic operators in the early 2000s are now preparing for a second round of market openings. 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.7 Foreign direct investment (FDI) In the past decade. globalization has led to a rapid increase in FDI.
Mobile tariffs per minute in US$ 0.11 0. 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.2 0. It also removed the distinction between fixed-line and cellular tariffs.23 0. 61 Enabling the next wave of telecom growth in India .” It was considered affordable. customer friendly and innovative for both local and long distance calls. 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. at the same time.01 India Phillipines Source: DoT. Furthermore.4.1 0. with a large majority of people using low-cost mobile handsets.1 0. a leading operator launched the “One India Plan.03 China 0. 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.3.16 0. giving India some of the lowest tariffs in the world.04 Pakistan 0.09 Malaysia 0.05 Thailand 0. the increase in subscriber base and teledensity has enabled telecom companies to achieve economies of scale and.2 0.0 Belgium UK France Brazil 0.3 0.17 0. provide leading class services.19 0. India Telecom 2010 brochure In February 2006.
The entity will sell the connections to their end customer and contract and bill them in their own capacity for the services provided. In order to drive penetration in rural and remote areas. which are available in very small increments. easy market entry. increased usage and highly utilized networks also help lower tariffs. the entity buying connections in wholesale will be the customer. operators in Bangladesh have designed products and services such as micro prepaid topups. 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.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. Resale of mobile services will allow an entity to resell mobile services after buying connections in wholesale from the underlying service provider. and also allow consumers to transfer airtime between each other and use it as currency. it is important that alternative models such as mobile resale be introduced. There is a need to create a regulatory framework that enables greater sharing. reduction in capital expenditure and operational expenditure. Enabling the next wave of telecom growth in India 62 . Similarly. The services will be provided only by the underlying access provider who will continue to address the related compliance requirements. small office. and low risk enable the creation of policy and a regulatory approach that helps to drive down tariffs. On the other hand. lower tax burden. The entity will not replicate the efforts of 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. Factors such as transparent regulation. operator strategies such as innovative business models. For the service provider. This arrangement will allow SMEs.
Such organizations promote R&D and help in creating a talented workforce. Government of India — Annual Report 2009–10. while the GoI provides basic and research infrastructure. As of December 2009.000 12. 92 Ministry of Human Resource Development.706 17. The main funding for a TCOE comes from the sponsoring telecom operators. 40 central universities.8 25. Number of higher education institutions and student enrollment 30. followed by the US and China. which is characterized by a dynamic young population base– more than half of which is under 25 years old. In terms of size and diversity. only 17%91 of those in their mid–20s or older have completed their secondary education. COAI. Each TCOE is sponsored by a telecom operating company and is hosted by a premier technical or management institute.4 30 25 20 15 10 21. 63 Enabling the next wave of telecom growth in India . organizations such as the Telecom Centers of Excellence (TCOE). 2010 0 India US China Source: Making the Indian higher education system future ready. in May 2007.4. Ernst & Young. Ernst & Young.213 20. 2010 In keeping with the NTP 1999’s R&D objective.000 6.213 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. India possesses a developed higher education system that offers training in many fields. However. including 243 state universities. India has the largest number of higher education institutions.9 10. the Center of Excellence in Wireless Technology (CEWIT) and the Broadband Wireless Consortium of India (BWCI) have been established. India lags behind China and the US in terms of student enrollment.3. 53 state private universities. FY10. 91 Unleashing India’s Innovation.92 there were 504 universities and university-level institutions. Ministry of Human Resource Development. a committee comprised of the DoT. page xv. World Bank website.000 Number of higher education institutions 21. However. October 2007. and AUSPI submitted a report that suggested ways to form seven TCOEs across India in a PPP mode. 130 deemed universities and 33 institutions of national importance.9 Human resource India has the benefit of a huge population. For instance.
resulting in the significant growth of exports to developing nations. further strengthening the case for a robust telecom manufacturing industry. growth in the segment holds the potential to triple the country’s current employment base by FY14. 95 “Indian telecom firms may get DoT boost.net/indian-telecom-a-tale-of-stupendousgrowth/. the share of locally manufactured equipment has declined to 30% in FY09 from 74% in FY04. supported by the banking system. In order to reduce transaction costs.6. 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. html. Fiscal incentives Domestic telecom equipment manufacturers may be allowed to have access to external commercial borrowing for capital expenditure and working capital requirements. and policy initiatives should be focused on encouraging localized manufacturing. reaching a value of INR518 billion94 in FY09 during the last five years. Increased competitiveness in the global market: a technologically advanced manufacturing ecosystem in India prospectively offers an international platform to telecom manufacturers. accessed 20 October 2010. the provision of a single window clearance for all state-level approvals would be a vital fiscal measure. 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. 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). http://www. accessed 02 August 2010. http://theviewspaper. The tax on the payment of royalty should be as low as possible. Other significant incentives would encompass the removal of withheld tax on the fee for transfer of technology and software import. 28 February 2010. There is a need to align product certification with international standards and to facilitate global accreditation for the testing facility. localized players can expect to compete globally with established manufacturers and make their own mark in foreign markets in the long run.10 Equipment manufacturing93 The production of telecom equipment in India has increased at a CAGR of 29% from FY04 to FY09. In addition. It is necessary to ensure the free movement of the equipment/raw materials.” LiveMint. for global practices. Export promotion The Government could create a sizable export promotion fund for the Telecom Equipment and Services Export Promotion Council (TESEPC). 96 Policy Recommendations to Increase Domestic Telecom Growth and Exports of Telecom Equipment & Services . customs clearance for imports and exports should be done on a self-declaration basis. 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.com/2010/04/01215017/Indian-telecom-firms-may-get-D. India needs to position itself as a telecom manufacturing hub in the long term. There should be provision for round-the-clock customs clearance. According to DoT estimates. However. royalty payments of up to 5% on domestic sales and 8% on exports should be exempted from income tax. the segment holds an export potential of INR450-500 billion96 by FY14. Enabling the next wave of telecom growth in India 64 .Telecom Equipment and Services Export Promotion Council (TEPC). In order to encourage technology transfer.4. The value of telecom equipment exports was INR81 billion in FY09 during the last five years. • • Employment generation: given the right impetus. page 4. the requirement for telecom equipment in India is expected to be about INR5 trillion95 by 2015. 94 “Indian Telecom: A Tale of Stupendous Growth.” The Viewspaper. In addition. Thus.3. 01 April 2010. 93 See 5.livemint.
Service hubs Telecom equipment manufacturers should be encouraged to create service hubs to develop a global network and strengthen their presence across India. 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. Taxation Financial support Investments for accessories R&D The current taxation structure for mobile handsets must be maintained for long-term growth. to assist and provide guidance to those who want to set up a manufacturing facility. similar to the Telecom Finance Corporation. Set up an autonomous body.Bilateral trade programs Telecom exports from India may be included in bilateral trade agreements with emerging markets in regions such as South Asia. A fund for R&D and product development for the segment should be created. Africa. 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. R&D should be the key focus. Latin America. Russia and Eastern Europe. 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.
But the lack of guidelines or standard procedures results in enormous delays and huge cost implications. There is a need for national ROW policy for rollout of backhaul network. Such practice is being followed in developed countries such as the US. Enabling the next wave of telecom growth in India 66 . Also. 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.” Tower infrastructure should be erected in accordance with the NTP and licenses granted by the GoI under the Indian Telegraph Act. Every tower should be fully utilized. Once the existing tower is at capacity. 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. If an existing tower is not operating at 100% capacity. The profitability is dependent on the ability to increase tenancy on the tower. for global practices. These are not matters of local self-government or municipal departments. creating a uniform taxation regime. the tower business is characterized by high initial capital investments. Civic issues Civic issues such as zoning regulation. There is also a need for an empowered committee or similar structure to engage with roads and power ministries. then no new tower should be allowed in that zone. Technological approaches that can potentially reduce the direct and indirect costs of creating telecom infrastructure should be encouraged. which avoids duplication of capex.3. 97 See 5. The biggest barrier to setting up telecom towers and other infrastructure is the wide variation in the approval process adopted by local bodies. A 70-meter tower could service an area of 2-3 square kilometers. it needs 95% coverage. single window clearance and preferential treatment for sharing and incentives need to be addressed in a timely manner. which are directly connected with the growth of tower infrastructure.7. At present. For India to achieve 85% teledensity. If legislative amendments are needed.11 Telecom infrastructure97 Infrastructure growth is critical to the rollout of services. the scale and spread of the tower portfolio and the ability to raise capital.4. GoI should announce a National Telecom Critical Infrastructure Policy (NTCIP). Full utilization of towers— optimum sharing There should be laws governing the rollout of towers. The march of technology-IP/converged platforms is leading to integrated technology-neutral host platforms. Moreover. low working capital requirements and high incremental profitability. a new tower could be awarded through a bidding process. but are matters liable to be governed by the GoI or regulatory authority constituted by it in accordance with the NTP. the rents charged. stable and predictable cash flow. they should be adopted in a timely manner. Given the challenges that the industry faces. Tower infrastructure needs to come under the Indian Telegraph Act. in-building solutions and DAS make it possible to conserve spectrum and reduce the visual impact of towers. and GoI should declare mobile and tower infrastructure as “Critical Infrastructure Services. Telecom/broadband connectivity should be considered a necessity such as water and power in every housing facility. 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. there is no uniform approval process across states for setting up telecom infrastructure. The rollout subsidy could be fixed at a flat amount based on the approved tower design for a period of five years. and there could be distance guidelines for the same. This mandate should be included in bylaws of the local and state governments. The telecom infrastructure service provider needs to apply to the local municipality or panchayats for permission to build a tower.
There should be a method to cash in carbon credits. The state electricity boards should be advised to place a priority on applications for utility connections from telecom infrastructure service providers. The SACFA Committee should be revamped as part of a faster and simpler site clearance process. Currently. Each tower should have a structural certificate. and treating these efforts as part of the overall effort to reduce greenhouse gases and the country’s carbon footprint.” The development of specific IS code of telecom towers will help the industry to follow optimized design parameters. The USOF contribution toward the setup of telecom infrastructure and its role for rural rollouts should be specified. There is little justification for imposing costs such as lincense fees on these players. 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. Power tariffs and consumption Telecom services should be treated as a public utility service. There could be 6-10 standard designs for a tower. and the industrial rate structure should be made applicable to towers across all states. The fee levied on tower companies should not be viewed as a source of income to fund the development of a municipality. The immediate cost of infrastructure creation can be brought down significantly by reducing government duties and taxes. Infrastructure companies are akin to players such as equipment vendors and network management companies. call centers (with about 40. Time-related incentives ought to be provided to tower infrastructure providers to speed up deployment.Taxation on towers Rationalize the tax structure across states in the form of tax cuts. Operators should reduce their existing diesel generator run times by deploying the latest fastcharging batteries and improving their partial-state-of-charge capabilities. which account for 60% of infrastructure companies’ outgo. 67 Enabling the next wave of telecom growth in India . The Central Government should not impose a cess on tower operators. 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. there is no cess on handset manufacturers. which would be approved by a “design approving authority. Grid power supply should be made available. SACFA clearances Telecom service providers coordinate with a variety of departments for site clearances which is a time-consuming process. 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. which will make towers safer. The energy used by tower companies should fall under a uniform classification in all states.000 employees) and BTS manufacturers. Since tower operators do not directly serve the end consumer. fuel cells or wind power. fiscal incentives and subsidies. USOF subsidies are required to defray the cost of infrastructure creation in rural areas. which should be approved by a competent authority. Standardized design across operators and geography would further help optimize sharing and potentially reduce cost. Tower specification and standardization requirements should be clearly spelled out. because they do not interface directly with end users. a cess should not be levied on them.
Environmental issues If these BTSs can be run on renewable energy resources. at similar radio frequency exposure levels. there should be a joint endeavor between civic agencies and other related departments. increase the energy efficiency of new network equipment and optimize network technology to increase energy efficiency. the British Medical Association. Furthermore. the body absorbs up to five times more of the signal from FM radio and television than from base stations.800MHz) and because a person’s height makes the body an efficient receiving antenna.3 million tonnes. 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. Enabling the next wave of telecom growth in India 68 . Local authorities and consumer groups should be made more aware of this. radio and television broadcast stations have been in operation for the past 50 or more years without any adverse health consequence being established. 118. In fact.002% to 2% of the levels of international exposure guidelines. Misplaced apprehensions on health hazards of electromagnetic radiation from mobile antennae-BTS International institutions like the World Health Organization.000 renewable energy base stations could reduce annual carbon emissions by up to 6.Aesthetic concerns There could also be special consideration made for camouflaging towers in and around certain specific urban areas having heritage or other architectural significance. and not for all generic urban areas. there is a need to fix the feed strength to control radiation emissions. These measures have the potential to reduce the carbon footprint significantly. 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. due to their lower frequency. 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. a positive public stand by the regulator would be extremely helpful. The feasibility of using biofuels is also being studied. depending on a variety of factors such as the proximity to the antenna and the surrounding environment. There should be incentives for tower companies to optimize fuel and power costs. annual carbon emissions could be reduced. Operators are also experimenting with the use of non-conventional sources of energy wherever feasible for meeting energy requirements. Operators should be encouraged to use green technologies. Alternative sources of energy need to be developed and deployed wherever found feasible. Further. While the operators are making their best efforts to educate the general public. Even for limited camouflaging.
Interconnection regime and cable landing station (CLS) access Access charges under existing Reference Interconnect Offers (RIOs) should be fair. 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.3. BPO customers need variable per minute usage-based pricing model both for inbound and outbound calls. Taxation 98 Enterprise Sector. should be clarified. However. with attention given to MPLS and IP-VPN services.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%. Ranking of subscribers. telecom licenses are voice-centric. 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. To promote competition in the IPLC segment. Despite the large number of players entering the enterprise data segment. The security/lawful monitoring and interception requirements applicable to enterprise data services should be specified. 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. November 2010. Association of Competitive Telecom Operators. current ILD and NLD licenses were drafted before the development of current GTS services and technologies.4. Costing should be in place for RIO charges to ensure proper cost-oriented charges. non-discriminatory and cost-based. India does not rank in the top 10 data revenue earning countries. specifically LIRC. most regulations are voice-centric and do not cover issues related to enterprise service providers. Therefore. Need to eliminate the cumulative assessment of licensing fees on the purchase of inputs. data revenue. and are largely premised on the provision of mass market consumer voice services. which imposes double taxation on ILD and NLD license holders. Regulatory restrictions related to interconnection of data and public switched voice networks interfere with the realization of these services’ full potential. a wholesale pricing regime should be introduced. including lawful interception and monitoring conditions. these licenses do not allow the use of adequate encryption in accordance with current commercial standards to protect confidential information. the customer should undertake to make its encryption key available to the licensed entity on demand. 69 Enabling the next wave of telecom growth in India . International private leased circuit (IPLC) regime Indian BPOs are addressing contact center requirements globally to collect voice calls outside of India and transporting them over an IPLC or MPLS link provided by the authorized service providers. In the interest of national security. Access charges under new RIOs for accessing new cables should represent only the actual incremental network costs of providing the access services. Therefore. In line with international practice. which do not connect to a public network. Lawful interception The proper treatment of data services under the ILD and NLD licenses. It should be retail minus and avoid vertical price squeeze by the incumbent.
which refers to the combination of three services — internet. data and telephone through separate channels. In the near future. 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. it is expected that these lines will become an alternate medium for providing information services.8. In the US and Hong Kong. with a service provider offering a bundle of services. broadcasting and internet-based services by a single operator. 99 See 5. Today. Hence. Convergence creates opportunities such as the combination of either equipment or businesses to provide multiple telecommunications.3. whereas another telco provides triple play through a single channel. Triple play is also used to define the end result of convergence. Market-related convergence arises due to consumer expectations of one-stop service availability and bundling of services. impacting both the telecommunications and broadcasting sector as a whole. Convergence has led to increased competition in the marketplace. Convergence has evolved due to the processes of digitalization and computerization. commercial power lines have been used to provide telecommunication and internet services. Enabling the next wave of telecom growth in India 70 . It is essential to create a regulatory framework that addresses the issues arising from both technological and business convergence. Technological convergence has made way for business convergence. or access devices such as the telephone.13 Convergence99 The ITU defines convergence as the integration of customer end terminal equipment.4. At the same time. for global practices. As a result. most of the telecom operators provide broadband services in addition to voice communication services. a telco provides video. taking convergence to a new level. it poses challenges that need to be addressed from a regulatory perspective. telecom and telephone. television and personal computer.
The management infrastructure that is able to monitor DoT has also mandated thorough inspection of hardware. the guidelines put the onus for compliance on the voice and data traffic. with Chinese mobile phones being the major category. the DoT blocked calls to mobile devices without a 15-digit International Mobile Equipment Identity (IMEI) number. Firstly. with the rapid growth in Further. issuing guidelines related to the import of network equipment from foreign telecommunications vendors. virtual private networks (VPNs). terabytes and exabytes of data need to be set up. Although the GoI has initiated these steps to enhance security and curb terrorism with the help of mobile telephony. Know Your Customer (KYC) verification process for a mobile connection faces issues The guidelines mandate the sharing and monitoring of such as forged documents. other issues remain that continue to raise concerns over security. which is a unique number allotted to every mobile phone for the identification purposes. highly vulnerable. as the requested information is considered sensitive and proprietary. Secondly. This move is expected to have impacted approximately 25 million users.3. leaving the telecom system source code and design along with Indian security agencies. with penalties for non-compliance.4. Indian intelligence agencies. 71 Enabling the next wave of telecom growth in India . The key players that have been impacted by the security concerns include one of the world’s leading mobile handset manufacturers. India has witnessed a series of terrorist attacks. As a result. 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. internet service providers and one of the world’s leading internet search engines. In 2009. any suspicious equipment periodic review thereafter. manufacturers. Thirdly. with terrorism being primarily attributable to religious communities and radical movements. modern data mining and network mobile operator. The IMIE number helps intelligence agencies track mobile phone users and curb anti–national activities. telecom equipment manufacturers and telecom operators. the GoI has taken steps regarding telecom infrastructure equipment. the Ministry of Home Affairs. The key stakeholders associated with security concerns surrounding telecom equipment include the DoT.14 Security In the recent past. along software and facilities at the time of procurement and with a trained workforce.
. mobile banking and multimedia messaging service (MMS). 4. m–commerce finds its applications across various end markets such as banking and financial institutions. Enabling the next wave of telecom growth in India 72 .4. especially in the case of banking and internet-based purchases.e.4. cinema) • Shopping (i. It is forecasted to overtake e-commerce in terms of the number of transactions. Going forward. for global practices. The rollout of 3G services m-commerce Mobile banking • Inter–account fund transfer • Account inquiry • Stock trading • Bill payment Mobile payments • Information services. 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.4. web-enabled phones and smartphones by mobile subscribers is expected to play an important role in the growth of m-commerce.g. driven by the uptake of services such as mobile web browsing. in India is expected to boost market growth.1 m-commerce100 The next revolution that is expected through the use of mobile phones is the emergence of m-commerce.. train. including current affairs. The m-commerce service umbrella in India has been limited primarily to payment and transfer systems. with each broad category providing an array of services. the UID scheme and financial inclusion. booking tickets for transportation services such as trains and taxis and online shopping.9. Mobile phones provide the consumer an opportunity to transact anytime and anywhere. the rollout of 3G services and increasing usage of WAP. purchase of goods and services) Mobile transfer • Prepaid card top-up • Person-to-person transfers • International remittances 100 See 5. with synergy existing between e–commerce and m–commerce. paying bills for utilities such as power and gas. tourism and search engines • Ticketing (e.
disruptive business models and reduced legal and professional fees. 4. This will cause a reduction in the cost of transactions. M2M is characterized by small amounts of data between the device and network. The initial application will focus on mobile banking. finance. with machine– to–machine (M2M) communication being the key driver behind this exponential increase in connected devices. monetary settlements. It will significantly impact the banking industry. Mobile payment technology will transform the nature of physical interaction between consumers. Ericsson.4. the world is expected to witness 50 billion101 connected devices in 2020. to extend affordable health care to all in the country.2 M2M communication According to Ericsson. 4. 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. December 2010. health care.4. There are a number of government schemes and other initiatives from medical service providers offering tele-medicine services. owing to increased volume. merchants and banks. Utilities. education. thereafter. bill payment related to utility and others will become a major application. mobilized and generated in future. over a period of time. researchers and patients. page 2. government.4.4. and will enable networks to support automated machine communications. real-time monitoring of patient vital signs and direct provision of care via mobile tele-medicine. delivery of health care information to practitioners. redundancy and coverage. to look at account information and transfer small amounts of money between various accounts. with mobile money becoming a truly rich and integrated application for consumer convenience. 73 Enabling the next wave of telecom growth in India . transportation and other emerging industries are expected to be at the forefront in adopting M2M communication. adoption of other services such as ticketing.4 M-health M-health applications include the use of mobile devices in collecting community and clinical health data. The key advantages provided by M2M include cost and spectrum efficiency. coupons and advertising would pick up.3 Mobile money Mobile communication and secure mobile transaction opportunities will bring a transformation in the manner in which money is managed. service quality and security.
Enabling the next wave of telecom growth in India 74 . 4. 4. It enables a virtual community to facilitate the learning activities of teachers. this data could be transmitted to MNREGA. 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. subsidies and other government programs while also strengthening national security. For instance. It aims to bridge the supplydemand gap of high-quality teachers in the country.6 Financial inclusion Financial inclusion is central to the overall task of inclusive growth. The integration of such programs with mobile telephony will benefit the nation.4. and help them earn their daily wages. 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. Once workers have logged in.7 MNREGA and UID MNREGA and UID strive for providing inclusive growth. The UID program is critical to improving the delivery of social services. 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.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. MNREGA achieves twin objectives of rural development and employment.4. students and peers through collaboration in a distributed environment.5 M-education M-education offers innovative use of mobile and wireless technologies for education. In India.4.
5. Global practices 75 Enabling the next wave of telecom growth in India .
the MPT established the technical regulations and publicized the licensing policies. allotting licenses to operators who best meet stated pre-set criteria). which is to the advantage of operators and consumers. with the number of applicants matching the number of licenses. with new as well as incumbent opeartors — but not fixed regional operators — being eligible.e. with the same royalty percentage applying to all licensees. Licensing Hong Kong In February 2001.. • Successful bidders were required to provide a five-year rolling guarantee of the minimum royalty payment for the entire license period. network rollout. the Hong Kong Government released its 3G licensing framework. In March 2000. with a guaranteed minimum payment. the Japanese Ministry of Posts and Telecommunications (MPT) published the draft for the introduction of 3G services and solicited public comment. • Successful bidders were expected to pay a minimum royalty fixed by the Government for the first five years of the license. • The selection of applicants was based on the “beauty contest” criteria (i. The Government decided to issue four licenses for up to 31 December 2015. Further. Sweden • In May 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. Enabling the next wave of telecom growth in India 76 . Following the pre–qualification exercise. From the sixth year on. • The number of 3G operators was fixed at three per region. The pre–qualification criteria included investment.5. the Government decided to issue four licenses through auctions. as operators do not pay expensive fees to the state for the issue of licenses. quality of service and financial capability. the Swedish law states that licenses are allocated based on specific criteria. • Since the 3G license allocation in Japan was straightforward. the policy for comparative selection was not invoked. Japan • In 1998. the successful bidders were required to pay royalties according to the royalty percentage determined at the time of auction. 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. Sweden issued an invitation to provide network capacity for UMTS mobile telecommunications services.1. • The Government focused on rapid rollout and nationwide coverage. • The three-license limit was driven by a shortage of spectrum. with the regulator having a total of 60MHz of spectrum for 3G services.
The 102 “3G Mobile Licensing Policy. Public consultation procedures and the right to appeal also increase the prospects for a successful renewal process. 5. and ensure sufficient lead times and transitional arrangements in the event of non-renewal or changes in licensing conditions.0 Nominal 4.0 Note: The “beauty contest” approach purports to allocate licenses to operators who best meet stated pre-set criteria. In September 2006. which provides a funding mechanism through which federal agencies can recover the costs associated with relocating their radio communications systems from certain spectrum bands. Policy-makers and regulators should focus on creating interest among providers and providing incentives for long-term investment.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.” National Telecommunications and Information Administration website.pdf.0 35. It is essential to provide details about license renewal or reissue.110– 2.08 116.0 51. Spectrum Re-farming of spectrum • The US Government created the Spectrum Relocation Fund (SRF) in December 2004.070. gov/reports/2008/SpectrumRelocation2008.0 351. 103 “1710–1755MHz spectrum band relocation. accessed 22 October 2010.755MHz band used by federal agencies was reallocated to AWS under the provisions of Commercial Spectrum Enhancement Act (CSEA). page 1.390. which were authorized to be auctioned for commercial purposes.508. This is done through the principle of renewal expectancy.4 44. accessed 12 October 2010.710–1. transparent and participatory renewal process.755MHz band paired with the 2. http://www. The 1.ntia. 77 Enabling the next wave of telecom growth in India .520.0 2.” ITU website. page 50.870.482.0 3. http://www.2.0 45. including the use of the SRF to facilitate relocation of federal communications systems.0 each 44.itu.103 the Federal Communications Commission (FCC) concluded the auction of Advanced Wireless Services (AWS) in the 1.7 1. and through promoting regulatory certainty through a fair.int/osg/spu/ni/3G/casestudies/GSM-FINAL.0 10.pdf.0 120.155MHz band.080.doc.710–1.8 360.
6GHz band. page 28. The MoD has management rights to 35%104 of the spectrum bands listed in the UK Frequency Allocation Table (UKFAT). uk/files/file38572. The FCC distinguished between de jure rights. emergency and public safety services (E&PSS) and science services. civil aeronautical. In 2010. • • • • • Sharing of spectrum • Time sharing: defense needs to use part of the spectrum only in crisis situations during exercises.4–3. bis.6GHz band had previously been allocated to multichannel multipoint distribution service (MMDS) operators to support pay-per-view TV services. and de facto control.AWS auction raised US$13. inland waterways and rivers. New Zealand was the first country to introduce open market trading of spectrum. http://www. an inefficient primary mechanism of spectrum allocation that makes it necessary to move to a market-based method of secondary allocation.gov. and spectrum regulation.e. • In March 2007. sharing or reallocation opportunities for spectrum.. Spectrum trading • Spectrum trading gives public and private sector entities the opportunity to decide which spectrum to release or share. In 2006. ANATEL. In 2003. promotion of innovation and flexibility. 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. While it is important to ensure that access to spectrum 104 “A Strategy for Management of major Public Sector Public Holdings. the possibility exists to use the spectrum for other applications the primary user does not need. civil maritime. One of the key recommendations of the Independent Review of Government Spectrum Holdings (IRGSH) was a regular review of all defense band allocations. assignment of the license to another party. and facilitates the provision of innovative new wireless services in the commercial market. agreed to re-allocate spectrum in the 2. in 2004. giving them the option to deploy LTE immediately. The 2. the FCC proposed the concept of developing smart devices that adjust to the spectrum they use and take advantage of underused spectrum. in consultation with the Office of Communications (Ofcom). the Brazilian telecommunications regulator. 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. The re–allocation benefits the country’s mobile operators. is guaranteed the moment it is needed. In Italy. i. The committee formulated the strategic plan for the Ministry of Defense (MoD). simplifying them in mid-2004. Such spectrum could be made available for other applications inland.7 billion in net winning bids. as a part of spectrum re–farming. Further. the Australian Communications and Media Authority (ACMA) reviewed government spectrum holdings. In 1989. The secondary trading of spectrum provided benefits such as economic efficiency. formulated policies and a strategic plan for the future allocation of spectrum to meet the needs of users in both the public and the private sector. the UK Department of Trade and Industry’s spectrum strategy committee. the FCC formulated rules for spectrum trading. accessed 12 October 2010.6GHz band to support the nationwide deployment of nextgeneration mobile broadband services. Innovation and Skills website. transferee retains the license and legal responsibilities. the Ministry of Communications and the Ministry of Defense have agreed to make 2x75MHz spectrum available for WiMAX in the 3.e. and it has begun a program to identify which spectrum can be released and time frame for releasing it. i. but transfers management control of the spectrum. Enabling the next wave of telecom growth in India 78 .pdf. The critical success factors for spectrum trading include a large number of buyers and sellers. Spectrum assigned to the maritime sector may need to be used for maritime radio services only near the coastline. • Geographical sharing: in certain situations.” UK Department for Business.. and innovation in the supply and demand for radio-based technologies. spectrum is needed only in certain geographical areas.
In Mexico. In most countries. with the aim of increasing overall teledensity. USO services were provided by incumbent operators. subsidies are granted according to formulas for compensating operators already serving high-cost rural areas within their operating territory. http:// www. countries with large geographic areas and consequently much higher costs to serve rural areas have funds that aim to cater for the rural population. page 19. the telecom regulator. Universal Service Obligation Fund In many countries. The Brazilian legal framework uses a variety of tools to achieve universal service. In the UK. the incumbent operator was required as part of its privatization to install payphones in 20.000 rural areas over a five-year period to meet the policy goal of ensuring some telephone access in all villages with at least 500 residents. governments should consider whether they should create a USOF for broadband services. 79 Enabling the next wave of telecom growth in India . The contribution rate ranges from 0. BT is the designated USO provider. Most European countries. However. 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% 1.5% (plus federal contributions) 1% 1% 1% Considering USOF for rural wireless broadband services With the rising importance of broadband. have not considered the creation of a universal fund. after liberalization of the telecom sector. 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. Communication service providers are obliged to contribute to this fund in many countries.1% in France to 6% in Malaysia. In Greece. a competitive tender mechanism was used.org/dataoecd/59/48/36503873.pdf. a separate universal service fund has been set up.oecd. with a relatively small geographical area and high population density. On the other hand.3. Brazil has developed a mechanism that achieves universal objectives through obligations imposed on its licensees. ANATEL has imposed a coverage obligation rather than a funding mechanism. As a result.5. or proposing to expand into high-costs areas. accessed 20 October 2010.
Subsidies distributed through competitive bidding. Subsidies distributed through competitive bidding. The USO provider makes an offer to provide services at specified cost. Government budget.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. 1% of all operators’ gross revenues. and the regulator decides what part to accept. including telecom operators. with the lowest bidder being the winner. 0. Universal service fund supports ICT projects consistent with the Government’s development objectives. Japan Developing countries Country Argentina Brazil Telecommunications carriers contribute to the USOF. 1% levy on all sector participants. ISPs and mobile operators. Subsidies distributed through competitive bidding. with the lowest bidder being the winner. Subsidies distributed through competitive bidding.e. Source of revenue 1% of all operators’ gross revenues. with the lowest bidder being the winner. Subsidies distributed through competitive bidding. plus funds from license fees. and additionally 15% for joint and common costs. Method of allocating funds The Government determines the level of subsidy paid to the USO provider. page 19. Subsidies mainly awarded to tele–center projects and areas of greatest need. Enabling the next wave of telecom growth in India 80 . operators invited to submit proposals for universal service provider and to be compensated from the fund through a competitive process. The telecommunication carriers are eligible to receive universal service funds.16% of all operators’ revenues. with the lowest bidder being the winner. 5% levy on the revenue of telecommunication operators. couriers and ISPs. 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. 1% of service providers’ gross operational revenues earned from telecom services.1%. with the lowest bidder being the winner. April 2006. France Italy Operators contribute a percentage of revenue i. 5% of national and long distance operators’ revenues.. Universal service fund compensates costs estimated on the basis of long run marginal costs. 0. Both fixed and mobile operators pay a fixed percentage of eligible telecom revenue. Method of allocating funds Government to determine based on its goal to increase wireless and wireline teledensity. Starting in 2002. Major operators contribute 1% of revenue. Compensation for costs incurred by USO provider. with the lowest bidder being the winner. Fixed and mobile network operators contribute 6% of their weighted revenue from designated services to the fund. Subsidies distributed through competitive bidding. 2% levy on the revenues of the incumbent operators. the postal service.
Increased security aware1.5% 29. Although the world is witnessing a rise in broadband penetration.5. 61% (46% globally) agreed that their organization will spend more this year in information security than it did last year.1% 33. regulatory environment.8 million107 broadband subscriptions across the world. page 2. whereas African countries were able to add 2. page 4.4.5 million fixed broadband subscribers. Indian organizations. Other top trends next 12 months. TRAI.7% 26. accessed 12 auditing capability and stronger they have embraced cloud October 2010. Intel 37. as they provide businesses and consumers with fast and continuous access to internet–based services. 2010. which covers the overall . invest in infrastructure and latest technology. http://www. urban–rural divide and other factors that impact broadband penetration are very different in developing nations. as against only 8% by systems. Point Topic Ltd. during 2005–08. encourage competitive ecosystems. Eastern Europe added 19. 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. The trend of actions that organizations have taken to control the leakage of Enabling the next wave of telecom growth in India 5.. and release spectrum for the sustainable deployment of broadband services.3% 7.5% 26.4% 23. Broadband Broadband networks are an essential infrastructure for the global economy. form PPPs. Investment in information world in terms of broadband penetration.pdf. it declined to just 2%. Broadband services have economic benefits both in developed and developing nations. content and applications.4 million fixed broadband subscribers. Broadband penetration by country 2009 Netherlands Korea UK Finland US Australia China India 0% Source: OECD.108 in comparison with 4% in developing economies. Booz & Company analysis There are more than 497. 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).” ITU. if China is excluded from the developing world.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. that emerged were increases in the global respondents stated that 108 “Intel: Realizing the benefits of broadband. the growth rate is much higher in the developed world. Furthermore. The essential leading practices that enable countries to increase broadband penetration include: adoption of regulations that embraces innovation and competition. 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. Of all participants.” Intel website. However. For instance. increased risks: 3. However.com/Assets/PDF/Article/WA-323857001. The number of organizations currently evaluating the use of virtualization techniques is growing: 81 4. 23% of 107 World Broadband Statistics: Short report.intel. identity and access management computing. However. The firm combination of national objectives toward broadband services with leading practices is expected to enable developing nations to achieve benefits of broadband growth. 23%. infrastructure. a large digital divide exists between the developed and the developing 2.7% 0.
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 . 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. 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. through funding • Financial support for R&D. formulated the action plans. where all have the confidence to access the new and innovative services delivered by computer. The Korean Digital Divide Act created the five–year master plan to close the digital divide. technology demonstration projects. 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. mobile phone. subsidies for purchase of personal computers by low-income citizens • Promote digital literacy • Support e–governance. e–commerce. education and other information and communications technology (ICT) services 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.South Korea Policy element Objectives Action • The South Korean Government created an action plan for the emergence of a knowledge-based society. 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. with each citizen having access to a personal computer. 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.
other countries. has proposed a cap on the award of spectrum to a mobile operator. In the US. there is a lack of regulatory consistency at the international level. The US and the UK have gradually eased their respective spectrum caps. the telecom regulator. Similarly. Ofcom.5. with different views on each regulatory issue. However. especially in emerging markets. A spectrum cap refers to the amount of spectrum any operator or group of operators can hold in a geographic area. 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. such as Australia. the merger of the UK operations of two mobile operators was cleared by the European Commission. After the elimination of the spectrum cap. The emergence of new technologies and applications worldwide has forced mobile operators to expand their global footprint through mergers and acquisitions. the FCC used a cap of 70MHz in deciding mergers. In March 2010.800MHz — was larger than that of their competitors. In the UK. However. the parties offered to surrender 15MHz of spectrum. Mergers and acquisitions The telecom sector has evolved at different rates around the world. and it was abolished in 2003. a spectrum cap was in place from 1994 to 2003. which would help overcome the challenges posed by globalization. After the auction in 700MHz band. the cap was raised to 55MHz. the spectrum cap in the US stands at 95MHz. In 2001. allowing other competitors to rollout services. Mexico and Guatemala. 83 Enabling the next wave of telecom growth in India . In any country.5. As a result. have abstained from the implementation of a spectrum cap. 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. a spectrum cap has been implemented in Canada. Ofcom has proposed a cap on the amount of spectrum held by any operator in the spectrum range under 1GHz. The combined amount of spectrum held by the two parties — at 1. the key to the telecom sector is radio spectrum management.
These changes were primarily driven by higher education and the emergence of knowledge-based industries.” OECD Publishing. particularly in the ICT sector. academic and research institutions. Further. Strategic initiatives 109 Caroline Lesser. • Foreign direct investment: in 1993. Norway-.000 firms in 2000. Trade Liberalisation and Innovation Capacity in the Finnish Telecom Equipment Industry. The country has invested in a number of technical universities. An increase in FDI has resulted in technology transfer and cooperation that has helped to fuel the telecom sector. telegraph and telephone (PTT) operator developed the Nordic mobile telephony standard in collaboration with Sweden-. the country’s ICT sector has benefitted from investment in R&D. The mobile telecom cluster. However. including mobile application developers. in the late 1990s.5. which more than doubled between 1985 and 2005. mobile network operators. • First-mover advantage: in the 1970s. Finland deregulated the telecom sector by the adoption of the Telecommunications Act and a new Radio Act. the country redirected its trade to the West. with electronics and electrotechnics accounting for about 25% of the country’s exports. which is also known as Finland’s Wireless Valley. component manufacturers and electronics contract manufacturers. Finland’s state-owned post. Enabling the next wave of telecom growth in India 84 . public certification and standardization authorities and financial service providers. equipment manufacturers. Equipment manufacturing Finland: Market openness. primarily driven by a robust educational system in which basic. • Skilled workforce: Finland has a strong skilled workforce. which has facilitated the emergence of Finland in the telecom sector by providing a large pool of engineers. • Specialization in telecom: Finland’s ICT sector has developed specialization in the manufacturing and export of telecom equipment. The country witnessed more than fivefold growth in FDI from 1990 to 2000. • Deregulation and increased competition: in the late 1980s and early 1990s. liberalization and innovation drive the telecom equipment industry109 Background • Prior to the 1990s. and joined the European Union in 1993. with Nordic countries benefitting from the first-mover advantage in the mobile telecom industry worldwide. and in 1991. the first GSM network was launched in Finland. with telecom equipment manufacturing accounting for 90% of the ICT manufacturing in 2003. consulting firms. which encourages cooperation among a wide range of manufacturers and suppliers. Finland lowered the entry barriers through the introduction of reforms. secondary and tertiary education is free of charge. “Market Openness. networks were opened to free competition. Finland removed the restriction on foreign ownership in Finnish firms and restrictions on capital inflows.6. the economy shifted to ICT and consumer electronics. includes a wide range of stakeholders. content owners and content providers for mobile applications. From 1987 to 1997. 29 July 2008. In 1991. It employed more than 80.000 people in over 4. and Denmark based PTTs. the Finnish economy was dominated by forest-related industries. • Development of clusters: the development of the Finnish telecom industry is also attributed to the emergence of an ICT cluster. After the collapse of the Soviet Union in 1991.
7. • Over the years. worldwide. In the EU. the US granted China the most favored nation status in 1980. leading global telecom manufacturers launched their R&D centers in China. government support to domestic telecom enterprises and the presence of a well–qualified technical workforce. some of its tariff rates were above 50%. although national roaming was permitted for new entrants. 5. In Sweden. These operators are encouraged to share both civil and electronic infrastructure. As a result. Telecom infrastructure • • Brazil is split into 11 licensing areas with 4 operators in each licensing area. Other European NRAs followed the Commission’s approach and as such active infrastructure sharing was limited. the country reduced its tariff barriers drastically. The key reforms undertaken by the country include development of a trade policy. along with technological expertise. Additionally. These centers have helped global players to understand the local market and helped in the overall development of the telecom sector. despite the presence of multinationals. In the 1980s. with the emergence of Chinese firms that have successfully competed in the global marketplace. This helped the country to produce products rapidly. it was often time limited. Each consortium has built a joint network. individual national regulatory authorities are required to notify the EU Commission of decisions regarding infrastructure sharing. This enabled the country’s domestic and foreign-owned firms to compete. 85 Enabling the next wave of telecom growth in India . as long as they are used to produce export goods. In Australia. National roaming was permitted in rural areas for a longer period than for urban areas. China implemented policies that favored the inflow of FDI. In 2001. An administrative group has been established to own and operate existing RAN and fund future network rollout plans as agreed with operators. The operators challenged the Commission’s decision. • Research and development: during the late 1990s. The regulator permitted this level of sharing. China established an export processing policy. Strategic initiatives Since 1978. Infrastructure sharing has been well accepted globally.China: Emergence of a global manufacturer and innovator110 Background • China’s telecom sector has witnessed rapid growth in the last two decades. This has led to greater opportunities for operators to engage in infrastructure sharing. the tariffs reached less than 15%. raw materials such as parts and components and other intermediate imported goods do not have any duty imposed. 2009. Furthermore. operators have commercially negotiated for 3G site and RAN sharing. 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. • Foreign direct investment: in 1979. four of whom have formed two separate consortiums of two operators each. R&D led to the emergence of Chinese manufacturers that spend a significant portion of their revenues on R&D. • Export processing: in the late 1970s and 1980s. particularly in rural areas that may be costly to serve otherwise. Initially. Under the policy. and the country joined the WTO in 2001. 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. “China’s Emergence as a Manufacturing Juggernaut: Is It Overstated?” Federal Reserve Bank of Philadelphia. reduction in tariff barriers and development of an enabling environment to attract FDI. The implementation of the export processing regime facilitated the reduction of tariff rates. • Tariff barriers: during the 1980s and early 1990s. China has implemented numerous reforms that have boosted the country’s manufacturing and trade. The European Court of First Instance ruled in favor of the operators and stated that the EU had overplayed the competition concerns. • • • 110 Behzad Kianian and Kei-Mu Yi. there are five operators. • 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. Chinese manufacturers have evolved from producing cheap and low-quality imitations to products that use high-end advanced technology.
networks’ packet data grew nine times larger than voice services. In July 2005. the mobile switching center (MSC) may not be shared. allow fulfillment of the coverage requirements through roaming in networks based on other technologies than Universal Mobile Telecommunications System (UMTS). Radio network controllers (RNC) may be shared physically. The cable industry has opposed this demand. Enabling the next wave of telecom growth in India 86 . • • • 5. wire. satellite and cable and content. The Ministry of Transport and Communications may.9. a number of commercially negotiated and regulated agreements exist between the two main operators and the MVNOs. radio. the Federal Communications Commission (FCC) is an independent agency that regulates interstate and international communications by radio.5 billion111 in 2015. and Mexico have also implemented m-commerce successfully. the regulatory functions of the Broadcasting Standards Commission. cables. For core networks. Countries such as Sudan. provided such networks can offer sufficient capacity and that the arrangement is without substantial disadvantage to subscribers. with responsibilities across television. Latin American countries such as Uruguay. Radio Authority and Radio Communications Authority were combined to form Ofcom. the Canadian Radio-television and Telecommunications Commission (CRTC) is an independent public authority to regulate and supervise all aspects of the Canadian broadcasting system. m-commerce Globally. Recently. Office of Telecommunications.7% during the same period. All transmission routes (i. but data revenues are expected to increase at a CAGR of 16. publish tariffs and reference offers.8. television. cable TV services require approvals at the municipal level. Ghana. Ovum website. After smartphones were released.ovumkc. The main operator is obliged to provide national roaming and MVNO access. In Canada in 2002. but operators must retain logical control over their networks and spectrum. accessed 16 October 2010. This has made it possible for telephone companies to receive a statewide franchise to provide video services that compete with cable. In Canada. 5. subject to an individual consideration. All operators may share sites and masts. and took over the functions of two previous regulators – the South African Telecommunications Regulatory Authority and the Independent Broadcasting Authority. the rollout of 3G has provided the required impetus to drive widespread adoption of m-commerce services. However. the Philippines and South Africa have been the largest adopters of this service. 111 Ovum: Mobile regional and country forecast pack: 2010–15. Independent Television Commission. telecommunications and wireless communications services.e. the Australian Broadcasting Authority and the Australian Communications Authority merged to form the Australian Communications and Media Authority. the state of Texas passed a bill deregulating the telecom markets.. Venezuela. voice revenues are expected to decline at a CAGR (2008–15) of 1. In India. Brazil. P-P radio lines) may be shared.com/. m-commerce is very popular in countries where most of the population is unbanked. In July 2000. It is also the regulator of the UK communications industries. as the cable industry underwent the time-consuming and expensive process to secure city-by-city franchises over the last three decades. There are commercial agreements between the main operators. It is the regulator of the telecommunications and the broadcasting sectors.1% to reach US$19. Argentina. as well as to regulate telecom common carriers and service providers. Mobile networks in North America witnessed growth in data services that were also driven by the introduction of smartphones. implement accounting separation and is subject to price and accounting controls for national roaming. Paraguay. http://www. the Independent Communications Authority of South Africa was established.but required each operator to maintain 30% of its network separately. • • In Norway. Convergence • In the US. 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. optic fiber.
87 Enabling the next wave of telecom growth in India .Multiple reforms in the Indian telecom sector have coalesced to produce a remarkable decade of continued success. progressive policies will become increasingly important to guide unparalleled growth and transformation in the sector. Looking ahead.
Conclusion The telecom sector in India has witnessed a series of fundamental structural and institutional reforms over the past decade. remote and inaccessible areas. USOF. 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. This approach has helped the sector grow by leaps and bounds. equipment manufacturing and infrastructure sharing. information services. There should be uniform fee structure across all telecom circles. Spectrum sharing and trading should be allowed. and fiscal incentives should be provided to promote local manufacturing. timely spectrum reconciliation and enhanced transparency. Broadband infrastructure — OFC. • • • A single license should cover all telecom services. security concerns and consumer affordability. HMCP should be set up across the country. Future policy should encourage identifying and vacating spectrum bands for future use. service flexibility. Enabling the next wave of telecom growth in India 88 . Content and applications in regional languages should be created to promote rural broadband. M&A. Operators must be allowed to merge intra-circle while being allowed to combine spectrum. A National Telecom Critical Infrastructure Policy on the lines of NTP 1999 should establish uniform procedures for land acquisition. R&D initiatives should be encouraged. The share of a merged entity should not be greater than 30% in terms of subscriber base or AGR. broadband. 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. timely allotment. DoT should also consider lowering the contribution to 1% of AGR toward the fund. a uniform taxation regime. convergence. The key recommendations for improving the existing scenario focus on licensing framework. and encourage a healthy level of consultation with stakeholders. with which the regulatory authorities make industry information public and accessible. The best feature of India’s regulatory regime has been its open and transparent approach. high-capacity microwave and satellite connectivity — must be extended to rural. household telephones and broadband connectivity in rural and remote areas. • The USOF should be utilized for the provision of public telecom. and inducting new technological developments in rural and remote areas. 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. m-commerce. spectrum. • • • The key recommendations for advancing the sector to the next level of growth focus on financial inclusion. The distribution of funds should be through transparent market-oriented allocation methodology.
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 .
About Federation of Indian Chambers of Commerce and Industry (FICCI) FICCI. FICCI espouses Indian businesses and speaks directly and indirectly for over 250. conferences.000 business units.500 corporates and over 500 chambers of commerce. With a nationwide membership of over 1. is the largest and oldest apex organization of Indian business. set up in 1927. FICCI maintains the lead as the proactive business solutions provider through research. FICCI organizes a large number of exhibitions. 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.
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ey.com Prashant Singhal Global Telecommunications Center — Delhi prashant.Contacts Vincent de La Bachelerie Global Telecommunications Center Global Telecommunications Leader email@example.com@sa.la.com Wasim Khan Global Telecommunications Center — Riyadh wasim.com Mike Stoltz Global Telecommunications Center — San Antonio michael.com Adrian Baschnonga Global Telecommunications Senior Analyst firstname.lastname@example.org@de.com Steve Lo Global Telecommunications Center — Beijing email@example.com Marc Chaya Global Telecommunications Markets Leader marc.ey.com 99 Enabling the next wave of telecom growth in India .com Jonathan Dharmapalan Global Deputy Telecommunications Leader firstname.lastname@example.org@email@example.com@ey.ey.com Serge Thiemele Global Telecommunications Center — Johannesburg serge.com Holger Forst Global Telecommunications Center — Cologne holger.thiemele@ci.
Enabling the next wave of telecom growth in India 100 .
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