TELECOM REPORT PRESENT PAST FUTURE , INDIA  2013
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TELECOM REPORT PRESENT PAST FUTURE , INDIA  2013 TELECOM REPORT PRESENT PAST FUTURE , INDIA 2013 Document Transcript

  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 1 Indian Telecom Industry: Past Present Future Name: Kaustav Sarkar Course: PGDTM Roll no: 07
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 2 Contents Introduction……………………………………………………………………………………………. An overview of the transition of Indian telecom Industry………………………… A Recap of the Past…………………………………………………………………………………… Glimpses of the Present……………………………………………………………………………. The Platform Today…………………………………………………………………………………. A Foresight into Future……………………………………………………………………………… Conclusion…………………………………………………………………………………………………
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 3 Indian Telecom Industry: past, present and the future INTRODUCTION: The history of the Indian Telecom sector goes way back to 1851, when the first operational landlines were laid by The British Government in Calcutta. With independence, all foreign telecommunication companies were nationalized to form Post, Telephone and Telegraph, a monopoly run by the Government of India. From the early ages of telecommunication in India flagged off by the then ruling British Government by telegraph, to the monopoly services by the Government of India till late 80’s, to the present dynamic liberal market from 90’s onwards, the industry of telecommunication has gone through a sea change in India. Presently standing tall in the world map of telecommunication sector holding the 2nd largest subscriber database with a whopping 904.56 subscribers of both wire line and wireless, as of October 2013 report by TRAI(Telecom Regulatory Authority of India). India is also projected to have 330 to 370 million internet users forming 2nd largest internet population in the world. Looking forward to the advancement in the technology and open competitive market and investments from both home based and foreign investors the map of telecom sector is expected to cross the estimations and reach new heights of achievements in the world map in terms of subscriber base, teledensity, improved environment friendly technology, quality of service and variety of service at affordable rates. This report leads to an understanding of what the telecom industry was a few decades back to where it stands now and to where it is heading to. A timeline of major advancements though the years • 2013 - Roaming Free India • 2012 - National Telecom Policy launched • 2011 - Mobile Number Portability Launched • 2010 - 3G Auctioned • 2008 - new licenses were issued to operators in 2G on first come first serve basis • 2006 - Number Portability was proposed • 2005 - Measures to boost rural Teledensity. FDI limit was also increased from 49 to 74% • 2004 - Intra circle merger guidelines established. Broadband 2004 policy was formulated • 2003 - Calling party pay was implemented. Unified license regime was introduced. • 2002 - CDMA services launched. • 2000 - BSNL was established / Reduction of license fees / ILD services opened. • 1999 - National Telecom Policy • 1997 - TRAI established • 1994 - National Telecom Policy launched • 1992 - PVT companies allowed in VAS • 1985 - DOT(Department of Telecom) formed
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 4 AN OVERVIEW TRANSITION OF INDIAN TELECOM INDUSTRY The history of the Indian Telecom sector goes way back to 1851, when the first operational landlines were laid by The British Government in Calcutta. With independence, all foreign telecommunication companies were nationalized to form Post, Telephone and Telegraph, a monopoly run by the Government of India. The Indian Telecom Sector, like most other infrastructure sectors is controlled by the state. The Department of Telecommunications (DoT), reporting to the Ministry of Communications (MoC) was the key body for policy issues and regulation, apart from being a basic service provider to rest of country. By an act of Parliament, the Telecom Regulatory Authority of India (TRAI) was formed to be the regulatory agency in 1997. Ministry of Communication: All the operations of this sector come under the control of MoC. It is responsible for all major policy changes, planning, supervision, spectrum control, etc. Department of Telecommunications: DoT was formed in 1985 separating Department of Posts and Telecommunications into Department of Posts and Department of Telecommunications. Till 1986, it was the only telecom service provider in India. It played a role beyond service provider by acting as a policy maker, planner, developer as well as an implementing body. In spite of being profitable, non- corporate entity status ensured that it did not have to pay taxes. DoT depends on Government of India for its expansion plans and funding but its functions got diluted after formation of TRAI. Telecom Regulatory Authority of India: TRAI was founded in 1997 to act as an independent regulatory body supervising telecom development in India. This became important, as DoT was a regulator and a player as well. Founded by an Act of Parliament, the main functions of the body was to finalize toll rates and settle disputes between players. An independent regulator was critical at the present situation as the sector witnessed competition. The operations of this sector were determined as under the Indian Telegraph Act of 1885 – A document buried in the sands of time. The next major policy document, which was produced, was the National Telecom Policy of 1994, 1999, and 2012 a consequence of the ongoing process of liberalization. The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to resolve any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 5 A Recap of the Past: 1980’s - early 1990’s : Prior to liberalization phase Prior to the liberalization, the telecom sector in India was far from enticing. Appalling low teledensity, poor state of infrastructure, restrictive portfolio of services and a highly bureaucratic structure characterized by government monopoly had adverse effect. Telecommunications was not perceived as one of the key infrastructures for rapid economic development during the formative years of the Indian economy. Before liberalization, the public sector held a monopoly in provision of telecom services. The entire telecom services operation in the country was carried out by the Department of Telecommunication (DoT), a public sector entity established in 1985. It managed the planning, engineering, installation, maintenance, management, and operations of telecom services for the whole of India. In order to ease out its operations, two new public sector corporations viz. MTNL and VSNL were set up under the DoT in 1986. Thus, before the entry of the private players, the telecom services were provided by three public entities viz. DoT, MTNL and VSNL. While MTNL primarily looked after the operation of basic telephony services in Delhi and Mumbai, VSNL provided international telecom services in India. DoT looked after basic telephony operations in regions other than Delhi and Mumbai. Prior to liberalization the telecom services were broadly classified as domestic basic (which included basic telephony, telex and fax), domestic value-added services (VAS) which covered all other services such as paging, cellular, data services, VSAT and international basic and VAS. 1990’s -2000 : During the initial liberalization phase The low levels of investment in this sector had affected the quality, quantity and range of services provided. In 1990, Indian Telephone density per 100 persons was 0.6, 0.8 in 1994 with the world at 10 per 100, in 1998 it was 2.2 while the world average was 14.26 (World Telecommunication Development Report, ITU, 1999). Though this data represented the depressing picture of Indian telecom sector but there was strong contrast with emerging situation with respect to many developed and developing countries. Soon the Government of India (GoI) recognized the fast changing trend in the market, the effect of globalization and a need for a strong communication backbone for the country as a whole and to that with the rest of the world. Easier said than done, the government faced impediments on the grounds of limited resources, strident stance of service unions, and opposition to any policy liberalization. Introducing any new change was a daunting task to the incumbents of the government. Through these changing periods and the rapidly growing consumer need and the new demands emerging from an unleashing of market forces led to the formation of new National Telecom Policy (NTP) 1994.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 6 National Telecom Policy 1994: The first liberalization policy towards the telecom industry was made including the involvement of nationally registered private telecom operators with the following objectives in mind. Objectives:  Availability of telephone on demand as early as possible.  Achieve universal service covering all villages as early as possible at affordable prices.  World standard Quality of Service, meeting disputes attention to customer interference  India emerges as a major manufacturing base and major exporter of telecom equipment.  Participation of private operator in Cellular Mobile Telephone Services(CMTS), Value Added Service (VAS), except in International Long Distance (ILD) and National Long Distance (NLD) services. Even though the NTP 1994 did not go far enough on liberalization and the expectations it raised but it certainly shredded off the century old Indian Telegraph Act and opened up the market once and for all drawing attention from private investors of home and abroad. However, only about half of nearly 600,000 villages stood covered by March 1999. And many of these telephones in rural areas failed to work properly for technology reasons. The STD/ISD PCOs were franchised, and provided opportunity for self-employment to unemployed youth, ex-servicemen and economically disadvantaged segments of the society. Apart from that the roll out of private operators were delayed due to controversies surrounding the bidding and selection process for award of licenses. Thus the complete immaterialization of the promised objectives and lack of transparency and clarity in formulated and regulated norms led to another reform in the policy to form the National Telecom Policy 1999. The National Telecom Policy 1999 Overcoming the flaws of the NTP 1994, mainly due to actual revenues realized falling short of projections and operators being unable to fund large projects that would completely change the face of Indian telecom in the global map, NTP 1999 were laid out with the following objectives. Main features of NTP 1999 were:  Strengthening of the Regulator.  Opening of NLD and ILD services to private sectors.  License to private telecom operators on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged.  Direct interconnectivity and sharing of network.  Strengthen research and development.  Achieve efficiency and transparency in spectrum management  Protect the defence & security interests of the country.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 7 Glimpses of the Present 2000-2012 : The Era of Wireless and Internet Data Service The powerful private operators substantially increased their share in the market and imposed a strong foothold on to the telecom map of India dominating over that of the government body. The changes in the policy made in NTP 1999 followed by the policies of Foreign Direct Investment (FDI) holding up to 49% share of a telecom venture, to that of infrastructure sharing helped roll out new operators into the market in a rapid pace. The advent of the modern technology, in the mobile arena, collaboration of telecom companies with that of mobile vendor companies, participation of global telecom giants led to a highly competitive market. Gradually this led to price wars with tariffs getting lowered to one of the cheapest in the world and over a dozen competitors in a single operating circle threatened the very sustenance and existence of private operators, whether big or small. Moreover, adding to the abysmal scenario, the ending period of the decade was completely shook of its image in the global map due to the 2G scam that wiped of the operators of their feet. Telecommunication sector plays an increasingly important role in contributing to the Gross Domestic Product (GDP) of the country, generating revenue for government and creating employment. The advents of the mobile technology with wireless service providers and manufacturers have contributed to 5.3% of the GDP in 2012, creating 730,000 jobs and an additional 2 million jobs when points of sale and distributors are included. From 2001 to 2011, the total numbers of telephone subscribers had grown at a Compounded Annual Growth Rate (CAGR) of 35% in comparison to 9% in 1980s and 22% in 1990s. The increase in teledensity has mainly driven by increase in mobile phones in which the urban teledensity accounts for nearly 4.4 times the growth than that of rural sectors of which most of the contribution came from wireless services, while wire line services accounted for only 3.4% of total subscriber base. The number of internet subscribers had increased but the numbers of data subscribers exceeded the former. Though Digital Subscriber Line (DSL) stood out the favorite technology to access the internet through personal computers but dongles and data Subscriber Identity Module (SIM) cards and mobile data services have also contributed largely. Owing to the very competitive tariff and being one of the lowest mobile tariffs in the world, prepaid and blended rates showed a decline from 25.3% and 21.5% respectively, between the years 2007-2010. In contrast post paid tariffs showed a decline of only 8.23%. Mobile voice usage showed that Indians talk more on the phone than the rest of the world accounting for 50% of the revenue from calls and 8.3% from Short Message Service (SMS) for the operators. The telecom sector had received 8.2% of total inward FDI, between 2000-2011, most of which had gone to the cellular mobile segment. The telecom sector contribution had increased from 0.96 in 200-01 to 3.78 in 2009-2010. Thus the increase in mobile telephony contributed a considerable amount to GDP leaving a positive impact. The tax revenues generated, further added to the contribution. The 3G spectrum auctions of 2010 along with bid values for broadband wireless access licenses culminated in more than Rs 100,000 crore to the government accounting for 1% of India’s overall GDP.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 8 Major segments influencing telecom sector from 2000-2012: Telephone Subscription: The number of total telephone subscribers in India increased from 28.53 million in March 2000 to 943.49 million in February 2012. Wireless subscriptions increased from 1.88 million in March 2000 to 911.57 million in February 2012 and wire line subscriptions increased from 26.65 million in March 2000 to 32.33 million in February 2012. By 2010, India had already secured the 2nd position among 222 countries in terms of subscribers, accounting for 12% of world’s telecom subscribers. Total telephone subscribers in India have increased at a CAGR of 32 per cent in 2000–10 against the world average growth rate of 17.34 per cent. However, India’s teledensity, 64, is still lower compared to the world average of 108 (Teledensity as on February 2012 is 78.1). This indicated low penetration of telephones in the rural areas.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 9 Tariff: Towards the end of 2008 when the average tariff in the world stood at $10.1, India’s average tariff was $1.6 per month. It was the second lowest tariff after Bangladesh. This resulted from the multiple players in the market, government regulation policies and low purchasing power. Apart from that the voice growth is also declining with more access to data services. Effective Price per minute declining sharply across India is driving down average revenue per user. Annual Voice Growth Rate reduced to 9% in 2012.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 10 Internet: By 2010 India ranked the fourth most internet user, accounting for 4.56% of internet users in the world, with CAGR of 32.27% compared to 17.46% of the world. However, internet user per 100 subscribers stood substantially low in case of India at 7.5 compared to world at 30.48. Out of the 91.8 million people using Internet in India, there were only 18.7 million fixed Internet subscribers in 2010. India ranked 7th highest out of 214 countries in this category in 2010. The country accounted for 3.54 per cent of the world’s total fixed Internet subscribers in 2010. The number of fixed internet subscribers per 100 inhabitants in 2010 was 1.53 as compared to the world figure of 7.73. Teledensity: With the increase in the number of telecom subscriptions, the total teledensity has increased from 2.81 in 2000 to 78.10 on February 2012, a CAGR of 31.9 per cent. This is mainly driven by the increase in wireless density. Wireline density was higher than wireless till 2004 and then declined after peaking in 2005. During the period March 2000–February 2012, wireline density increased at the CAGR of 0.19 per cent. Wireless density increased at the CAGR of 64.65 per cent during the period March 2000 to February 2012.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 11 Foreign Direct Investment (FDI): FDI in telecom sector India grew at a Compound Annual Growth Rate (CAGR) of 24.8%, in between 2000-01 to 2011-12. The growth rate peaked initially in 2001 onwards then dropped significantly through the following years to reach heights again around 2005, dropped again and touched peaks around 2008. The worldwide recession during 2008-10 still saw FDI inflow but at reduced rate due to uncertainty in world market in terms of inflation infrastructure and implementation bottlenecks. Most of the FDI was directed towards wireless cellular serving amounting to Rs 6,635 crore during January to March, 2011. Large share of revenue had attracted these foreign investments but the urban market saturation led the Indian based operators for outflow of FDI in developing countries of Africa. Thus the attraction of FDI was not on a sustained basis rather it fluctuated and depended largely on the world economy even though India’s economy stood on better grounds.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 12 In 2008, the government allowed more operators to come to the telecom market in a first come first serve basis. The then minister for communications & IT from 2007 to 2009, A Raja was found guilty of giving undue advantages to some telecom operators with undercharging of licenses. Eventually he was found guilty and the Comptroller Auditor General (CAG) of India stated a difference of Rs 1766.45 billion on the value collected and the value law mandated to be collected. This led to the cancellation of 122 licenses including some of the well established operators like TATA, Idea, and Sistema (MTS) etc in February 2012 by the Supreme Court. In 2011, Time magazine listed the scam at number two on their "Top 10 Abuses of Power" list (just behind the Watergate scandal). India was lagging behind the developed and the developing countries in terms of 3G roll out. America had 3G facilities from 2003 while China from 2008. India was late to embrace the technology, and only in 2010, it led out auctions for the allocation of licenses for operators. 9 operators participated of which 7 won, generating huge revenues for the government as the final bids stood at price nearly 5 to 7 times than that of the base price. Though in its initial growth stage the 3G was not living up to its expectations in terms of generating revenue but in the later part of 2012 onwards it gradually started to grow and since then has been growing at a considerable pace. Major Constraints in the Growth of Telecom Sector: Spectrum Management: About 60% of the spectrum of relevance to operators and internationally functioning are still not open for use to operators in India. Moreover the overcharged spectrum prices serve a major road block in advancement of investment. Universal Service Obligation Fund (USOF): Since rural sectors generate fewer revenues private operators show less interest for investment. In order to invest more in rural development, government enforced 5% of operating revenue of telecom operators to be invested in rural sector. This percentage is considerably higher than rest of the world developed and developing countries like 2% for Columbia, 0.8% for Canada, 2% for Pakistan. This comes as a financial burden to operators. The USOF has been poorly utilized, with only 34 percent of funds allocated between 2007 and 2012 on an aggregated basis. Though the penetrations in rural sectors have increased, internet backbone, optical fiber layout, broadband connectivity has fallen behind targets. Thus they need reforms. Radio Frequency Exposure Limits: Owing to pressure from social activists, public anxiety, Government of India made telecom operators in 2012, to reduce the transmission power of their towers to one tenth of the existing standards defined by World Health Organization (WHO) and International Commission on Non-Ionizing Radiation Protection (ICNIRP). Though, no definite results have been found through researches carried out by WHO, on the fact that radiation from mobile towers below defined standards causes adverse health effects but still the government insists. This has led to adverse effects on operations and coverage for operators. 
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 13 The Platform Today: According to the quarterly reports of October, 2013, released by Telecom Regulatory Authority of India (TRAI), the present market status on subscription stands as follows from the table below. It is evident from the table and the chart the role of private operators in the present scenario of Indian Telecom Sector.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 14 The year 2013 has been dominated mostly by the advent of the smart phones. The smart phone manufacturers like Apple, Samsung, LG, Nokia and the application stores of Apple, Google Android have been the influential factors in changing market dynamics. Though, fixed line internet users have grown, but their contribution has not been impressive and far from comparison to that of the mobile data access. The smart phones, tablets, dongles industry has been a dominant force in terms of the market we knew and the market we see today. All of the investments from inside and outside the nation have been into transforming the existing infrastructure, service module, operational systems and methodologies. India is fast catching up with the change in the globe and expected to reach new benchmarks. Mobile Number Portability: The new ongoing trend of being able to opt for the operator of choice without having to change the phone number has been an eye opening for the operators. Mobile Number Portability requests increased from 102.49 million subscribers at the end of September, 2013 to 104.79 million at the end of October 2013. In the month of October 2013 alone 2.30 million requests have been made for MNP. This has seen one of the greatest churn of customers from existing operators. This has reduced the encumbrances of customers to change mobile numbers in search of better facility operators and forwarding new number to all concerned people. On the other hand this brought down the customer retention charge experienced by the operators to only 3 months from previous 6 months.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 15 The last decade of telecommunication left a remarkable impact on the nation. In the macro level of socioeconomic impact it left behind its footprints in terms of contribution towards India’s overall GDP, job creation, and revenue collection through different licensing, taxation and auctions. On the other hand, in the micro level, it led a positive impact on agriculture, fisheries, small and medium enterprises (SMEs). It also affected the gender and the youth of the nation. The present hold our pathway to the future. The implementation of applications of technology in different sectors, convergence of different sectors into one single integrated system that separates the plethora of services by one touch on the hand held deice is an outstanding achievement. The nearing end of the past decade, around 2010 onwards saw the banking sector, financial sector, health, education .etc, join hands with the upcoming technology trend to integrate these sectors and connect them through the help of mobile services making life for people and the organizations involved, to be simpler, faster, easier and better. Some of these applications of technology mentioned as follows: 1. m-Agriculture: Mobile agriculture helps farmers increase their income through location and market information. The core challenges of supply chain inefficiencies, productivity loss, poor market and price discovery and access to credit, savings and insurance facilities. This has eliminated the middle, provided the farmers with real time information of market demand and price. The discrepancies between the supply and the demand gets narrowed leading to les wastage and efficient utilization of farm products. Collaboration of agricultural bodies and telecom operators has led this provision for farmers. One such example of another information distribution model is IFFCO’s Kisan Sanchar Limited (IKSL) a joint venture between the Indian Farmers Fertilizer Cooperative Ltd (IFFCO), India’s largest farmers’ co-operative, and Airtel, along with rural telephony experts Star Global Resources. IKSL distributes “Green SIM” cards to its members and other farmers, who receive five free recorded voice messages a day covering local and national agricultural topics. Through an Agri Helpline, they can also get answers from agricultural experts on all their farming questions. Presently, the IKSL Green SIM service has 3 million users. These activities are expected to spread and penetrate further deep into the rural sector which accounts for 70 % percent of the Indian population and improve their life style. 2. m-Health: India is struggling to meet its healthcare challenges. These include expanding access to healthcare, reducing child and infant mortality and improving healthcare quality, all within increasingly tight budgets. Since existing resources and methods will not suffice, the pressure is increasing to find affordable but high-quality solutions. Health care is potentially one area where telecom can make a huge impact. Over $5 trillion is spent on providing healthcare worldwide and 10-20% can be saved by providing telemedicine through broadband. Telemedicine, information related to health care issues, medical advice, monitoring, diagnosis, training personnel can be reached out to the farthest remote areas by video service through broadband services. The major problem in India
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 16 lies not with the infrastructure as it is looked after by Indian Space Research Organization (ISRO) but the broadband connectivity and the full time availability of trained professional. Aircel joined hands with Apollo Hospitals providing health care services to both rural and urban sectors. Airtel’s “Mediphone”, Tata’s Sparsh, Vodafone’s “e-Mamta”, have served and are serving the masses addressing maternity, infant care and death, communicable diseases, adolescence and family planning related issues. This trend is expected to impact more in the future though demand of m-Health solution from workers and the people still remain low, the operators face difficulty with funding and government policies, financially sustainable and scalable business models are yet to emerge. Government support will play a key role in future. 3. m-Education: On an average it has been found Indian people spend 28% of their annual income on public schools and if they were to provide private and international level education to their children it would account for 40-165 % of their annual income. To address to the high dropout rate and poor student performance in the rural sector Vodafone joined with Pratham Education Foundation forming “Learning with Vodafone” solutions. This combines software with mobile technology empowering teachers to improve the classroom experience. Rich graphical and multi-media content and interactive teaching methods help students improve their performance by exploring and learning via the internet in an interactive, engaging manner. The program includes a school management system that tracks attendance and grades also. Another Initiative by an IT entrepreneur Sugata Mitra with the concept of “hole in the wall”, that leaves a computer with internet facilities and educational games interactive programs on various subjects of science arts is left with a whole in the wall. Underprivileged uneducated children out of interest start learning from it from zero knowledge base and have found to be equally intelligent enough to educate by their own selves and with this computer increasing literacy by about 50-70%. A group of grandmothers from across the world also provide English learning and speaking capabilities to these children through this “hole in the wall” initiative. Tata DOCOMO’s Tutor on Mobile service provides affordable access to education. Subscribers can obtain access to learning content on a wide range subjects, including school curricula, job interview preparation guides and hobbies. Content is sourced from about 75 providers, including other subscribers, and delivered via multiple channels, including WAP, SMS, IVRS and video. 4. m-Financing: Basic financial services access continues to be an unrealized dream for millions of citizen, even for rural and remote areas. Banks find it difficult to operate so many small accounts and micro transaction profitably. Transparency of these transactions also remains an issue. The internet technology has been able to bridge the gap for banking sector. The concept of M-Pesa by Vodafone has been a recent landmark. The improved technology provides provision augmentation in Indian in future for using the mobile handset similar to a credit card through certain software applications as being
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 17 implemented in Japan by NTT DOCOMO. However, as per the 2011 census, 41.3% of the Indian population - or 513 million people – live in households without access to formal financial services. Despite this potential, in India today, there are still only 20 million registered mobile financial service users (RBI, 2012), but only a small proportion of these use mobile payments and transfer services on a regular basis. Through Airtel Money’s PPI service (the “Express Account”), users can make utility payments for electricity, water and cooking gas, send remittances for medical and education services, pay for citizen services and shop at local grocery stores without carrying a card or cash or having to worry about losing them. Mobile financial services are more affordable for low income people than services offered at a bank branch, with average costs for mobile financial transactions about 20 US cents, compared to US $1.45 at branches. Other such examples of live mobile money services include Aircel ICICI Bank Mobile Money and m- Rupee (launched by Tata), Idea MyCash initiative, set up in association with Axis Bank. With about 67 percent of retail spending in India carried out in cash, mobile money services could potentially replace cash transactions and enable micro transactions to proliferate, enabling millions to store, send and spend money at low transaction costs. n just one year (2011 to 2012), mobile financial services transaction volumes have doubled, with the value of those transactions tripling. 5. Entertainment and Social Behavior: Enhanced internet data access, social networking, video calling, video download, online gaming have taken social entertainment to a new level of digitization from the existing trends of e-mail, short message service, instant messaging, web browsing, educational information. Mobile users are accessing content related to various services like ABC- Astrology, Bollywood, and Cricket. The emerging growth of IPTV, voice over IP (VoIP) services, video on demand, mobile TV will restructure the way people communicate.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 18 A Foresight into Future The Government of India with the formulation of new National Telecom Policy 2012 laid the foundation for the future trends in telecom to be explored. The present statistics available gives a foresight into what the future of the telecom sector could be like. With many a promised initiatives investments and advancements been held back with the existing government policy, recent amendment have open the doors for the operators to unleash the reins that pulled them back. As already it has been evident from the present ongoing trend that data services would soon be taking over that of voice revenues but still it would take time since the teledensity increase and rural penetration would see contribution to voice revenues unlike the saturated urban sector. Types of Operators: Besides the telecom operators the mobile vendor companies like that of Apple and Google have been putting up a tough fight with their advanced technology. In future the telecom sector would broadly be classified into two sorts of players, one The SMART (Services Management Application Relationship Technology) players like that of Apple Google Samsung, while on the other hand the LEAN (Low cost Enablers for Agnostic Networks) players like the existing telecom operators). The more application driven market status at present, leads the experts to believe that the SMART players would have an edge over that of the LEAN players. The LEAN players would then be either left with the options to set up their own ecosystem of application software based programs and compete with the large existing markets of Apple and Google Android applications stores or just serve these SMART players with providing the basic broadband connectivity, good quality service and maintenance for these services offered by the SMART players, thus serving as wholesalers. Consumers: The consumer behavior would also see a dramatic change with new competition along the value chain. The slow but increasing literacy rate would see more people embracing to these technology advancements. The consumers could be broadly divided into three categories of the digital adventurers (the youth, who are more prone to self improvisation and experimenting with available assets at hand), the digital metics (referring generally to the self content class of people who are more or less satisfied with the basic services) and the digital citizens (the upper tier class of people who are tech savvy, technology driven and look for services beyond the basics provided by the operators). Platforms: The existing platforms and the emerging platforms of access technologies will undergo a change along with up gradation from the previous infrastructure. Platforms like application download stores, wi- max, value added services (vas), long term evolution (LTE), and multiple path diversity will be of concern. Application download platforms will become more open and would see competition from emerging players along with the existing ones like Apple iStore and Google Android. Indian app market to grow 5x to INR 2,000 crore by
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 19 2016. Though, the unavailability of proper and efficient last mile connectivity has led to the development of wi-max, but its increasing cost and tough competition from the existing networks of 2G, 3G, and Digital Subscriber Line (DSL). The cost of maintenance, modem would restrict its popularity. Value added services (vas) would still enjoy popularity but the dynamic environment varying from market to market, ever changing customer need, the software and infrastructure to provide and maintain such service would increase cost for operators and would generate a marginal contribution in overall revenue. Long term Evolution (LTE) is gradually creeping into the Indian market, but the available technology, necessary investments proper funding, public acceptance and tariff structure will play a significant role in its popularization. The operators are left with the question of whether to roll out LTE services in a slow pace like 3G or to roll out as fast as possible since the later seems to be more profitable owing to operator’s point of view. Convergence: The upcoming years would see the present ongoing convergence of different sectors integrate to provide unified services to customers. Convergence could be on the grounds of:  Device Convergence: multiradio terminals, samrtphones, music devices, cameras etc.  Service and Operational Convergence: voice over IP(VoIP), digital content messaging, push to talk, video telephony and sharing etc.  Network Convergence: fixed mobile, multiple accesses, common core service machinery etc.  Industry Convergence: telecom media /Tv digital devices. By 2016 India is expected to have 8.7 million IPTV subscribers according to Indian Digital TV Forecast report. Converging Trends:  Big Data: large amount of everyday data in zita bytes generated across the world.  Rise of Social Media: face book, twitter, that allows organizations to track the consumer trend and change according to likes and dislikes.  Cloud Computing: Accessing data from anywhere anytime any place any content.  Embedded Systems: Like mp3 players, camera, and telephone all in one integrated system and lowering price of device chips.  Dominance of Mobility: Going beyond fixed access technologies to accessing data content on the move rather than sitting in front of a machine in a confined room. Examples of samrtphones and tablets, dongles, wi fi, wi max etc.  Multiple Path Diversity: Alternative communication path through different routes terrestrial, under water submarine cable etc.  Augmented Reality: Live view of physical real world environment whose elements are enhanced by computer generated sensory inputs such as sounds graphics video etc. Example like the sixth sense technology, Google Glasses.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 20 Statistical forecasting of the future
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 21 Options for Operators in Future: Operators need to be ready for the fundamental shift in the market by deciding which markets to address and which business model best suit them. Operators can evolve into utility operators or they can play further up the value chain. Moving up the value chain brings about higher rewards and the ability to deal with market “black swans” but also carries higher levels of risk. Integrated leading operators working across multiple markets are best positioned for value chain expansion thanks to their larger customer bases and cross-platform synergies. Financially, remaining a non-optimized operator is not an option. Generally, the most financially rewarding - and riskiest - is being a 2.0 operator. Four potential business models: There are four business model scenarios which operators can adopt in recent future: 1. “Non-optimized” operator: Offers commoditized connectivity products 2. “Optimized utility” operator: Forgoes the resale market, focuses on building best-of-breed Infrastructure and secures long-term wholesale contracts. An optimized utility operator needs a solid network efficiency strategy to effectively deal with data explosion with a best-of-breed cost structure for differentiation. Cost efficiencies can be achieved with a focus on technology mix and roadmap optimization (macro/micro/pico/femto cell Network planning) or traffic management strategies (off-loading, connection management, dynamic Quality of Service, etc). 3. “Basic” operator: Moving beyond connectivity with expansion into some new products and services, avoiding new, yet-to-develop markets. This will bring about higher reward from a cost and revenue optimization perspective. In the short-term, either option, if executed properly, may be sufficient to respond to the “known threats” in the short to medium term. In the long term though, there are “black swans,” whose type and magnitude of threat may not be apparent at this point in time. Just as smart phones revolutionized the telecoms industry in a matter of three to four years, it is likely these disrupters will be hardware or technology led. 4. “2.0” operator: Transforms itself and expands its portfolio to include most advanced products and services, exploring markets under formation such as M2M, sophisticated m-advertising, applications, etc. These operators either would not play at the customer level (i.e. avoid market risk as much as possible) as in the case of the “Optimized utility” or would have a much wider and deeper customer relationship coupled with a diversified product portfolio.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 22 CONCLUSION The dynamic Indian market has always been a challenge for the telecom operators. Operating within the restricted government policies and meeting the regulated norms and still drawing out profits from them has been a phenomenal task. Indian market has been a close follower of the developed markets but the twist lies in the business model that operated successfully in developed countries did not fit in well here. Therefore there was a scope and a need of constant improvisation in this sector. There are three major challenges in this sector: (i) digital divide, (ii) development of the telecommunications manufacturing sector, and (iii) growth of broadband sector. India has the second largest and fastest growing mobile telephone market in the world. Power and energy consumption for network operations is by far the most significant contributor of carbon emissions in the telecom industry. However, large parts of the country are power deficient and with increasing coverage of mobiles in off-grid areas, network operations will increasingly have to rely on alternative sources of energy until the rural electrification process is complete. The new concept of Green Telecom needs to be implemented not in a concentrated segmented market but throughout the nation. The telecom equipment manufacturing sector in India has contributed far beyond consideration in comparison to the imports of equipments. Thus, this sector needs focus from the government and the private manufacturers to boost up revenues and provide a considerable section of the revenue instead of relying on foreign imports. This sector thus promises an open opportunity in the telecom market. The digital divide between the urban and rural sector and teledensity issues need to be addressed. The reforms and policies should look to the spectrum management issues with utmost importance and maintain a cordial relationship with the interested investors and private operators to see the sector growing in terms of the interest of the people of India. The reform to provide roaming free India has been one of the major advancements and highly appreciable move but providing separate licenses for separate services by one single operator need to be addressed. Penetration of the broadband connectivity to the rural sectors that still remains an unfulfilled dream for the government need to be attended with serious reinforcement to keep up with the changing times and contribute to the emerging India. Private operators would need to come up with sustainable business model in this ever changing need of the market. The yet to be completely explored rural sector holds the potential key success factors in the future and government initiatives, funding, collaborations would then see the light of the day. The Indian telecom sector has learned lessons from the past, implemented in the recent past; the present holds the key to the future it would create. Thus to create the future foreseen, it needs to act on behalf of the investors, private operators and the government initiatives.
  • Indian Telecom Industry : past present and future IISWBM PGDTM Page 23 References:  http://trai.gov.in/  http://www.dot.gov.in/  Avendus Report-India’s Mobile Internet  Telecom Sector in India : A Decadal Profile (TRAI)  GSMA - The Mobile Economy India 2013  ideasmakemarket.com- Aug Entry6 Analysis of the Indian Telecommunication Industry : The Changing Forces  http://www.dnb.co.in/IndianTelecomIndustry/industrystructure.asp  The Impact of Policy and Regulatory Decisions on Telecom Growth in India By R.U.S. Prasad July 2008  TELECOM POLICY REFORM IN INDIA by Harsha Vardhana Singh, Anita Soni, and Rajat Kathuria  McKinsey internet report : India 2012