It is refreshing to see the course of action that you have been taking to put India and Indian Economy back on track. Knowing that your time is precious, i would keep this short and to the point. I write this letter with a four pointer action plan as the road-map for the recovery of telecom sector in India. While i would avoid playing cliche, the background to all this is how telecom/ broadband penetration is directly associated with GDP acceleration and inclusive growth of the economy. Out of the very many reports that substantiate this fact, the IAMAI ICRIER report on Internet’s impact on the Indian economy suggests a $17B p.a boost to Indian economy basis broadband basis the fact that 10% increment in broadband penetration can increase GDP by 1.08%.It is believed that if the TRAI broadband roadmap 2012 targets are met, it would generate $87B to Indian economy within 2012-14 time-frame.
The policy paralysis from 2011-2014 coupled with disputes on spectrum and spectrum-pricing, retrospective taxes has arrested the growth of telecom sector – and now with a stable governance building up for next 5 years, it is expected that you would be instrumental in resolving not only the immediate issues but provide a long term vision of growth of this sector. With due respect sir, may i beg to put a few pointers to the long term needs and hence the roadmap of the industry.
The right horse and the right cart
1. While spectrum related regulations need a cobweb cleaning – it is important that the roapmap takes into account the right spectrum for telecommunications. By right spectrum, i would mean the 450 MHz and 700MHzDD bands to be put in pace. With 4G in place, if the right spectrum support is provided to the ISPs/ operators, it will give a huge boost to providing high speed broadband not only to urban centres but also to rural areas. The economic effects of putting the right spectrum and the right technology together in the long runs outweighs any immediate hassles that need to be undertaken for setting this prescription in place.
Dont put the cart before the horse
2. Growth and Governance would need to walk side by side. One cannot follow the other. While governance would need to make monies and admissibly so, retrospective actions, arbitration and taxes would need to be side stepped. A very just economic model for spectrum auctions could involve – Low CAPEX (auction rates) and higher OPEX (Revenue shares) with operators.
A few horses for inclusive development through broadband
3. A phased project scoping of telecommunication projects with critical KPIs – which could be based on social parameters, such as education, healthcare, community care powered by broadband could also be a very apt in driving inclusive and sustained growth – could also lead to interesting results. Such a project would need to be driven from the PMO in terms of a large scale integration with ministries, states and operators
The race winning horse cannot have too many jockeys
4. Last but not the least, there has to be one apex body on Telecom, suitably represented by Telcos, Telecom infra companies, other telecom eco-system players, ministries, consulting bodies and the officials. We would need to do away with too many such bodies (including the now dissolved EGOM) and too many voices and opinions (often contradicting) – and need one apex body for the industry.
I am sure, with your wisdom and perspective, many and most of these points would be in your agenda. While there are other priorities that you may right fully have, this four pointer could be a good starting point for cleaning up the Telecom muddle in the country.
(Views expressed in this blog are solely mine with no affinity or bias towards anyone)
If your believe that Broadband penetration is the messiah-like solution or the panacea to a lot of 3rd world nation issues and problems, there is good news and there is bad news. The good news is that you haven’t been thinking alone – the International Telecommunications Union has firm evidence of the positive impact of (higher) broadband penetration on the economic well being and growth of nations.
Expostulating the (positive) impact of broadband on economy of the state, the ITU states that-
First, broadband exhibits a higher contribution to economic growth in countries that have a higher adoption of the technology (this could be labelled the “critical mass” or “return to scale” theory”).
Second, broadband has a stronger productivity impact in sectors with high transaction costs, such as financial services, or high labour intensity, such as tourism and lodging.
Third, in less developed regions, as postulated in economic theory, broadband enables the adoption of more efficient business processes and leads to capital-labour substitution and, therefore loss of jobs (this could be labelled the “productivity shock theory”).
Fourth, the impact of broadband on small and medium enterprises takes longer to materialize due to the need to restructure the firms’ processes and labour organization in order to gain from adopting the technology (this is called “accumulation of intangible capital”).
Finally, the economic impact of broadband is higher when promotion of the technology is combined with stimulus of innovative businesses that are tied to new applications. In other words, the impact of broadband is neither automatic nor homogeneous across the economic system.
So much so for the obvious – but then whats the bad news: Just that broadband by itself is not the end all prescription to everything – the effect of broadband is not homogeneous across all industry groups and broadband’s positives are possibly more applicable to industries classified as under Information, Communication and Entertainment. There would have to be some bridge building for industries, which are little off-centred from the direct broadband benefits – and again, these pose interesting bundle of opportunities to businesses and entrepreneurs.
The importance of broadband penetration as a GDP driver isnt lost on anyone – especially in a state like India – and while the internet connectivity in India hovers at the 10% level – there’s quite simply so much more that is to be done to enhance the state of broadband in India.
A recent report from Broadband Commission For Digital Development, a United Nations set-up, launched by the International Telecommunication Union (ITU) and the United Nations Educational states That broadband in India has already generated nearly 9 million direct and indirect jobs, while a 1% increase in broadband penetration has potential to add US$2.7 bn or 0.11% to Indian GDP in 2015.
India ranks a distant 122nd worldwide in Fixed Broadband Penetration per 100 residents.Third world countries like Tonga and Kyrgyzstan are ahead of India
India also ranks a far-off 106th in the Mobile Broadband Penetration across the world per 100 residents.
In terms of households with Internet for developing countries, India ranks better at 75.
Percentage of Individuals using the Internet across the world, India is at 145 and among developing countries is at 98.
In 2011, India adopted the National Optical Fiber Network policy. The results are not obvious in the current time-frame.
India is also one of the first countries to launch LTE (4G telephony). This could accelerate service delivery in sectors ranging from health to public infrastructure, and thus drive a significant structural shift in consumer behaviour over the next few years. However from the current context India’s Broadband does cast an inadequate and be-littling picture.
Total number of net adds for Q4, 2012 accounted 140 million.
In terms of new subs/net adds, China leads the fray with 30 mln subs, followed by India (11 mln), Bangladesh (9mln), Indonesia (8 mln) and Nigeria (5mln).
Mobile subs have grown around 9% y-o-y and 2% q-o-q
In Q4, mobile broadband subscriptions1 grew ~125 million to 1.5 billion, reflecting a 50% year-on-year increase.
There is continued strong momentum for smartphone uptake in all regions. Approximately 40 percent of all mobile phones sold during 2012 were smartphones, compared to around 30 percent for the full year 2011. Only around 15-20 percent of the worldwide installed base of mobile phone subscriptions uses smartphones, which means that there is considerable room for
By the end of Q4, 2012, Global mobile penetration reached 89% totalling 6.3bln connections- However, actual number of subs is around 4.4 bln, since many users have multiple connections
GSM/GPRS/EDGE subscriptions grew ~44 million and WCDMA/HSPA grew ~70 million. Together these technologies represent ~80 percent of total net additions. LTE subscriptions grew from 14 million to 57 million. GSM/GPRS/EDGE + WCDMA/HSPA + LTE accounted for 90% of the global mobile net adds.
World wide data traffic continues a healthy uptrend and shows significant and stable growth. Data traffic has doubled Q-o-Q Q4, 2012 versus Q4, 2011 with a 28% quarterly growth between Q3, 2012 and Q4, 2012.There are variations in data consumption patterns across geographies and maturity of markets.
Source of data and Infographic: Ericsson Mobility
This post is the second of a two part series on the scenario around LTE network deployments in India.Read First post here
Aircel and Bharti Airtel are believed to be targeting the enterprise segment. While the enterprise segment are the biggest in terms of data usage, the success of LTE will depend on the fact that there has to be a compelling reason for large enterprises to move to LTE network.Initial traction on Data services will depend on how well the vertical applications are engineered for key industry verticals. Verticals like healthcare and banking, which have to be always-on are likely to be the early adopters of LTE, provided applications are developed around them. In case this happens, it might be possible to expect a much higher ARPU from LTE. Having said that, going by the 3G experience, it is quite clear that price is going to be a critical factor (if not the deciding factor!) for the uptake of BWA services.
Further to this, the government needs to put in place a telecom policy that could be instrumental in regulatory guidance and support which would impact faster roll-outs of the services at reasonable tariffs. Unlike 3G auction mechanism, where spectrum licences were bought by operators had extremely high bids leaving precious little CAPEX for network roll outs and resulting in high and unreasonable tariffs (for recovery of investment), government needs to play a more inclusive role in successful 4G LTE roll outs. In the 3G auction case, the only winner was the government who made a handsome lot through the bidding process. This time, the government could keep the bids controlled, lease the spectrum, sponsor the networks infrastructure (or cost share) and foster network infrastructure sharing arrangements between the service providers. This would leave a pool for the Telecom sector where investments could be made into value added ancillary services which would promote usage of the network.
Besides enterprise segments, some operators might also be looking at the rural market initially for LTE services. Experts believe that it will be sometime before Indian operators expect returns from this new service. They might have made huge investments, but right now it is unclear as to how long the investment will take to make profit.
This post is the first of a two part series on the scenario around LTE network deployments in India.
Ten years of trailblazing performances and more, the Indian Telecom story needs a new super hero. This is necessitated by the demands of the bandwidth starved data hungry customers are placing an inordinate amount of pressure on the spectrum. The Indian government has been instrumental and forward planning to meet the challenges of increased data bandwidths. That is where 4G LTE services hold out a promise to provide super speed technology on high bandwidth spectrum.
Despite the initial success in field trials, a key question facing the operators is the financial viability and the unclear business models surrounding this emerging technology. Though the industry remains gung-ho about the potential of LTE TDD, it is imperative that the industry evaluates certain critical factors to decide on the business case of the technology. Of the 160 million broadband connections expected by the end of 2014, a good percentage is to come from LTE services which is expected to drive 60 per cent of next level mobile broadband growth.
However, post the lukewarm response to 3G, experts believe that operators need to have a viable business model, clear go-to-market strategy and a marketing campaign designed to target specific segments, niches and user segments of the society to make a business case from the soon-to-be launched Long Term Evolution Time Division Duplex (LTE TDD) technology. There has to be a proper strategy in place to make sure that all investment-related decisions (for LTE TDD) are being taken after due consideration. Operators are yet to make 3G a true business case in India, and if proper targets are not set, many operators may find it challenging to survive.
Contrarian to the earlier view, analysts also believe, what works in favor of operators in India is the relative lukewarm response to 3G, which leaves a lot of scope for LTE to make headway. However, on the flip-side, discouraging numbers for 3G uptake is likely to have some impact on LTE roll-out as well. If 3G has been unable to set the mobile broadband segment on fire in the country, what is it that LTE would offer which will make customers embrace it.
Mission of NTP 2011:- To offer Broadband on Demand to all Indians and develop state of Art network special focus on rural broadband.
Vision of NTP 2011:- To provide secure, reliable and high speed broadband to all.
1) To increase the rural density to 60% by 2017 from 35%. And ultimately to 100% by 2020.
2) Provide high speed Broadband to village panchayat through the high speed fibre by 2014.
One Country, one license regime:-
1) Intra Circle MNP to be allowed.
2) Review of the roaming charges, with the ultimate aim of removing them.
1) To provide 500Mhz by 2020, 300Mhz by 2017 and further 200Mhz by 2020.
2) To allow pooling, Sharing and Trading (later on) of Spectrum .
3) Separate spectrum Act to be enacted for the management of spectrum.
4) Spectrum to be de-linked from license. And the price to be determined through market driven process.
5) Periodic Audit of spectrum to make sure that it is utilised efficiently.
6) Roadmap for spectrum every 5 years to ensure the future availability.
1) Affordable broadband on demand to 175mn by 2017 and 600mn by 2020, with minimum speed of 2Mbps.
2) Will seek TRAI’s recommendation on new licenses, migration to new licenses and exit policy.
3) To regulate VAS, in order to provide the converged services.
4) Change in the definition of broadband from current speed of 256Kbps to 512Kbps and finally to 2Mbps.
5) Delinking license from the usage of service- network provider is not necessary the service provider.
6) Promote the domestic manufactured equipments upto 80% of total requirement.
Inspired by the success of Telecom sector and the advent of mobility, the Government of India is relentlessly pushing for better services, reach and depth of telecom services as a economy support, enabler and growth engine for India. The policy makers think of Telecom as a medium to reach out to the far and inaccessible corners of a rather large state.
A couple of new initiatives are worth mentioning in this regard.
1. The Ministry of Human Resource development (mHRD) along with a UK based device maker DataWind have produced the cheapest tablet/ computing device in the world. Called Aakash (meaning Sky In Hindi), the 7” tablet combines Android 2.2 Froyo, a 336 MHz processor, a 800*480 WVGA resistive screen, 256 MB RAM and 2GB flash memory along with 32GB expandable memory with a 2100 mAH battery in what could be best termed as Frugal Innovation targeting the bottom of the period. The product is priced at an unbelievable $38 and the government is subsiding a lot of it to make it available to colleges and universities.
Not only does this mark the entry of a computing devices to Sec C,D and below consumers, it also opens up a new avenue for internet penetration. It is also expected to spawn off a hundred apps and other value added services
2. To support services through wireless, the government has also at least five new frequency bands, including the 700 Mhz band, for telecom services (mobile broadband). The 700MHz digital dividend was earlier being used for analogue TV signals. The other major spectrum allocation is the use of S-band has been opened up for broadband services. This band, falling between 2.5 Ghz and 2.6 Ghz, is being currently used exclusively by INSAT systems for satellite based services including meteorological data dissemination. If the Plan is implemented then telecom companies could get access to about 200 Mhz spectrum more, which could boost broadband coverage. However, the NFAP is only a broad guideline outlining the future roadmap for spectrum usage in line with international standards. The actual implementation of this Plan depends upon inter-ministerial negotiations.
The spectrum auction for broadband wireless access (BWA) services fetched the Government of India an unprecedented Rs.38.543.61 crores (USD 8.56 billion) after 16 days and 117 rounds of auction. 11 companies were a part of the auction. The pan India licence price stood at Rs. 12,847.77 crore ( USD 2.85 billion), which was 634% (6 times) the base price set by GoI at Rs.1,750 crore. Unlike the 3G event, Infotel Broadband won a pan India license, while Aircel bagged 7 slots, Tikona got 5 slots, Qualcomm and Bharti 4 each and Augere 1. The others failed to pick up any stakes in the BWA circles. The total revenue of the government from sale of spectrum for both 3G and BWA touched over Rs.1.06 lakh crore. Reliance Communication, Tata Communications, Vodafone Essar, Spice,and Idea missed picking up even a single circle.
BWA spectrum is essentially for rolling out WiMAX services enabling handheld devices and laptops to access Internet.
GoI has been pushing for more widespread access to broadband usage in the country which is at a paltry 9% of the population currently. McKinsey study projected that a country GDP improves by 0.6% for every 10% increase in penetration levels of Broadband.
1. The high prices (above expectations) paid in both auctions, which were too rich for several major cellular operators who dropped out of the second BWA auction, ease the strain on the country’s public sector deficit for this fiscal year.
2. At the same time they exacerbate the financial difficulties of the two state-owned operators BSNL and MTNL which although automatically awarded both 3G and BWA spectrum are obliged to pay the same amounts for their spectrum as the winning bidders.
3. Furthermore, the outcomes of these auctions introduce additional players into India’s mobile market, whose supply structure, absent consolidation, is already unsustainable with an uneconomically large number of competitors.
4. The real impact and value of allocating this new spectrum for mobile broadband will depend upon sensible consolidation between operators – which will require a change in M&A regulations – and the establishment of roaming arrangements between operators.
5. The combination of very high spectrum prices (e.g. $1.34 per MHz/pop for 20 MHz of BWA spectrum at 2.3GHz in Delhi) will intensify the pressure that winning bidders will exert on the prices offered by equipment vendors for network rollouts to minimize capex, while the need for intercircle roaming agreements will favor technologies that are widely supported.
6. Qualcomm which won BWA spectrum in 4 circles – including Delhi and Mumbai – will be looking for roaming agreements with operators in other circles that deploy either WCDMA 3G (Qualcomm is the pioneering supplier of 3G/LTE chipsets) and/or TD-LTE networks.
7. Infotel Broadband is being acquired by Reliance Industries Ltd. This thus enables Mukesh Ambani who was barred under a family non-compete agreement from entering the telecom sector to re-enter and establish himself in the telecom sector.
8. Qualcomm which won BWA spectrum in 4 circles – including Delhi and Mumbai – will be looking for roaming agreements with operators in other circles that deploy either WCDMA 3G (Qualcomm is the pioneering supplier of 3G/LTE chipsets) and/or TD-LTE networks.
9. Infotel’s (Reliance) choice of technology will be critical in terms of introduction of TD-LTE. It will be influenced by Infotel’s ability to offer roaming as long as its network does not have nationwide coverage, as well as by the pricing of alternative technologies, and even the availability of international roaming arrangements (since target customers for mobile broadband customers will include the most internationally active of Indian customers).
In a few earlier posts, i had lamented the lack of data traffic focus in TELCOs in India. Given the tariff war, hyper-competition and the near advent of 3G and the necessity to augment voice incomes, TELCOs in India are changing their focus very ostensibly from Voice to Data Traffic. Ad Mob’s mobile ad requests for India is a surrogate measure but then it carries home the point that internet on Mobile is here and here to stay for good.
Over the last 24 months, Internet requests from Mobiles have registered a 220% CAGR in India. The growth percentage is 3X i.e 660% on a four month basis in 2010. Over the last 2 quarters, Indian Telecom Operators have been trying to make a point with data services and the data tarriffs have now breached the Rs.100 per month mark, which is a critical pricing threshold for mass acceptance. With the coming of 3G and Broadband, this number will become self sustaining given the following factors:
1. The high quality content and delivery systems that 3G will provide will increase traffic volumes
2. Increased traffic volumes will bring in economies of scale reducing prices and making Internet more accessible to more people.
3. The strong eco-system that is beginning to take shape with Telcos, OEMs, ODMs, Developers and Consumers will further drive compelling content that will drive data traffic.
The internet and data habit is quickly becoming mainstream and the TELCOs and other VAS players are pleasantly surprised and are hoping for an extended run into this source of revenues.
The growth registered in the last 4 months in India was also forecasted study by Cisco released in February 2010 projected that India has the highest country mobile data traffic growth rate of any country, with a CAGR of 222% from 2009 to 2014. The study says that annual global mobile data traffic will reach 3.6 exabytes per month or an annual run rate of 40 exabytes by 2014. Such a figure equates to a 39-fold increase from 2009 to 2014, or a CAGR of 108%. If AdMob is to be believed, these numbers are happening already. The same survey also concludes that by 2014, more than 400 million of the world’s Internet users will access the network solely through a mobile connection.
The rapid consumer adoption of smart phones, netbooks, e-readers and Web-ready video cameras as well as machine-to-machine applications like eHealth monitoring and asset-tracking systems, is continuing to place unprecedented demands on mobile networks. In spite of the economic downturn, the demand for mobile services has remained high, posing both challenges and opportunities for service providers worldwide.
I shall be exploring the opportunities and challenges that the proliferation of Mobile Internet will be bringing to the Indian context in my next blog.