Monday, April 30, 2007

Cellular telephony: India 1997

Cellular telephony will soon be as common as carrying a pen or wearing a watch

India opened up its telecommunications sector to modernisation only three years ago. The privatisation of basic telephony has been mired in teething troubles and is beginning to reach the starting blocks only now. The first manifestation of the new policy therefore has been the entry of private operators, typically joint ventures between reputed Indian companies and global majors in the field, in the relatively high-tech area of GSM based cellular telephony. Cellular telephony was introduced first into metro cities, fanning out to the circles in a year or two. The total number of cellular subscribers at the end of year three is rapidly approaching the million subscriber mark. This compares favourably with China, in the context of the first three-year time frame. Looking ahead to the first decade, say by the year 2004, given the size of India’s potential subscriber base, cellular telephony usage in India may well resemble China’s 8 million subscribers, making it among the largest cellular telephony markets in the world.

The ITU( International Telecommunication Union) has recently urged India to view the advent of telecommunications, both basic and cellular as an engine to fuel “economic activity” rather than the rather socialistic accent on providing telephones in “every village or home,” enshrined in the National Telecom Policy of 1994.

The manufacturing of telecom equipment in this country has anticipated this trend. Growth rates range from a healthy 120 per cent for certain product categories to a phenomenal 2,500 per cent for brand new technology introduced for the first time into India. While these figures pertain to both fixed and mobile telephony, consider present phone density as a measure of the road ahead. In 1997, the average is only 1.5 telephones per hundred of the population. Is is as low as 0.2 phones per 100 persons in rural areas and still paltry at 3.4 phones per 100 people in urban areas despite 84.7 per cent of all the telephone exchanges being located in urban areas. The need and potential for growth are therefore immense.

There has been a flurry of activity on the infrastructural front despite political instability. DoT( Department of Telecommunications) is in the process of restructuring itself to compete with the private sector and has been divested of its regulatory functions. These have been invested in the TRAI(Telecom Regulatory Authority of India) and this organisation has demonstrated its vision and independence by taking a number of bold and visionary decisions in short order. Other government monopolies such as MTNL( Mahanagar Telephone Nigam Limited) and VSNL(Videsh Sanchar Nigam Limited) are raising funds to carry out ambitious value addition programmes to prepare for an era of competition now well underway. The cellular operators themselves have banded together to project their industry issues via the COAI(Cellular Operator Association of India).

Meanwhile, prices of cellular handsets have tumbled in India, mirroring the global development of this easy way of staying connected. The latest trends are towards the bulk purchasing of cellular phones to bring down the prices even further. Cellular operators are offering ever better schemes which bundle more and more free airtime with the purchase of a handset. In some instances, the schemes are so attractive that they actually make the first year or eighteen months of cell phone usage virtually free of charge. In addition, the airtime rates themselves are reducing rapidly in the search for both a higher subscriber base and increased airtime usage. Technology protocols to permit roaming between circles and other countries are being implemented at a rapid pace. Entry barriers are therefore receding into history.

One clear consequence of liberalisation is the influence of global trends coming into play, whether it be in terms of expanding bandwidth in digital satellite technology or other forms of convergence, between telephony in all its fixed, wireless and GSM modes on the one hand and television and the computer on the other. Future trends indicate multiple access and interactivity, which will be impossible to restrict or legislate against. It is already possible to make an overseas Internet phone call at the price of a local call and the technology is improving as I write. The advent of the mini-M satellite telephone sets is another case in point to illustrate the unstoppable. Cellular operators are now turning their attention to greater value addition by way of interconnectivity with other media like the PC( personal computer) and the Internet so that the customer can be mobile and still have the ever increasing benefits of the multimedia environment.

The survival of the telecommunications sector in its broad and global sense will depend more on expanding its user bases. Technology itself is proving to be the great opener of doors, and governments, monopolies and the like can do nothing to stop it.

The present companies which have entered the sunrise industry of cellular telephony operations in India have grasped the nature of the sea changes to come and decided to defray the start up expenses as early birds. They know the only direction possible is straight ahead to spectacular long-term growth and profits. Fixed telephony will grow exponentially through the WLL (Wireless-in-local loop) route, and there will be an ability to switch between fixed and cellular networks at will on the part of the user. Tariffs will tend to converge as well, making it less and less relevant to make the switch to effect economies. The golden age of cellular telephony will come when the subscriber base is sufficiently expanded to lower tariffs to levels approximating those of fixed telephony. This will have to be viewed in tandem with the drastic reductions expected in the costs of long distance communications via the benefits of the world-wide-web and its multimedia capabilities boosted beyond present belief by the rapid proliferation of broad banding satellites.

It won’t be long, no more than a decade, before cellular telephony becomes as common as carrying a pen or wearing a watch. India will be among the front runners in this phenomenon, because the world is going to see to it. A practically virgin frontier of unending possibility is not a chance that telecom majors can afford to pass up.

(1,011 words)
By Gautam Mukerji
First published in THE HINDU
www.hindu.com in December 1997

Post script.

The shape of the future circa April 2007:

Witness the advent of Vodafone-Hutch and the stellar prosperity of the Bharti Group but have we almost reached the end of the line for fixed line telephony and even a lot of cellular telephony?

MTNL and BSNL( Bharat Sanchar Nigam Limited) have announced plans to provide free broadband and city-wide wi-fi connectivity by 2009. These government agencies are very good at driving down prices as we have seen.

The days of cellphones as we know them today using the services of operators to connect may give over and to a some extent, already have ( viz. Skype) to Internet video telephony.

All the private cellular operators are scrambling to take a position in 3G( high-speed wireless broadband) and the Government is considering bandwith resale and allowing privates and new players to bid for spectrum. It will bring down costs... The more things change, the more they seem the same but I can't see the consumer complaining.

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