INDIAN TELECOMMUNICATION – A RARE SUCCESS STORY

S.C.Pandya *

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Landmarks during the last three years

Ø As a follow-up of National Telecom Policy ’99 (NTP’99), multiple operators allowed in the fixed (basic) telephony sector.

Ø Domestic long distance telephone service opened to private players.

Ø Telephone Regulatory Authority of India (TRAI) reconstituted through an Ordinance

Ø Unrestricted entry permitted in long distance telephony.

Ø Department of Telecom Services (DTS) corporatised as Bharat Sanchar Nigam Ltd. (BSNL).

Ø Videsh Sanchar Nigam Ltd. (VSNL) privatised, ending its monopoly in international calls, two years ahead of the deadline. HTL, too, privatised.

Ø Mahanagar Telephone Nigam Ltd. (MTNL) and BSNL enter cellular telephone market.

Ø Policy for Global Mobile Personal Communication Satellite (GMPCS) service, Public Mobile Radio Trunked Service (PMRTS), and Voice Mail/Audiotex service incorporating Unified Messaging Service (UMS) announced.

Ø Basic service providers allowed to begin Wireless in Local Loop (WLL) service to provide limited mobility at fixed line local call rates.

Ø Internet telephony introduced in India.

For providing world class telecommunication infrastructure and services, the Government has taken a number of momentous decisions, during the last three years, for meeting the objectives and targets of New Telecom Policy ’99 (NTP’99), especially achieving a teledensity of seven by the year 2005 and 15 by the year 2010 as well as for furtherance of the ongoing reforms in the telecom sector. The cutting edge of all policy initiatives has been to provide affordable and effective means of communication to the common man, especially in rural and remote areas, through mobile as well as fixed phones besides Internet, V-SAT, radio paging services and public mobile radio trunking services.

The other landmark policy decision was the merger of the Ministry of Telecommunications with the Ministry of Information Technology, which was hailed by the entire telecom industry and analysts as the right step towards convergence, particularly in the wake of the Communications and Convergence Bill (2001) which has already been introduced in Parliament.

Expansion

For rapid expansion of telecommunication network, the Government spent Rs.13,521.33 crore during 1999-2000, Rs.18,605.15 crore during 2000-2001, and Rs.13,208.66 crore during 2001-2002. This resulted in increasing the equipped capacity of both the BSNL and the MTNL, from 32.8 million lines (March 31, 2000) to 39.91 million lines (March 31,2001). The equipped capacity went up further to 42.92 million lines, by December 31, 2001. If the Government, however, wants to meet the NTP’99 target of achieving a teledensity of seven by the year 2005, it will need to add 15 million lines every year to its basic telecom infrastructure.

Consequent upon the increase in the equipped capacity, the number of direct exchange lines (DELs) increased from 26.5 million (March 31, 2000) to 32.44 million (including 0.27 million by private sector) by March 31, 2001. The number of DELs increased further to 35.18 million (including 0.45 million by private sector), by December 31, 2001.

As a result of these measures, the teledensity (telephone per 100 population) increased from 2.86 (March 31, 2000) to 3.58 (March 31, 2001) to 4.2 (March 31, 2002), and is currently around 4.5 (August, 2002). All, because of the very sound foundation laid during these years. The teledensity is expected to nearly double, reaching a figure of 9.6 by 2007, according to the latest study undertaken by ICICI Securities.

Cellular Services in Fast Lane

Expansion of telecom network by private sector for cellular services has, however, been remarkable, resulting in a phenomenal increase in the cellular mobile subscriber base. From 1.88 million (March 31, 2000), it increased to 3.57 million (March 31, 2001), and, thereafter, shot up to 6.43 million (March 31, 2002) and an incredible 8.17 million, by August 31, 2002.

In fact, India’s cellular subscriber base has grown at a blistering pace, registering an average annual growth of 105 per cent (from a mere 77,000 in 1995 to over 8 million in August, 2002), well above 85per cent growth witnessed in China and 26per cent growth in USA, during the same period.

Not to be left behind, the MTNL, too, started a full mobility cellular service, called Dolphin (based on GSM technology), in February, 2001, with an installed capacity of 1,00,000 lines each in Delhi and Mumbai. The proposed additional capacity of 1,25,000 each, in both these metros, is expected to be achieved by December, 2002.

A few months later, the MTNL started another service with limited mobility, called Garuda (based on CDMA technology), in October, 2001, in Delhi; followed by Mumbai, in January, 2002. Initially, both these metros had an installed capacity of 50,000 lines each for this service. The proposed additional capacity of 1,00,000 each, in both these metros, is expected to be achieved by February, 2003.

The BSNL, too, announced its entry in cellular mobile telephony in a big way, by launching its mobile brand – CellOne – on September 2, 2002. This service is to be rolled out in 17 States. The BSNL has also launched its prepaid cellular service – ExCel – to be made available in State capitals by October 2, and in 850 cities, by December 25, 2002. It plans to roll out four million cellular lines across 3,500 cities and towns, by December, 2003. Launching these services, the Minister for Telecommunications & IT, Shri Pramod Mahajan observed, "whether it is economically viable or not,the BSNL’s mobile services will cover all district centres and villages. No other company can claim this."

Affordable for Rural Areas

For bridging the wide gap between rural and urban teledensity (on May 31, 2002, urban teledensity was 12.24, nearly three times the national average, while rural teledensity was a mere 1.24) as well as to provide affordable telecom services in rural and remote areas, a number of policy measures were taken during the past few years for the expansion of rural telecom services.

Besides making it as a ‘license obligation’ for private basic operators to provide village public telephones, under Universal Service Obligation, rental and call charges, too, have been drastically reduced for rural areas in comparison to urban areas. In fact, these are much below the cost incurred in providing a village phone. For offsetting this loss, a "Universal Service Fund" has especially been created for subsidising the installation of VPTs in rural and areas where total revenue is less than total cost.

As a result of these efforts, as many as 1,29,057 village public telephones (VPTs) were provided during the last three years, bringing the total number of villages with a public phone to 5,01,383 (September, 2002), out of 6,07,491 villages identified as revenue villages during 1991 census. It is expected all villages in India will have a telephone booth by the end of December, 2002.

This is not all. Under the Grameen Sanchar Seva, every postman is going to be equipped with a wireless phone so that "every village he visits gets a mobile PCO booth. Initially, a pilot project involving 2,000 post offices covering 10,000 villages is all set to be executed from December 25, 2002.

Foreign Direct Investment

Opening up of telecom sector to private participation and the resultant competition, has boosted foreign direct investment (FDI) in this sector. In the last about 10 years (August, 1991 to January, 2002), actual inflow of FDI in the telecom sector has been of the order of Rs.8,480.59 crore. Out of this, Rs.3,970 crore came in just one year (2001) alone. This is enough testimony to the fact that telecom sector in India is becoming a favoured destination for foreign direct investment. In an effort to further boost FDI, the Government is considering to increase the present ceiling of FDI from 49 per cent in basic, cellular, national as well as international long distance services to 74 per cent.

Price War

Consistent with the worldwide trend and keeping in view the market reality, a number of steps have been taken to balance the tariff structure. The first phase of tariff re-balancing started on May 1, 1999 when long distance STD and ISD tariffs were reduced by about 23 per cent. In the second phase, on October 1, 2000, STD tariffs were reduced by further 13 per cent and ISD tariffs by another 17 per cent. From January 26, 2001, tariff were further revised in addition to bringing a radial distance of about 200 km, within the same telecom circle, as local area.

Simultaneously, because of competition, tariff for cellular services were also getting slashed practically every quarter. It, however, was the MTNL’s entry with its ‘Dolphin’ in February 2001 which triggered an unprecedented price war to the extent that cellular tariffs, prevailing in the last two and a half years, have dropped by over 90per cent, from Rs.16.80 per minute (August, 1999) to about Rs.2 per minute for an outgoing call (August, 2002).

The creditable aspect of the measures initiated by the Government has been that the tariffs had to be slashed by private sector basic as well as cellular service providers. The increasing competition has also resulted in improving efficiency, besides stimulating investment and making the services affordable for the common man, who is going to have the last laugh for the first time in all these years.

* Freelance Writer