Indian Telecom Sector

Introduction
The telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.

Status of Telecom Sector

The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest in the world. The sector is growing at a speed of 45% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom

services have been opened for private participation. The Government has taken following main initiatives for the growth of the Telecom Sector: Liberalization
The process of liberalization in the country began in the right earnest with the announcement of the New Economic Policy in July 1991. Telecom equipment manufacturing was delicensed in 1991 and value added services were declared open to the private sector in 1992, following which radio paging, cellular mobile and other value added services were opened gradually to the private sector. This has resulted in large number of manufacturing units been set up in the country. As a result most of the equipment used in telecom area is being manufactured within the country. A major breakthrough was the clear enunciation of the government intention of liberalizing the telecom sector in the National Telecom Policy resolution of 13th May 1994.

National Telecom Policy 1994

In 1994, the Government announced the National Telecom Policy which defined certain important objectives, including availability of telephone on demand, provision of world class services at reasonable prices, improving Indias competitiveness in global market and promoting exports, attractive FDI and stimulating domestic investment, ensuring Indias emergence as major manufacturing / export base of telecom equipment and universal availability of basic telecom services to all villages. It also announced a series of specific targets to be achieved by 1997

Telecom Regulatory Authority of India (TRAI)

The entry of private service providers brought with it the inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government. TRAIs mission is to create and nurture conditions for growth of telecommunications in the country in manner and at a pace, which will enable India to play a leading role in emerging global information society. One of the main objectives of TRAI is to provide a fair and transparent policy environment, which promotes a level playing field and facilitates fair competition. In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market. The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service as well as governance of the Authority. 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 adjudicate 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.

New Telecom Policy 1999

The most important milestone and instrument of telecom reforms in India is the New Telecom Policy 1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was approved on 26th March 1999, to become effective from 1st April 1999. Key features of the NTP 99 include: Strengthening of Regulator. National long distance services opened to private operators. International Long Distance Services opened to private sectors. Private telecom operators licensed on a revenue sharing basis, plus a one-time entry fee. Resolution of problems of existing operators envisaged. . Direct interconnectivity and sharing of network with other telecom operators within the service area was permitted. Department of Telecommunication Services (DTS) corporatised in 2000. Spectrum Management made transparent and more efficient

Broadband Policy 2004

Recognizing the potential of ubiquitous Broadband service in growth of GDP and enhancement in quality of life through societal applications including tele-education, tele-medicine, e-governance, entertainment as well as employment generation by way of high-speed access to information and web based communication; Government has announced Broadband Policy in October 2004. The main emphasis is on the creation of infrastructure through various technologies that can contribute to the growth of broadband services. These technologies include optical fibre, Asymmetric Digital Subscriber Lines (ADSL), cable TV network; DTH etc. Broadband connectivity has been defined as Always On with the minimum speed of 256 kbps. It is estimated that the number of broadband subscribers would be 20 million by 2010. With a view to encourage Broadband Connectivity, both outdoor and indoor usage of low power Wi-Fi and Wi-Max systems in 2.4 GHz-2.4835 GHz band has been delicensed. The use of low power indoor systems in 5.15-5.35 GHz and 5.725-5.875 GHz bands has also been delicensed in January 05. The SACFA/WPC clearance has been simplified. The setting up of National Internet Exchange of India (NIXI) would enable bringing down the international bandwidth cost substantially, thus making the broadband connectivity more affordable. The prime consideration guiding the Policy includes affordability and reliability of Broadband services, incentives for creation of additional infrastructure, employment opportunities, induction of latest technologies, national security and brings in competitive environment so as to reduce regulatory interventions. By this new policy, the Government intends to make available transponder capacity for VSAT services at competitive rates after taking into consideration the security requirements. The service providers permitted to enter into franchisee agreement with cable TV network operators. However, the Licensee shall be responsible for compliance of the terms and conditions of the licence. Further in the case of DTH services, the service providers permitted to provide Receive-Only-Internet Service. The role of other facilitators such as electricity authorities, Departments of ITs of various State Governments, Departments of Local Self Governments, Panchayats, Departments of Health and Family Welfare, Departments of Education is very important to carry the advantage of broadband services to the users particularly in rural areas. .

Broadband Policy 2004

The International Long Distance tariff from US$ 1.36 per minute in 2000 to US$ 0.16 per minute in 2009 for USA, Canada & UK. 2009. The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per month The mobile tariff for local calls has reduced from US$0.36 per minute in 1999 to US$ 0.009 - US$ 0.04 per minute in

Investment Opportunities and Incentives

An attractive trade and investment policy and lucrative incentives for foreign collaborations have made India one of the worlds most attractive markets for the telecom equipment suppliers and service providers.

No industrial license required for setting up manufacturing units for telecom equipment. 100% Foreign Direct Investment (FDI) is allowed through automatic route for manufacturing of telecom equipments.

Payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route.

Foreign equity of 74% (49 % under automatic route) permitted for telecom services - basic, cellular mobile, paging, value added services, NLD, ILD, ISPs - and global mobile personal communications by satellite.

Full repatriability of dividend income and capital invested in the telecom sector.

Network Expansion
The telecom sector has shown robust growth during the past few years. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The following table shows the growth trend of telecom sector from last five years: The number of telephones has increased from 54.63 million as on 31.03.2003 to 621.28 million as on 31.03.2010. Wireless subscribers increased from 13.3 million as on 31.03.2003 to 584.32 million as on 31.03.2010. Whereas, the fixed line subscribers decreased from 41.33 million in 31.03.2003 to 36.95 million in 31.03.2010. The broadband subscribers grew from a meager 0.18 million to 8.76 million as on 31.03.2010.

Opportunities
India offers an unprecedented opportunity for telecom service operators, infrastructure vendors, manufacturers and associated services companies. A host of factors are contributing to enlarged opportunities for growth and investment in telecom sector: An expanding Indian economy with increased focus on the services sector Population mix moving favorably towards a younger age profile Urbanization with increasing incomes

Investors can look to capture the gains of the Indian telecom boom and diversify their operations outside developed economies that are marked by saturated telecom markets and lower GDP growth rates.

Research & Development

India has proven its dominance as a technology solution provider. Efforts are being continuously made to develop affordable technology for masses, as also comprehensive security infrastructure for telecom network. Research is on for the preparation of tested infrastructure for enabling interoperability in Next Generation Network. It is expected that the telecom equipment R & D shall be doubled by 2010 from present level of 15%. Modern technologies inductions are being promoted. Pilot projects on the existing and emerging technologies have been undertaken including WiMax, 3G etc. Emphasis is being given to technologies

having potential to improve rural connectivity. Also to beef up R&D infrastructure in the telecom sector and bridge the digital divide, cellular operators, top academic institutes and the Government of India together set up the Telecom Centres of Excellence (COEs). The main objectives of the COEs are as follows: Achieve Telecom Vision 2010 that stipulates a definite growth model and take it beyond. Secure Information Infrastructure that is vital for countrys security. Capacity Building through Knowledge for a sustained growth. Support Planned Predictive Growth for stability. Reduce Rural Urban Digital Divide to reach out to masses. Utilize available talent pool and create environment for innovation. Management of National Information Infrastructure (NII) during Disaster Cater the requirement of South East Asia as Regional Telecom Leader

Targets Set By the Government

1. Network expansion 800 million connections by the year 2012.

2. Rural telephony . 200 million rural subscribers by 2012 Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010.

3. Broadband . 20 million Broadband connections by 2010 Broadband with minimum speed of 1 mbps. Broadband coverage for all secondary & higher secondary schools and public health care centres by the end of year 2010. . Broadband coverage for all Grampanchayats by the year 2010 Broadband on demand is every village by 2012

4. Manufacturing Making India a hub for telecom manufacturing by facilitating more and more telecom specific SEZs. Quadrupling production in 2010. Achieving exports of 10 billion during 11th Five year plan.

5. Research & Development . Indian Telecommunications at a glance (As on 31st March 2010) Pre-eminence of India as a technology solution provider. Comprehensive security infrastructure for telecom network. Tested infrastructure for enabling interoperability in Next Generation Network.

Rank in world in network size Teledensity (per hundred populations) Telephone connection (In million) Fixed Mobile Total Village Public Telephones inhabited (Out of 5,93,601 uncovered villages) Foreign Direct Investment (in million) (from April 2000 till March 2010) Licenses issued Basic CMTS UAS Infrastructure Provider I ISP (Internet) National Long distance International Long Distance

3rd 52.74 36.95 548.32 621.28 5,69,385 4070

2 38 241 219 371 29 24