Telecom Industry in India

With the Telecom industry booming and with lots of players coming in for this big industry in
India, there is a fierce competition among all the players. All are trying their means to grab the loyalty of the customer through various means; differentiation is one of the key factors. However, we see that one scheme by one player is outsmarted by another player with newer scheme in a short time. In such a scenario, can something new be done?

Today, a big chunk of users of cellular phone belongs to the professional, working class of people. These people (especially from software industry) have to roam internationally for their work. The assignments vary from half a year to couple of them. what do they do with their cell phones when they are in another country? How do they keep in touch with their dear ones back in
India? Do they go for roaming services? If a person uses roaming facility, he has to pay Rs. 85-90 per minute on an average. Where as, if he buys an international card, the same call takes Rs. 8-10 per minute. Such a huge difference makes people to switch off their cellular phone and go for these international cards.

If the key players in cellular services in
India focus on this aspect, they might come up with innovative solutions. And the company which comes up first with international-cheap roaming facility, would gain the first mover advantage which would also give it the loyalty of customers, nationally and internationally….!!!

Tejal

India is aiming to move towards fourth generation (4G) wireless technology, skipping 3G technology as it is not found to be cost effective. There are many problems in allocating 3G spectrum to telecom networks. Also, world has already moved towards 3G networks, so it is more sensible for India to jump to 4G and wireless broadband technologies because they are around 1.5 times more cost effective than the current Indian standard.

But what do we mean by 4G networks?

According to Wikipedia “4G is fully IP-based integrated system of systems and network of networks achieved after the convergence of wired and wireless networks as well as computer, consumer electronics, communications technology and several other convergences that will be capable of providing 100 Mbps and 1 Gbps respectively, in outdoor and indoor environments”

The applications offered by 4G are wireless broadband access, mobile TV, high definition TV content and digital video broadcasting, MMS and video chat. It will also offer increased level of security for all kinds of services anytime, anywhere, at affordable cost. Technologists suggest 4G will also allow 3D virtual reality and interactive video hologram images. Globally, technologists and businessmen are still debating the pros and cons of commercial as well as the technological aspects of 4G.

Garima Lohiya

The need and emergence of Telecom regulatory authority (TRAI) 

In the advent of lots of private companies in telecommunication services a need was arisen to have an independent regulatory body. Hence, (TRAI) Telecom Regulatory Authority of India was established in the year 1997 in pursuit of TRAI (Ordinance) 1997. TRAI ordinance was replaced by an Act of Parliament later, for regulating the telecommunication services. The function of TRAI was of regulatory and recommendatory nature. It also included tariff setting function.

Some of the salient functions of TRAI are as follows:

• recommending on the need and timing for introduction of new service provider
• recommending on the terms and conditions of license to be given to a service provider
• making sure the compliance of terms and conditions of license
• setting down the standards of quality of service to be provided by the service provider
• ensuring the quality of service and conducting the periodical survey of such service provided by the service providers for protecting interest of the consumers of the service
• ensuring effective fulfillment of Universal Service Obligations
• Informing the rates at which telecommunication services within
  India and abroad shall be provided under this Act 

Telecom Dispute Settlement and Appellate Tribunal

In the year 2000, an amendment of the Telecom Regulatory Authority of India Act made reconstitution of the Telecom Regulatory Authority of India (TRAI) and creation of the Telecom Dispute Settlement and Appellate Tribunal (TDSAT)

TRAI authorized to provide recommendations on various facets related to the functioning of telecom service providers (TSP) and to carry out regulatory functions like

•     TRAI helped to fix tariffs for various telecom services

•     Recommendations of TRAI to be sought by the Government on:

       -    Need and timing for introduction of new service providers
       -    terms and conditions of the license

•     The process has also been made time-bound.

•     TDSAT empowered to judge on disputes:

       - between a licensor and a licensee
       - between two or more service providers
       - between service provider and group of consumers
       - listen and dispose of appeal against any direction, decision or order of the Authority under the TRAI Act, 1997.

Ombudsman (meaning) –An ombudsman is an official, usually (but not always) appointed by the government or by parliament, who is charged with representing the interests of the public by investigating and addressing complaints reported by individual citizens.

Source: wikipedia

The most irritating part of the day is when you are frantically trying to get in touch with someone , you cannot get through your phone and then hear a very monotonous tone at the other end which in no way helps u in that situation. Such situations ensure that the telecom provider is bombarded with all sorts of nasty words by the telecom users.

But imagine having a body that actually looks after a telephone users complain. That’s exactly the latest development in this industry- the set up of an Office of Ombudsman for telephone users which will be a self regulatory initiative voluntary in nature. This will be funded both by private and public operators.

Consumers can now take all their issues related to telecom to the Ombudsman directly and the decision taken by the Ombudsman would be enforced on the telephone operators. Consumers now have a choice of taking their complaints to the consumer courts in case they are not satisfied with the decision taken by the Ombudsman.

“Mr S.C. Khanna, Secretary-General, Association of Unified Service Providers of India, said that the office for the Telecom Sector Ombudsman (TSO) will be set up in New Delhi. The TSO would function as a private arbitrator and settlement authority and will not be a legal forum with advocates representing the parties.”

TSO would be head by a former Chairman of the National Consumer Commission and former Chairman of the telecom tribunal.

This thus ensures that the industry has taken the fact seriously that it is important to now take cognizance of the fact that the users have a problem and it’s high time they address the problem in a fair manner.

-Beena

Today mobile phones have moved beyond their fundamental role of communication and have become an extension of the individual. Today users buy mobile phones not just to communicate but to also express themselves, their feelings & interests. Customers want something more and more from their phone. They use their cellular phones to play games, read news headlines, surf the Internet,  check their astrologyforecasts, listen to music, or keep a check on their bank balances. This has been instrumental in driving the service providers to provide numerous services to their customers. Today on account of this people are choosing their subscribers based on the value added services they offer. It has been found that SMS is not considered as a VAS by most people when in reality it is actually a VAS. Other VAS services offered are Mobile blogs, area related info,etc.The current VAS market is expected to grow by 60% for the next year and at the end of 2007 should be close to Rs. 4560 crore. Mobile VAS in India can be further categorized into Ringtones, Games and MMS.

(Source: Internet and Mobile Association of India)

• Environmental factors driving VAS:

 1. Booming economy
 2. Increasing comfort levels with basic mobility services

• There are several challenges to the growth of VAS in India:

1. Focus only on youth and entertainment
2. Piracy of content
3. Lack of infrastructure
4. Preference for low feature handsets
5. High cost to the end user
6. Spam
7. Transparency in revenue sharing

Future of VAS:

The mobile VAS arena is expected to grow rapidly. However, the overall focus for Mobile VAS would shift to utility based services like location information & mobile transactions like MOBISODES and MOBLOGS in the times to come.

Radhika

A mobile phone has now become a statement- a statement of style, prosperity, standard of living in developing economies. However the biggest question of how it is going to add to our country’s economy still remains. “According to a study of the wireless markets in China, India, and the Philippines, the economic impact of all wireless activity on these countries is up to four times the value to the wireless operators alone”

This thereby reinforces the fact that as an operator of these services one’s aim should be to make a mobile phone available to most number of people.

When we take into account the value of a mobile phone to a country’s GDP one ignores the other auxiliary services (content providers and handset manufacturers) and take just the wireless activities into consideration. If the total contribution of both i.e. the wireless activity and the auxiliary service is considered then-

India which has a wireless market penetration of 7%, has 0.4% direct impact from wireless operators and 0.3% indirect impact from auxiliary players, this shows auxiliary players contribute as much to the GDP as does the wireless operators and play as an important role as does the wireless activity.

A survey of 600 odd people in
China indicated that a usage of mobile helped them save their time by 6% which reflected in increased productivity which was a whopping $ 33 billion in 2005.

Apart from making the people aware of the fact that wireless services contributes significantly to the GDP, the increased productivity achieved could be used as a strategy to attract more people to use mobiles. A Mc Kinsey research said,”For India, a 10 percent increase in penetration would add $2.3 billion to the end-user surplus and a further $6.2 billion in operator revenues.”

So how do operators attract people??

• Lower the cost of owning and operating a phone
• Cutting of subscriptions is not an option as it influences the bottom line of operators.
• Innovative schemes to attract customers with lower income and retain that segment.
• Network sharing in areas where the population is not dense and service coverage isn’t strong.eg if one was to travel from Mumbai to the south it’s observed a BPL network changes from a Hutch to Airtel to Idea.

Thus the more the number of people attracted the better the performance of the country’s economy in that sector.

-Beena

We have to admit that the Telecom Sector in India wouldn’t have been the way it has been had it not been for a village boy who had a vision to make India a winner in the Telecom space and make the world look upto India - He is none other than our very own Minister of IT and Telecommunication Mr. Dayanidhi Maran!!! Son of late Mr. Murasoli Maran, a votary of liberalisation and anti license raj, he has been a voracious reader and takes keen interest in areas of current affairs, political science, social science, commerce, finance, global trade and information technology.Within a few years he has changed the face of the Telecom and IT industry in India. His lowest in the world call charges in the government owned telecom companies has been emulated by a majority of the private players also, making India the lowest cost drivers in Telecom sector in the world. With his further reduction in the ADC charges is expected to reduce the call charges further and is expected to further his resolve of taking Telecom to the rural areas. He himself has led a initiative to facilitate sharing of infrastructure by mobile operators in Delhi and Mumbai. This would facilitate sharing of passive and active infrastructure and network operating expenses. Similarly sharing of infrastructure in the rural areas is in plans to cut costs. Also to facilitate rural penetration of telephones a handset for Rs. 1000 is being planned.

To benchmark the Indian Telephony to world class standards the FDI ceiling in telecom services increased from 49 to 74%. License fee for NLD, ILD, IP-II, VSAT commercial and ISP with internet telephony (restricted) licences was reduced to 6% of AGR w.e.f. 1-1-2006. Entry fee for NLD reduced to Rs. 2.5 Crore from Rs. 100 Crore. Entry fee for ILD reduced to Rs. 2.5 Crore from Rs. 25 Crore. Lease line charges reduced to make the bandwidth available at competitive prices to facilitate growth in IT enabled services.

To further even the manufacturing in the Telecom sector he has Zero-Customs duty on all import of component and raw materials required for manufacturing telecom equipment including Custom duty on all 217 ITA-1 items to boost manufacturing sector. Mobile phone components exempted from 4% CVD. Mobile telephone removed from the ‘one- out- of- the six criteria’ for income tax return purpose, giving mobile the status a common man goods. Also looking at the zeal of the minister many of the world’s greatest firms like Ericsson, Motorola, Nokia, Flextronics, Motorola, Foxconn, Aspocomn, Microsoft, AMD etc have been attracted to invest in India.

He is said to be a visionary leader having a clear vision of where he wants to take the sector in the future. He expects to take the mobile coverage from 85% in 2007 to 90% in 2010 and the quantum of connections from 50 to 80 million. He has declared 2007 as the year of Broadband and plans to have speeds upto 1 mbps. Third Generations mobile services like 3G and WiMAX introductions are being planned soon. Introduction of futuristic IPTV and Mobile TV are also being planned in 2007. Atleast now you can expect to use many of the features that your smartphone had, but never used many of those!!!

So the next time you come across a situation where you felt that your life is made so easy because of the mobile phone, you know whom to thank.

Rocky Paul

(Source: http://www.dmaran.nic.in/)

The global telecom giant Vodafone will now have to wait a little longer to complete its acquisition of Hutch –Essar, as government approval of the deal now depends on whether the two minority shareholders namely Hutch-Essar managing director Asim Ghosh and Max India chairman Analjit Singh can prove that they are not acting as benami shareholders for Hutchison Telecom International. Foreign Investment Promotion Board approval is necessary in order to ascertain that the deal meets the FDI guidelines in the telecom sector.

Vodafone had last month picked up 67% stake in Hutchison –Essar India’s fourth biggest cellular firm for $11.1 billion in cash. Reliance Communications, Maxis and Essar were some of the other players bidding for the deal.

Vodafone has been facing the investor’s rage over sluggish growth in the European markets and massive write offs. It has been selling its minority stake in the Belgian, Japanese and Sweden markets. It is now sharpening its focus on emerging markets like India.  If approved, the deal will give Vodafone a pan India presence, 24 million customers and an over 16% market share. Also India is likely to beat Germany and US as Vodafone’s biggest market in terms of subscribers.

What can the Indian consumer expect out of the deal?

§         The Indian consumer can expect better and more variety of value added services as around the world Vodafone specializes in offering VAS like gaming, high speed audio/video download etc. Vodafone is believed to have spent around $27 billion on 3G licenses and would be waiting for the services in India too.

§         Low cost handsets: Vodafone had earlier this month announced a deal with Chinese handset maker ZTE to produce a range of low cost Vodafone branded phones starting at retail prices as low as Rs 850.

“Competition v/s Co-opetition” 

The regulator TRAI recently recommended that for better growth and penetration of the telecom service providers into the rural markets the players should look at constructive cooperation to have a better chance of survival in these areas.

Currently a major chunk of the total mobile subscriber base i.e. around 61% comes from the metros and the Category A circles.  The Category B and C circles still lag far behind.

This difference bears evidence in the fact that the urban tele-density is 31.4% and in rural areas it is a poor 19%.

Need for a Rural Focus

The telecom sector in the urban areas is experiencing tremendous competition amongst the major players which has led to the low revenue generation from these areas. As a result of this intense competition the Average Revenue Per User has been driven down to less than Rs.400 per month and this is one of the lowest in the in the world. This is also one of the reasons that telecom service providers need to reduce costs.  Hence advancing into the rural areas seems to be a very strong alternative in order to battle the competition and ensure profitability and future survival.  However the costs for doing so are quite prohibitive and deter the private players from venturing into these areas. 

Facing these challenges on of the recent strategies being suggested and which has also been recommended by TRAI is for the players to collaborate in terms of the infrastructure development.  The infrastructure sharing can basically happen at three levels; the first would be to have common cell sites, which includes the tower and the power plant. Setting up of such a BTS (Base Transceiver Station) generally costs around 2 crores. The network operators by having such kind of a sharing agreement have been able to bring down the costs of setting up a cell site by almost 40%.  There is also the factor of saving on time in terms of scouting for a site, negotiating on the price and the actual setting up of the site. 

The next level is that of sharing the antennae and the BTS equipment.  This equipment is basically concerned with the transmission of signals over the mobile networks.

Finally, the last level of sharing can be that of the sharing of the core networks which would help to reduce the cost of setting up the network.  The greater the degree of network sharing the greater would be the cost savings for the setting up of the network. 

Such a model of collaborative infrastructure development and network sharing has also been seen in countries like
Malaysia and
Australia where it has been successful to a great degree in optimizing the resources and thereby bringing about greater cost savings.

In
India, the regulatory authority TRAI has also come up with strong recommendations for the same in order to facilitate infrastructure development at a faster pace with a view to bringing about greater tele-density in the rural areas in the near future. The recent example of the infrastructure sharing agreement between Bharti Airtel and Hutch is a case in point and in this case it would be helping both the parties significantly in terms of widening their coverage areas.  Thus such co-optetition between players is one of the favourable trends in the telecom sector and would help in sustaining as well as accelerating the growth in this sector.

Priyanka Mehra

Well known grameen bank in Bangladesh (a micro finance institution) has worked for upliftment of poor people in rural
Bangladesh specially women. The bank has in a way worked to strengthen rural women by making them economically independent. The bank gives them credit in small amount and charges less interest. This has lead to creation of self employed women in rural
Bangladesh.

The idea of providing wider mobile phone access to rural areas was originally conceived by Iqbal Quadir, he was an investment banker from
United States. After leaving his job he worked with Grameen bank understanding its micro credit model. With the help of Grameen bank he envisioned a business model where a cell phone would serve as a source of income for the poor population of rural
Bangladesh. So with Grameen bank and Norwegian telephone company Telenor he established Grameen phone. Grameen Phone received a license for cellular phone operation in
Bangladesh from the Ministry of Posts and Telecommunications on November 28 1996. Grameen Phone started operations on March 26, 1997, the Independence Day in
Bangladesh. As Grameen bank gave micro credit to poor women from rural Bangladesh Grameen phone also gave more preference to rural women. Village Phone worked as an owner-operated GSM payphone whereby a borrower (mostly women) took a USD 200 loan from Grameen Bank to subscribe to Grameen Phone and is then trained on how to operate it and how to charge others to use it at a profit. As in September 2006 there are more than 255,000 Village Phones in operation in 55,000 villages around
Bangladesh.

This model is also replicated in other countries like Uganda and Rwanda in
Africa. It is important to understand this model because this model can also be replicated not only in rural areas to provide employment to poor rural women but also to poor women staying in urban areas and small towns. “Fortune at the Bottom of the Pyramid” talks about how in a country like
India where poor population is very large companies don’t come up with products specially designed for them. The idea of Grameen bank and Grameen phone not only gave employment to many poor women in
Bangladesh but also in a way actually penetrated rural areas and developed a customer base.

JAY SHAH