The Indian Telecommunication Industry

Transcription

1 The Indian Telecommunication Industry Submitted to: Dr. Faheem Hussain Submitted by: Binny K. Babu, Nithya P.C. Shivalaxmi Arumugham Computer Science Major

2 Table of Contents Introduction Telecom and ICT regulations/acts in India o The Indian Telegraph Act, 1885 o The Indian Wireless telegraphy Act, 1933, Act XVII of 1933 o Telecom Regulatory Authority of India (TRAI) Act 1997 Communication Convergence Bill 2001 o The Information Technology Act, 2000 o Indian Telegraph (Amendment) Rules, 2004 o Right to Information Act, 2005 Universal Service and the Status of 3A s in Indian Telecom Industry Telephone and Internet Connectivity o Penetration rate o Major Market players Emerging Technologies o 3G technologies: o Mobile Number Portability o WiMAX Expected Changes in the Telecommunication Industry of India Challenges/Problems identified Recommendations Conclusion Works Cited

3 1 Introduction India is an emerging Southeast Asian economy with a population of 1.15 billion people. Despite of its population, it has a fast growing telecommunication industry, which contributes 8.5% to the Nation s GDP (Amrit). As per the data by March 2010, the Indian telecommunication is the third largest in the world, with a total network of 621 million network connections. Moreover, the growth of the industry in the last few years is at the rate of 45%. The country has undergone a lot of changes and development in the past and has turned out to be one among the hubs of telecommunication industry. Liberalization of the market policies by the Indian Government, the fair regulatory framework which offers affordable telecom services to its customers all over the country, and the large number of consumer make the Indian telecommunication industry successful (Department of Telecommunications). This paper explores the present status of Indian Telecommunication Industry in terms of its growth in both telecom and internet sectors. Also, the paper briefly talks about the issues with regulatory policies and acts and identifies the challenges faced by the industry and hence concludes by giving some recommendations for improvements. Telecom and ICT regulations/acts in India The Indian Telegraph Act, 1885 The Indian Telegraph Act is the first act regarding telegraph services in India. This act defined different terms related to telegraph and postal services. Most importantly it defined Universal service and established Universal Service Obligation fund (USOF) in order to attain the goals of universal service concept (Ministry of Communication and Information Technology, 1885). The Indian Wireless telegraphy Act, 1933, Act XVII of 1933 This act was meant to manage the ownership of wireless telegraphy equipment. It prohibits the possession of unlicensed telegraph equipment. Also, it defined a couple of technical terms regarding wireless communication (Ministry of Communication and Information Technology, 1993).

4 2 Telecom Regulatory Authority of India (TRAI) Act 1997 Telecom Regulatory Authority of India (TRAI) Act 1997 was for establishing the Indian Telecom Regulatory Authority and gives them power to regulate the telecom services and to analyze and solve the issues in the growth of telecommunication sector of India (Ministry of Communication and Information Technology, 1997). Communication Convergence Bill 2001: Communication Convergence Bill 2001 was to improve different modes of communication such as telecommunication, and multimedia, for setting up an independent commission in order to regulate all communication systems, creation of an Appellate Tribunal and to examine the issues related with all of the above (Ministry of Communication and Information Technology, 2001). The Information Technology Act, 2000 Main goal of the The Information Technology Act, 2000 was to legitimize the transactions which include the storage and exchange of electronic data and electronic commerce. It enforces the usage of electronic data storage devices as alternatives for paper based methods of storing information in government offices (Ministry of Communication and Information Technology, 2000). Indian Telegraph (Amendment) Rules, 2004 The rule after the 522 of the Indian Telegraph Rules, 1951 is modified to have the Indian Telegraph (Amendment) Rules, It included some additional details about Universal Service Obligation Fund. It defined terms such as administrator of universal service obligation fund, universal service provider, universal service obligation and village public telephone. It briefly talked about the criteria for the selection of universal service providers and it is by a bidding process among the eligible operators. Afore mentioned eligible operators includes Basic Service Operators, Cellular Mobile Service Providers and Unified Access Services Licensees or any others mentioned by the Central Government. The act says that the

5 3 funds must be provided to the universal service providers in intervals (Ministry of Communication and Information Technology, 2004). Right to Information Act, 2005 This act allows any citizen in India to have the right to information about any government department. In order to have access to information, the person has to submit an application to the Central Public Information Officer (CPIO). If the person is not satisfied with the information provided, he/she can file a petition against the CPIO within 30 days of receiving the reply (Ministry of Communication and Information Technology). In addition to above mentioned acts and rules, there are certain important regulations in the telecom industry of India. The major and recent ones are for ensuring interconnection among the service providers (The Telecommunication (broadcasting and cable services) Interconnection regulations, 2010) (Telecom Regulatory Authority of India, 2009, 2010 ), regulating broadband connectivity and mobile number portability (Telecommunication Mobile Number Portability (First and Second amendments) Regulations) (Telecom Regulatory Authority of India, 2010). Universal Service and the Status of 3A s in Indian Telecom Industry The telephone amendment act of 2002 has defined universal service as the service, which can provide basic telegraph services to citizens of India in affordable and reasonable rates in urban as well as rural areas. Later, in 2004, Indian Telegraph (Amendment) Rules appended the mobile phone services and broadband connectivity to universal service in order to get support for their expansion in connectivity in rural and distant areas of the country. USOF (Universal Service Obligation Fund) is meant for meeting the objectives of Universal Service in the country. Universal Service Levy (USL) is responsible for raising the resources for achieving the goals of universal service fund and it is at 5% of the AGR (Adjusted Gross revenue) of the telecom providers all over the country. This is charged as a license fee which is between 6% to 10% means that every person engaged in telephone conversation is contributing to the Universal Service Fund. Also, there are loans and subsidies for the service providers from the Central

6 4 Government to accomplish the objectives of universal service (Ministry of Communication and Information Technology, 2002). Apart from the general idea of how 3A s (Availability, Affordability and Accessibility) should work, India has its own obligations that they think is necessary for attaining the goal universal service (Eric Lie, 2007). Programs by USO Fund Public as well as private telecom operators are in charge for implementing the USO programs. Their activities mainly include: a. Establishing and maintaining VPTs (Village Public Telephone) b. Substituting the Village Public telephones working on Multi Access Radio Relay Technology. c. Provision of more telephones in rural areas in order to have at least one VPT for every revenue village. d. Introducing RDELs (household telephones) in the rural areas distant areas of the country. e. Broadband connectivity in rural areas and government offices in rural areas. f. Introducing new and advanced technologies and infrastructure in rural areas in order to amplify the growth of telecommunication sector (Ministry of Communication and Information Technology, 2002). Status of implementation of the USO programs (3A) Village Public Telephones: As per the agreements with six Private Basic Service Operators(PBOS) like M/s BSNL, RIL (Reliance), TTL & TTL (MH), Bharti (Airtel), HFCL and Shyam Telecom, they are the ones who is responsible for the maintenance and implementation of the Village Public Telephones(VPTs) in certain revenue villages according to the Census Also, as per the Census of 2001, 96% of the revenue villages already have the VPTs (Ministry of Communication and Information Technology).

7 5 New VPTs: There are 62,433 uncovered villages which needed to have the VPT facility and BSNL will be providing the service with the help of subsidies from USOF according the agreement with USOF in Replacement of MARR based VPTs: Since the most of the VTPS (about 1, 86,872 of them) were working on Multi Access Radio Relay (MARR) technology, which are not working properly, will be replaced by advanced technology equipment in with the help of subsidies from USOF. In addition to the above mentioned services, DoT is planning to provide and have already shown little progress in RCP (Rural Community phone) and RDELs (Rural Household Direct Exchange Lines (Ministry of Communication and Information Technology). Support to develop Infrastructure: There is a scheme from USOF to establish the infrastructure for wireless or mobile services in the rural and remote areas of 27 states where there are no such services by providing subsidies to the eligible service providers. According to the agreement, three service providers will be sharing the infrastructure for it. Broadband in rural areas: Individual users and Government offices will be benefitted from the 8, 61, 459 wire-line Broadband connections by 2014 in the rural areas of the country. BSNL will be the responsible service provider for this (Ministry of Communication and Information Technology). Telephone and Internet Connectivity Telephone and Internet Penetration The number of telephone subscribers, including mobile and landline, in India is million at the end of August 2010 with a growth rate of 2.61% (in July 2010, the number of telephone subscribers was million). Among the million telephone subscribers, 670 million people use mobile phones, which contribute to 58.2% of the total population. The teledensity, which is defined as the ration of phone per population, of India has reached in 2010(TELECOM REGULATORY AUTHORITY OF INDIA, 2010). India plays a very important role in Mobile market. In Asian Pacific market, India stands next to China and

8 6 together India and China contribute 1.04 billion of mobile customers to 4.15 billion mobile customers of the world (Cellular News, 2009). However, in comparison to all the technological facilities India has, it has a very low Internet penetration rate. As per the statistics of ITU, there are only 81 million internet users in India which is expected to rise up to 237 million in 2015 with an internet penetration rate of 6.9% (The Hindu, 2010) (Internet World Stats., 2010). The majority of the internet users in India are from the large cities like Delhi, Bangalore, Mumbai and Chennai, and the people who came into the cities from the rural area of the country. Figure 1 shows the penetration rate and the number of users (in million) in India from the year 2001 to 2010 except the year The 4 th column shows the rate of internet penetration in different years (Internet World Stats., 2010). In the year 2006 and 2007, there was a decrease in the number of internet users, which has resulted in less penetration rate. The decrease might be because of the economic turmoil that happened in these years. In the graph, the number of internet users has skewed to the year 2001, which shows that there is an increase in the number of internet users along with the increase in penetration rate. Figure 1. Internet Penetration and the Number of User-India

9 7 Market Player in Telecom Sector The giant in the Indian telecom market is Bharti Airtel which has % of market share followed by Reliance with 17.2%. Vodafone holds the 3 rd highest market share of 16.97% and Tata has 11.47% of the market share. Other major players in the market are Bharat Sanchar Nigam Limited (BSNL) and Idea with 11.34% and 10.85% of the telecom industry market share respectively (TELECOM REGULATORY AUTHORITY OF INDIA, 2010). Figure 2 represents the Market share of Indian Service Providers in the year Service Providers Market Share (%) Bharti Reliance 17.2 Vodafone Tata BSNL Idea Aircel 6.7 Unitech 1.36 Sistema 0.91 MTNL 0.79 Videocon 0.55 Loop 0.44 Stel 0.23 HFCL 0.14 Etisalat 0.01 Figure 2: Market Share of the Telephone Service Providers(August 2010) (TELECOM REGULATORY AUTHORITY OF INDIA, 2010).

10 8 Market players in ICT industry The dominant player in Indian IT market is Bharat Sanchar Nigam Limited (BSNL) which owns a market share of 56.76% followed by MTNL that has about 14.29%. Bharti Airtel holds 8.07% of the market share which is close to the market share of Reliance Communication Infra with 7.56%. Hathway Cable and Datacome Pvt. Ltd hold 1.94% of the share and the rest 11% belongs to a couple of other companies that are not as famous as the other major internet service providers. Figure 3 shows the market share of different Internet service providers in India in the month of March in Figure 3: Market Share of Internet Service Providers in India

11 9 India is still in the process of growing as the biggest telecommunication industry in South Asia. As a part of this growth, the country has already started replacing the existing technologies with new technologies. The next section Emerging Technologies in India lists out the different technologies that came into play in this decade. Emerging Technologies in India 3G technologies 3G (third generation) technologies possess greater advancements over the wireless technologies. They are mostly found in mobile phones connected to internet and provides voice and video data calls, upload and downloading files and browse the net, and other broadband applications like audio-video conferencing, e-commerce services, fax services, e-learning at a faster rate(about.com, 2010). Comparing to the 2G technology, 3G provides higher downloading capacity of 3 Mbps speed. 3G also has initiated the network operators and handset providers to come up with new services and advanced mobile phones with new multimedia applications to promote 3G technologies in 2007 (NaukriHub, 2010). With a fast internet, it is able to provide high quality video conferencing and advanced audio and video stream and web browsing. Although the 2G technology was very common in India, there was a huge gap between the tele density in the urban and rural areas. Within a population of 1.08 in 2004, there were only 14 phones per 100 people. This number is comparatively higher in urban areas (teledensity is 31%) than in rural (only 2%). Research finds that when 3G is used as a modem or a data card can bridge the gap (India Telecom News, 2010). In order to provide 3G service in India, the service providers need to get license. Some telecom service providers such as Bharti Airtel, Vodafone, Reliance, Tata and Idea were being issued with 3G licenses (Mahima, 2010). Among all the providers of 3G, BSNL and MTNL, pioneers of 3G providers and Government Corporation in the country, have 1.5 million of connections around India. Therefore, these providers are forecasted to cover 25% of the market of 3G whereas Airtel, Reliance Communications and Vodafone together would cover 43% of the whole market. Marketing of 3G is very interesting in a way that the carriers provide better offers for the schools and educational institutions. Recently, BSNL has introduced a new plan called BSNL

12 10 Yuva Rajasthan 3G Plan, which offers cheapest voice and video calls with the speed of 3.6 Mbps along with many free national SMS. More importantly, they offer video calls with the rate of 10, 30 and 70 paisa per minute (Sanjay Bafna, 2010). The study conducted by The Nielsen Company pointed out some main plans that will help Indian 3G market to succeed. Similar to the US plan in the 3G penetration, India needs to provide better user experience with their carrier s service and suitable handsets. This brings the users to experience 3G which certainly let consumers know how it would be like to use 3G. In order to make it more sustainable, the service should have consumer relevant services. Mobile Number Portability Few years back, India started to think about the new technology for changing mobile operators without changing the number. This number portability is first established in Haryana and expected to reach the all over the country by January The cost for mobile number porting will be INR 19. Policies are very essential to open up company s willingness and promote competition in the Mobile Number Portability market. Customers do not need to get stuck with monotonous services because of the need to change the number. It will certainly make an impact on the telecom provides by creating a fear of losing customers which would lead to better services. This would be a situation where the telecom providers/carriers become more aware of their services to their customers in order to not to lose them (Sanjay Bafna, WiMAX WiMAX, which is Worldwide Interoperability for Microwave Access, provides access to broadband internet thorough a wireless connection in a large area. There are million subscribers in the country. India has 368 member companies in the WIMAX forum, which also includes 136 service providers. VOIP VoIP(Voice over Internet Protocol) helps people to make low call rates anywhere in the world to mobiles or land phones via internet. This voip requires high speed internet. It breaks the voice to many digital packets to transfer voice over an efficient pathway of internet. With India s developing networking outside of the country, voip would be a great way to make communication easier and simple. During August 2009, The Department of Telecom (DoT) gave

13 11 permission to VoIP in India but the guidelines were not mentioned at that time. The internet service providers that need the licenses for VoIP must agree to share 9% of their annual revenue to the government. Later, the telecom providers during 2009 either wired or wireless service providers acquired their licenses for telephony internet. Expected Changes in the Telecommunication Industry of India billion Mobile phone subscribers by 2013Expected to reach a size of US$ 78.3 billion by 2012 with a growth rate of 26% and to generate job for about 10 million people. The low cost of broadband will help in the growth of broadband in India (Internet World Stats., 2010). Indian IT industry is taking initiatives in giving out computers below 10,000 Rs. One of the trade groups, GSMA Ltd has predicted that by 2014 India s will have 150 million 3G connections (NaukriHub, 2010). Challenges /Problems identified One of the major problems that are identified in the Indian telecommunication market is less growth rate of internet users compared to the number of mobile phone subscribers. One of the major reasons behind this trend is the growth people who use net from their mobile phones not but not from computers BSNL holds more than half of the internet market share, which may result them evolving as a monopoly in the coming years (Bruce Einhorn, 2007). We doubt whether BSNL would turn out to the AT & T in India. Though the service providers offer handsome offers for their customers, a lot of times these offers are unmet. Furthermore, there are other infrastructure constraints such as low-quality cables that do not support broad band which has resulted in the low broadband penetration rate in India. Talking about the policies and regulations India has adopted in the telecommunication industry, the reforms have happened over a long period of time. With the introduction of new technologies, the consumer s demand for better services and applications leaves a question of how much the Indian service providers can introduce in the telecommunication market and who all can afford it. One of the other challenges is the lack of infrastructure in the semi rural and rural areas of the country which makes the life of the service providers miserable.

14 12 Spectrum management is one of the huge problems in the Indian telecommunication industry. Because of limited availability of spectrum, some of the companies cannot enter into the Indian market that prevents healthy competition in the Indian telecommunication market. Recommendations According to the reports, the rural tele-density is only 5% where as the urban tele-density is 50%. This gap should be bridged by providing technological infrastructure in the rural parts of the country. India should focus on cellular games and technological innovations like internet protocol services for the growth of the industry in the coming days (Frost and Sullivan, 2009). Indian customers should be provided with adequate choices of mobile phones rather than bundling the mobile phones with a few options of applications and the telephone service providers should provide quality services to its customers. The mobile phone companies should not sell their customer information to third parties. The market should be opened so that all the service providers will get to provide services to the consumers, resulting in fair competition among service providers. In India, a large amount money, about 5.5 billion dollars in the USO Fund remained unutilized. The reason for this is the inflexible rules by the government regarding usage of funds. However, the government is planning to provide broadband connections within two years to about 2.5 lakh panchayats throughout the country (Kalyan Parbat, 2010). In order to attain this, rules of USO Fund are being modified constantly to increase the rural penetration of telephone services. In addition to that, government should have a control over the usage of subsidies provided to the service providers. The government should make sure that the subsidies are being used properly otherwise people will not get the benefits. The system of managing USO Fund should be transparent, flexible, autonomic and responsible in order to accomplish tele-density of 100% in India (Moni, 2010)

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