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Dayanidhi Maran, union minister for communications and information technology - Focus on wireless, broadband and rural telecommunications

May 15, 2005
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We bring you excerpts from a speech by Dayanidhi Maran, union minister for communications and information technology, at the Cellular Summit 2005 held on April 26, 2005 in New Delhi...

Indian telecom has reached the historic landmark of 100 million subscribers a few days ago. Of this, the mobile industry has been a strong contributor, accounting for over 50 per cent of all the telecom subscribers in the country. The growth and achievement of mobile services in India has been commendable. The mobile industry has maintained a compound annual growth rate of 85 per cent per annum during the last six years. Tariffs have dropped continuously by around 37 per cent every year during the last four years. Today, mobile services in India are available at the lowest tariffs in the world. Network expansion has also been commendable, as all the operators are increasingly rolling out their networks to the smaller cities and towns. I understand that most of the large mobile operators have announced their plans to cover about 5,000 cities and towns within the next few months. Of the 250 million phones by end-2007, it is expected that about 180-200 million phones will be mobile.

On importance of rural telecommunications

Wireless can play an important role in contributing to the plan objective of reaching the rural and underserved areas where communication services are inadequate or unavailable. The government is keen that the benefits of connectivity are increasingly delivered to India's rural population.

Recently, Vodafone, the world's largest mobile operator, in association with the Government of UK, organised a seminar on the impact of mobile telephony on economic development in London. A new study in February 2005 by Leonard Waverman of the London Business School provided the most detailed analysis yet of the relationship between mobile phones and economic growth. Though the focus was on Africa, the lessons are equally relevant to the developing countries. They used this to examine the impact of telecom on economic growth in 92 countries, both rich and poor, between 1980 and 2003. The study found that in a typical developing country, mobile telephony has a positive and significant impact on economic growth, and this impact may be twice as large in developing countries as in developed countries. In quantified terms, an increase of 10 mobile phones per 100 people boosts GDP growth by 0.6 percentage points. They also found that demand for mobile telephones increases much more than in proportion to either increase in income or reduction in price. For policymakers interested in closing the "digital divide" to boost growth, the message is clear: mobile phones are the most effective means of doing so.

There is every reason to believe that the economic and social returns to mobile will be the highest of all in rural areas. These areas are consistently less well provided with telecommunication services. Serving rural areas is also closely linked to anti-poverty efforts. Half the world's population –­ 3 billion people –­ lives in rural areas. There is a substantial overlap between poverty and rural dwelling. In all developing countries, the average expenditure on telecommunications is about 2 per cent of monthly income. In a sample of Indian villages, the average was 3 per cent of household income. In Chile, poor people spend more of their incomes on telecommunications than on water, and even the average household spends more on telecom than on water and electricity combined.

Given the advantages of mobile telephony, special efforts are presently underway to encourage mobile operators to reach out and cover these rural and underserved areas. Efforts are on to find out ways and means to provide passive infrastructure through the USO Fund which can be shared by all the operators for mobile telephony to give a boost to rural telephony, particularly in those areas where operators do not dare entering because of viability considerations.

In the recent past, the government has taken many proactive measures to contribute towards faster expansion of the telecom network. These, inter-alia, include reduction in licence fee for infrastructure providers to encourage end-toend bandwidth provision, reduction in performance bank guarantee for national long distance (NLD) and reduction in customs duty on components, raw materials and capital goods to manufacture telecom equipments. The government has also approved the enhancement of the FDI ceiling from 49 per cent to 74 per cent for major telecom services in February 2005.

On broadband connectivity

In the area of broadband connectivity, a well laid out broadband policy was announced in October 2004. Definite targets have also been given in the policy itself for broadband and internet connections right up to 2010. To encourage expansion of broadband connectivity at a faster pace, 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 2005. Further, an automated spectrum management system was commenced in January 2005.

On spectrum

To meet the increasing demand of spectrum users, efforts are on to get spectrum released from other spectrum users for public telecom services.

Another aspect, which we are looking into, is the area of bank guarantee for spectrum usage charge. I would like to assure that the government would accord high priority to all the matters which promote telecom growth in the country.

On future growth drivers

The consumer adoption of mobile phones is the fastest and the most spectacular technology adoption rate the world has ever seen. Today, over 1.5 billion subscribers spend over 1 trillion dollars every year on mobile phone services. This year, close to 1 billion dollars will be spent on ringtones alone! But if the industry already has 1.5 billion subscribers, where will future growth come from? The answer to this question is twofold, one obvious and the other subtle: even more new subscribers and new valueadded services.

On 3G services...

New value-added services represent the most sustainable source of growth for the mobile phone industry. Most of today's mobile phone subscribers do not use 3G, but this will change. With the migration to 3G, mobile phone users will discover value-added services that they want and are willing to pay for. 3G is the enabling technology which will allow new and exciting services to be built, since 2G technology does not quite have the bandwidth to make everything happen. Applications like conversational video, interactive gaming, video streaming, interactive data like web, e-mail and database query are the class of applications which will run only on 3G networks. Further, borderline applications such as streaming video will finally reach their full potential.

When we talk about the future growth of mobile services, the subject of third generation mobile services also needs to be considered. 3G with its enhanced voice capacity, higher data speeds, etc. will be very crucial for achieving India's broadband objectives. The higher voice capacity of 3G would enable delivery of cheaper voice services which could drive penetration in the rural areas. It would also facilitate the e-initiatives of the government such as e-education, e-medicine, e-governance, etc. In the urban areas, 3G would decongest voice, where the spectrum crunch is seriously affecting quality of mobile services. Finally, 3G along with other systems would also play an important role in enhancing India's competitiveness in the ITeS/BPO segment where India is already recongised as a major player in the global market.

Several initiatives have been taken in the field of 3G technology. MTNL has floated a 3G tender and BSNL has initiated a pilot project in 3G. Private operators have shown interest in investment in 3G technologies.

Growth of subscriber base to 250 million

We have visualised that by 2007, the country will have 250 million telephones and the teledensity will be about 22 per cent. By that time the entire country shall be carpeted by the telecom network and all villages shall be connected by phone. Internet connections shall increase from 5.45 million in December 2004 to 18 million by 2007. By this time, broadband connections are targeted to be 9 million. To enable faster expansion of wireless telephony and other services, the required spectrum shall have to be made available to operators. With the increasing competition, we expect that the tariff rates will fall further, benefiting consumers at large.

We are sure that with the coordinated efforts of public as well as private service providers, we shall achieve the target of 250 million lines by 2007. BSNL and MTNL have already indicated a target of 80 million additional phones up to 2007. Similarly, the private operators will also have to prepare their detailed roadmap to contribute towards achieving the overall target. We need to closely monitor and review the progress in this regard for which a system is being developed.

On local manufacturing of telecom hardware

Normally, the revolution in mobile telephony should have been strongly supported by a solid manufacturing base within the country. We somehow failed in that endeavour in the past due to the lack of advance planning and imagination. However, as a result of initiatives of the new government to encourage manufacturing in the telecom sector, tie-ups between Alcatel and ITI for their Rae Bareilly and Mankapur plants and the agreement between Alcatel and C-DOT for setting up a global research centre for Wi-Max technology in Chennai have been finalised. Similarly, for manufacturing mobile equipments, Ericsson has upgraded their plant at Jaipur, and Elcoteq has set up a plant in Bangalore. Nokia and LG have announced their intention to set up their plants in Chennai and Pune respectively. These are very positive signals for making India self-reliant in the field of telecom equipments.

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