July 2006

Telecom & Wireless Technologies

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First came the sprawling network of bright yellow ‘STD/PCO’ phone  booths across the country, which helped connect people of India thereby providing instant employment to millions, even in the far-flung regions and remotest corners. Sam Pitroda, great visionary and technocrat, realised the importance of connectivity and a ‘wired’ India two decades ago. It was he who brought telecom revolution in the country.

Next came the era of cellular phones. Mobile telephony made advent in India in 1995. It took three years to cross the one million mark in 1998. It crossed three million in 2000, five million in 2001, 10 million in 2002 and finally, 50 million in early 2005. Though the earlier perception was that mobiles would be for the rich and strictly an urban phenomenon, it did not take much time to prove otherwise. The kind of direct impact mobile phones has on the economic and social lives of the poor is profound. Today, we hear stories of villagers selling their products or knowing the latest market price of agricultural commodity through mobile.

From stringent government monopoly, Indian telecom market has now become vibrant with multiple players and stiff competition. According to a June 2005 study paper of the Telecom Regulatory Authority of India (TRAI), India is one of the fastest growing telecom markets in the world. The telecom industry is developing the fastest among all sectors in the country. India has crossed 100 million telephone connections, which puts India as the fifth largest telephone population in the world, after China, USA, Japan and Germany.

As such, GSM (Global System for Mobile communication) mobile communication is currently in the leading position in the development of telecom market. In the past five years, the number of GSM handset users has increased ten-fold. The next few years is likely to see a dramatic expansion in the number of handset subscribers with the growth rate of more than 50%. It is expected that by 2008, there would be some 200 million GSM users, accounting for 75% of all telecom subscribers.

Insofar as the growth of wireless technology in India is concerned, there has been a consistent increase over the years. There is no gainsaying the fact that wireless technologies represent a rapidly emerging area of growth and importance for providing ubiquitous access. Undoubtedly so, India today surpasses several big countries worldwide in terms of possessing world-class wireless networks. A single standard— GSM 900 covers the entire length and breadth of the country thus providing unique benefits for telecom operators to support countrywide mobility.

Telecom Market status

The current market status for the telecom industry in India by all accounts depicts quite a  promising future. As on 13th April 2005, of the estimated 100.27 million total telephone  connections in India, there were close to 53.94 million mobile connections and 46.33 million  fixed line connections thereby showing that the number of phones (fixed and cellular) per 100 population stood at 9.13%. Further, mobile phone sector is bracing to overtake the fixed-line  sector in a big way. Almost 60,000 new mobile connections are being added daily. Notably,  telecom companies have anticipated the number would become three-fold in the next two years.

Announcing the plans for the telecom industry, Dayanidhi Maran, Union Minister for  Communications and Information Technology, declared that by 2007 India would be carpeted  by telecom network and all the villages connected by phone. The country would have 250 million telephones and the teledensity would be about 22%. There is a tremendous  potential to expand telecom network in the country since the teledensity as of now is pegged at  only about 13.02% against over 100% in the US, Japan and Germany. At the current rate  India is expected to surpass the developed countries in the next 4-5 years, where the demand  has already saturated. As also in terms of having a subscriber base, India is also far behind its  neighbour China, which has the largest subscriber base of more than 600 million. To give a boost to the telecom industry, the Government of India (GoI) recently raised the limit for  Foreign Direct Investment (FDI) in telecom companies from 49% to 74%. The GoI expects to  raise a part of the planned US$20bn investment to strengthen telecom  infrastructure through FDI. Amply indicating that this augurs well for the economy, the economists have linked a 1% growth in telecom penetration to a 3% rise in the country’s Gross Domestic Product (GDP).

Currently, in India airtime rates are among the lowest in the world. Leading telecom private  players in the country such as Hutch, Airtel, Reliance, Escotel, Idea and the state-owned BSNL  and MTNL are at a cutthroat competition to build their individual massive subscriber base. Over the last few years, call rates have dropped sharply due to escalating price war. This  has also given a significant boost to the rural market. In the eastern part of the State of  Uttar Pradesh, for example, while the first 100,000 connections took five years to reach, the same number was sold by Airtel in less than two months earlier in 2005. According to  V&D100 2005, the 10th Indian Telecom Industry Report, released by a prominent  Communications business magazine Voice & Data, private operators accounted for 43% of the  total telecom services revenue in 2004-05 in the Indian telecom market.

Wireless Options

Worldwide, various wireless technologies continue to evolve. However, the growth of wireless   technology in India has been increasing consistently over the years. In fact, wireless technologies represent a rapidly emerging area of growth and importance for providing  ubiquitous access. India is expected to see the growth of wireless data services through 2.5G technologies and the exploration of data applications over the next 2-3 years. A wide deployment of Bluetooth and Wireless LAN in the home and enterprise markets is to be witnessed in future. The growth of wireless data services, however, depends on the availability of more relevant content, which is still wanting. Besides, the fate of wireless technology also depends on the usefulness of content and applications, interoperable standards, and user acceptance. According to Eric A. Brewer, some of the most promising wireless technologies for rural connectivity are:

• CDMA450: CDMA is the technology developed by Qualcomm that is widely deployed as CDMA2000. CDMA450 is a variation that runs at 450 MHz and is good solution for mixed data/voice service and also for large flat areas in which a single expensive tower could cover a large rural area.
• WiFi: Though a low cost solution, the normal usage of WiFi (as defined by the 802.11 standards) provides short range connectivity intended for sharing and relatively poor supportfor voice connectivity. This is a good solution for hilly areas or places with line of sight among villages (to minimize tower costs).
• WiMax standard (802.16): It has higher bandwidth and is very suitable for replacing fiber for wireless backbone networks. But there are some challenges, for example, the standards are still in flux, demonstration networks are still rare and WiMax equipment is expensive.

Future plans

The future model of tele-info services has to be both futuristic and financially viable. It must  have the capabilities to meet the future needs of e-Commerce, tele-info services, social services  such as e-Education, e-Health and delivery of public services including e-Governance. Broadband appears to be an appropriate platform for rollout of services and  development of last mile connectivity through wireless technologies appears to be most suited considering cost-effectiveness.

There is a need to finalise the legal, institutional and regulatory modalities of opening of  broadband services in the rural areas quickly to leapfrog the broadband rollout. Dayanidhi  Maran, while spelling out his vision for the next two years, indicated that the Internet connections are expected to increase to 18 million by 2007 from 5.45 million in December  2004. Broadband connections are targeted to be 9 million during this period. The GoI also  recently announced a new broadband policy in keeping with increasing connectivity across  the country. The policy aims to target 20 million broadband subscribers and 40 million  Internet subscribers by the end of 2010.

The future for telecom industry in India, undoubtedly, holds promise. As we have seen, the  industry as such is growing at an increasing pace. There is a tremendous potential for growth, as connectivity still remain beyond r e a c h particularly in the rural hinterland. As the  current scenario indicate, fixed-lines would be left far behind in the race being overtaken by  wireless communica-tions on a massive scale. The Government of India’s decision to raise FDI  is significantly aimed at giving the industry the much-needed boost. However, the growth of  wireless technology sector would significantly depend on the availability and utility of the  content, the issue of interoperability, and the user acceptance.

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