Unleashing Telecom and Internet in India
Ashok Jhunjhunwala
Dept of Electrical Engineering,
IIT Madras, Chennai 600 036
E-mail :
1 Introduction
Barely a decade ago, India and China both had about five million telephone lines. India has done well in increasing its connections to about 25 million today. China, in the meanwhile have crossed 140 million connections and is adding about 25 million connections every year. It has recognized that providing telecom and Internet connection (built on a telephone network) to most of its people is a must, if it has to become a superpower in coming years.
Internet today is not just another means of communication. Those who use Internet know that Internet is POWER. It gives a user not only all kinds of information, but also enables him/her to do things one could not even dream of till recently.
Internet gives to its users so much competitive advantage that those without access will face significant disadvantages. In other words, access to the Internet can enable people in all kinds of ways including providing access to education, removing barriers of distance and remoteness, and enabling one to get all kinds of information and to close business deals. But at the same time, lack of Internet access would put a person at a tremendous disadvantage. Therefore, unless steps are taken to provide Telecom and Internet access widely, one would face accentuation of
India today has about 25 million telephones and about 1 million Internet connections for its one billion people. It is obvious that India urgently needs at least 150 to 200 million telephone and Internet connections. Is this expansion from 25 million telephone connection and 1 million Internet connections to 150-200 million telephones and Internet connecti on possible in a short time frame? Has India achieved such rapid growth in any area? One thing where such a spectacular performance has been possible is in providing cable TV connections, where the numbers grew from 0 in 1992 to about 40 million households in 2000. What made this spectacular performance possible? Are there lessons to be learned here which enables expansion of telecom and Internet connections?
In this paper we examine such lessons. We start in section 2 by looking in detail at these lessons, examine bottlenecks in rapid telecom expansion and suggest solutions. In section 3 we look at some of the R&D efforts in the country, particularly the recent efforts of the TeNeT group at IIT Madras, in developing technologies, which provide examples of what needs to be done. In section 4, we look at policy issues which need to be pursued towards this objective. Section 5 concludes the article.
2 Learning from Cable Connections
2.1 Economic Issues
The most important lesson from the growth of Cable TV connections in India is the issue of affordability. A cable connection in India costs from around $1.50* to $4 per month. This is affordable to almost 60% of the 180 million households in India. Cable connections can therefore continue to grow in India. The story of telecom and Internet is however very different.
In a country like USA, household monthly expenditure of US$30 on communications is affordable to well over 90% of its households. Thus a telecom and Internet operator can expect a minimum of $360 per year of revenue from each household. If the operator invests $1000 per line to set up the service, the $ 360 per year return would pay for the finance charges, operation, maintenance and obsolescence cost and may provide some profit. The fact that some households and most businesses will provide higher revenue would only help. Thus a $1000 investment per line is viable in the USA. Technologies are developed to provide the best service at this level of investment. As the services is affordable to well over 90% of households, lowering of per-line cost makes little sense and does not enable the operator to expand market. The focus of R&D is therefore rightly not on reducing per-line cost, but instead, on providing a larger basket of services at this fixed cost.
Developing countries like India, on the other hand, are very different. Assuming that a household is willing to spend upto 7% of its total income on communications, Table 1 shows the percentage of households in India which would be able to afford telecom service at various levels of cost. Thus, a revenue of over $350 (around $30 per month) is affordable to less than 1.6% of the households. If 30% of the households are to be provided service, the expected revenue has to reduce to around $10 to $12 per month. Further, the revenue expected must drop to around $5 per month, so that almost 60% of the 180 million households could afford communications. Assuming again that 35% of initial investment is required as yearly revenue to pay for finance charges (which is as high as 15% in India), depriciation (around 10%) and for operation and maintenance (around 10%), one needs to bring down the per-line network cost to about $ 300 to cater to 30% of Indian households and $ 200 per line to enable almost 50% of households to have telecom and Internet connections (as shown in Fig 1).
|
Household Income (yearly) |
`% of households |
Affordable Expenditure on Communications* (yearly) |
|
> $5000 |
1.6% |
> $350 |
|
$2500 - $5000 |
6.3% |
$175- $350 |
|
$1000 - $2500 |
23.3 % |
$ 70 - $175 |
|
$ 500 - $1000 |
31.8% |
$ 35 - $ 70 |
Table: 1 Percentage of Indian households, which can afford certain yearly expense on communications
Unfortunately, the current cost of providing a telephone line in India is close to $800. While such a cost is affordable to most in the West, it is affordable to only a few in India. It is imperative for India to cut the per-line network cost by a factor of 3 to 4. The focus of R&D in the West is not on this cost reduction, but to expand services at a fixed cost which is affordable to most of them. It becomes the task of Indian scientists and engineers to turn the technological developments upside down, innovate and bring down the cost to enable Indians at large to have telephone and Internet connections. The Government must do whatever it can to enable this task.
Fig. 1: Telecom Affordability for Indian Households. Total number of Households is 180 million.
2.1.1 Focus on Access Network
The telecom network today consists of a backbone network component and an access network component (referred to as access network or AN). The backbone network consists of large switches and routers and interconnection of these exchanges and routers, including inter-city connections and international connections. Fortunately, the cost of this part of the network is reducing rapidly over the last fifteen years, driven by the R&D efforts in the West to provide higher and higher bandwidth on the backbone. The per-line cost of fibre and fibre-based network is decreasing rapidly every year. We therefore can borrow and use such developments intelligently. One must remember that the capacity of the optical network is doubling every nine months and per bit cost of the network is falling very rapidly. One must be very careful to understand the slope of this downward-moving cost and the technology. While one wants to install fibre for today, tomorrow and even for fifteen years hence, the network of today should be built to take into account the bandwidth requirement of only the next few years and yet must be upgradable. A careful design of backbone network would imply that a backbone network, even though very powerful, would not cost more than $ 100 per-line including the cost of infrastructure.
The Access Network consists of the connection from the exchange (or ISP routers) to homes and offices and would today include an access switch. It is this part of the network which is expensive today, amounting to about two-thirds of the per line cost. In urban areas the access network cost would exceed $ 500 per line, and would be even more in rural areas. Besides, it is the access part of the telecom network, which requires maximum service and contributes most to the operation cost. It is the access part of the network on which one needs to focus one's attention.
2.2 Local Operation
The second important reason for the rapid growth of cable connection in India lies in the nature of operation involved. Typically, a cable TV operator in India installs a dish antenna and provide service to subscribers in a radius of about 700 m. The operation is carried out by a self-employed person, typically with a couple of helpers. The operators goes to each home selling the connection and visits every home every month to collect the charges. The customers know the operator personally. The service operator is available even on Sunday evening to rectify any fault that may occur. Therefore, eventhough cable technology is significantly more complicated (because of taps, amplifier and power feeding of amplifiers) as compared to a twisted pair based telephone technology, the cable service in India is superior to the telephone services. More important, the operation cost in a self-employed small business in India is about 3 to 4 times less than that of an organised corporate sector. The cable TV business in India uses this, passing the lower cost down to the customer and making cable TV highly affordable in India.
It is important to recognise that any service that works cost-effectively and provides service to a significant number of people in the country, requires the organised corporate sector to use this self-employed sector in a judicious way. One cannot imagine newspapers and milk reaching each doorstep at an affordable cost without the unorganized sector. The Public Call Office, which today generates about 20% of total telecom revenue in some states, and enables large sections of people in India to use telephones, provides an excellent example of how the telecom department has used the self-employed sector in expanding service.
The obvious lesson for telecom and Internet is to use such Local Service Providers (LSPs) to provide the access network for the subscribers. The Access Network, which is about 70% of the network cost and most difficult to maintain could be owned and operated by such LSPs in a neighborhood. This implies that provision and maintenance of the last mile (including Access switching), finding the subscriber and installation of subscriber premise equipment, bill collection – all these should became the tasks of the LSP, who runs it as a small business. The lower costs of operation and a face-to-face relationship between a subscriber and LSP would go a longway in making telecom and Internet affordable at large.
Access Network technology must be such that such local operation is possible. At the same time it would be highly desirable if AN technology is such that multiple LSPs can operate in one area giving choice to a subscriber.
2.3 Regulation
The third reason for Cable TV success was that the sector grew in India in absence of all regulations. The cable TV operator required no license. The obvious lesson for telecom is to make Access Network operation totally license free. A LSP should be able to start a service in a neighborhood or a "taluk" or a small town by just registering oneself and connecting to the nearest backbone available. The access operator and the backbone operator could share revenue, say at 70% for Access operator and 30% for backbone operator. Such a policy will enable large number of LSPs to emerge all over the country and provide service in a local area.
2.4 Internet Bottleneck
Internet access today, for the most part, uses a modem to connect a computer to a telephone line. One then dials an Internet Service Provider’s telephone number and gets connected to an ISP router, which connects one to the Internet as shown in Fig 2. This seemingly simple technique has a number of pitfalls. The most important pitfall is that Internet traffic passes through telecom network. The telephone calls are of relatively short duration and the telecom network is designed to handle only such traffic. The Internet is normally kept ON for much longer duration and large number of subscribers using Internet would overload the telecom network, resulting into its collapse. It is a must that Internet traffic does not pass through telecom network but bypasses it. The Access Network must be designed to must make this possible.
Fig. 2: Internet Access using Todayy's Telephone Network
2.5 Future Access Network
Fig 3. Future Access Network consisting of Access Unit(AU) and Subscriber Unit(SU)
A conceptual future access network, addressing the issues discussed in sections 2.1, 2.2 and 2.4, is as shown in Fig.3. Tomorrow's subscriber unit (SU) would provide direct interface to a telephone (or fax machine, cordless telephone, speakerphone, pay phone) as well as to a PC (serial port or Ethernet port) and would enable simultaneous voice and Internet communications. The subscriber units would be connected to an Access Unit (AU) using wired, wireless, fibre, DSL on copper, coaxial cable or even power line communications. A typical AU would serve anywhere from 200 to 2000 subscribers. In urban areas, the AU would be deployed close to the subscribers, almost on street corners, making this last-hop link less than 800m. In rural areas, an AU could serve an area of 10 km radius and sometime even 25km radius. The Access unit separates voice traffic and Internet traffic. The voice traffic is switched to the telecom network (typically using an E1 connection to the telephone network using the standard V5.2 access protocol). The bursty Internet traffic from each subscriber is statistically multiplexed before being carried to the Internet network. Ability to multiplex bursty Internet traffic from multiple subscribers at AU enable one to overcome the bottleneck described earlier in the section. It should be possible to carry voice traffic on Internet in future when Quality of Service (QOS) on Internet permits this.
Such a conceptual Access Network solves the Internet tangle as the Internet traffic does not enter the telephone network at all. The concentration of traffic at AU implies savings in backhaul bandwidth between AN and exchange/router. Besides, placing of an AU close to the subscriber (at least in dense urban areas) implies lower cost for the last-hop.
3 Some R & D Efforts
From the above tasks, it is clear that in order to enable Indians through expansion of telecom and Internet Access, one need to provide 150 to 200 million telephones and Internet connections at the earliest. It is also apparent that this is possible only by
With the current costs of Telecom Network in India hovering around $800 per line, reducing cost to around $250 per line is indeed a difficult task. But then R&D tasks are not supposed to be easy; and a vision of enabling India through Telecom and Internet cannot be a simple task.
The task may be difficult, but is achievable. This confidence emerged in the late eighties primarily due the to efforts of the Center for Development of Telecom (CDOT), a telecom R&D organization set up by the Department of Telecommunications in the mid-eighties under the charismatic leadership of, Sam Pitroda. CDOT developed telecom switches and these switches today provide 12 million of the total of 24 millions telephones in India. The switches are rugged, work without air-conditioning and even today cost 2/3 of any imported switch.. CDOT has continued to upgrade the switch and have added ISDN services, signalling system 7 (SS7), access protocols like V5.2 and even Intelligent Network (IN) functions.
But more important than the product itself, CDOT generated a confidence amongst Indian engineers that world-class design efforts can be undertaken in India. The large number of people that it trained, provided the basis for numerous design-houses that emerged all over the country.
About five years back, a university-based group, called Telecommunications and Computer Network (TeNeT) emerged at IIT Madras, Chennai. This group focussed on developing a world-class and yet affordable Access Network for India. It helped incubate a number of R&D companies formed by its alumni; Midas Communications, Banyan Networks, Vembu Systems (AdventNet Systems), Nilgiri Networks, and n-Logue Communications thus formed, started working in partnership with IIT Madras to develop a wide range of access technologies. The products designed by this group today include Fibre Access Network (optiMA), Wireless in Local Loop system (corDECT), Direct Internet Access System (DIAS), CygNet Network Management system and a host of protocol stacks. The products are aimed at significant reduction in access cost and at the same time enable large-scale usage of Internet. These products take into account that the future access network should separate the telecom and Internet traffic at the Access Unit (as shown in Fig.3), and that the connectivity from the AU to subscriber could use any of the several media. Let us take a brief look at these products.
3.1 corDECT WLL
The first access product developed is corDECT WLL,
shown in Fig.4. It consists of a subscriber unit called Wallset with Internet port (WS-IP),
located at subscriber’s premises. It has a standard (RJ-11) interface for a telephone and
a serial port (RS 232) to connect a PC (without use of a telephone modem). The system provides
Internet at 35/70 kbps and simultaneous telephone conversation.
The WS-IP is connected to a Base Station (CBS) on wireless and the base station is connected
to a Access Unit which consists of a DECT
Fig 4: corDECT Wireless Local Loop
Fig.5(a): WS-IP : Wallset with Internet port
Fig.5(b): DIU, Base Station and WS-IP
A multiple subscriber unit, referred to as Multiwallset (MWS) has been designed to serve four independent subscribers in the same building. The MWS brings down the per-line cost of corDECT by half.
3.2 DIAS
Fig. 6: DIAS(DSL on Copper)
The second access product, again modeled after the Access Unit of Fig.3, uses DSL-on-copper technology to provide access. As shown in Fig 6, the Direct Internet Access System (DIAS) consist of a Basic Rate Digital Subscriber Unit (BDSU) or High–bit rate Digital Subscriber Unit (HDSU) at subscriber’s premises. The BDSU connect a telephone and provide an Ethernet interface for one or more computers. It is connected to an Access Unit referred to as Internet Access Unit (IAN) using twisted pair copper wires. Typical distance is 800m, though 5km it is possible to use it a distance using 0.4 mm twisted copper pair. The service provided is 144 kbps always-on Internet Access the rate of which drops down to 80 kbps when the telephone is being used. The IAN separates voice traffic and directs it to the telecom network and the Internet traffic is taken to the Internet Router. HDSU, designed for corporate subscribers, provide upto 8 phones and an Ethernet connection for Internet. Upto 2 Mbps always-on internet connectivity is possible with the copper distance being restricted to 3 kms. Fig 7 shows a picture of a IAN and a BDSU.
Fig. 7: Direct Internet Access System
3.3 Access Centre
Fig. 8: Access Center(AC) providing POTS, wireless and DSL service
The third Access product designed by the TeNeT group is a simple POTS line connected to an Access Unit called Versatile Remote Unit (VRU) located on a street corner.
This enables corDECT WLL, DIAS and VRU to be combined into a single Access Centre as shown in Fig 8. An Access centre could be located on a street corner in dense urban areas serving 200 to 2000 subscribers in about 800m radius. Alternatively, it could be located in a small town/village centre and serve subscribers in 10km radius or even 25km radius.
The corporate and upper middle-class subscribers are served using DSL and provided with
always-on Internet connection. On the other hand, middle-class subscribers are provided telecom and Internet using wireless; and the lower middle-class subscribers could be provided
service using either corDECT multiwallset or POTS (using VRU). The AC can be made self-contained with a built-in power-plant and battery back-up as shown in Fig.9. The ratio of DSL, WLL and POTS subscribers could be varied depending upon the locality served and the subscriber profile.
The Access Centre provides one of the most versatile ways of providing telecom and Internet access. The total cost (including copper laying is about 800 in radius) of providing service to about 250 dsl subscribers, 500 wireless subscribers (voice as well as Internet) and 250 subscribers with either MWS or POTS would work out to be approximately $260 (the cost includes about 30% local taxes).
Fig. 9 Access Center: Ratio of POTS/Wireless/DSL Access Lines depending on Access Scenario3.4 Fibre in the Loop
A Fibre-in-the-Loop system is yet another product from TeNeT group. A fibre drop-and-insert backhaul system connects multiple Access Centres (discussed in the previous section and located on street corners), together using a PDH or a SDH ring network as shown in Fig.10. The Voice and Internet traffic from each AC are taken to a central location in the city and handed over to the telecom switches and Internet Routers respectively. Alternatively, if the AC is located in remote locations, where fibre may not be available, a point-to-point microwave radio (2GHz/ 7GHz / 11GHz / 13GHz or 17GHz) can be used to bring both the voice and Internet traffic to a town as shown in Fig.11.
Fig.10: Fiber Backhaul at 34/155 Mbps
Fig.11: Radio backhaul
3.5 Network Management System (NMS)
Finally, the TeNeT group has come up with an integrated network management system (CygNeT) to manage all these products as well as other telecom and network products. Integrating SNMP and TMN, the CygNeT manages traffic, configuration and health and enable a multi-tier operation. Fig.12 shows a typical view obtained from CygNeT.
The network described above is versatile, flexible and expandable. It provides different kinds of services including voice telephony, dial-up Internet connections and permanent Internet connections. The network can be deployed in large cities, small towns as well as in sparse rural areas (using corDECT Relay Base Station).
Fig.12: CygNeT Network Management System
3.6 Deployment in urban and rural areas
Fig.13 shows the typical deployment plan in a large urban centre of Hyderabad. Access centre locations are identified at about 12 places, each serving roughly an area of 1.6 x 1.6 km. About 1000 subscribers are provided connectivity from each access centre. To get the service quickly off the ground, first a few ACs can be connected to the switching centre using point-to-point 8 Mbps radio links. In the mean-time, the work on a SDH fibre-optic SDH ring network can start to connect all the ACs to the switching centre. What is important to note that this network not only provides voice connectivity but also Internet connection without loading the telephone network. This is because, the Internet traffic is separated at Access Centres and carried on from this point on a packet network. Similar efforts are on at Patiala in Punjab.
Fig.14 shows deployment of corDECT system in Connaught place in Delhi, one of the Delhi’s highly built-up business districts. Using four BS, telecom and Interne t Access is provided in the whole area by an ISP.
Fig.13: AC being installed in Hyderabad
Fig. 14: corDECT installation in Connaught Place(Delhi)
Recently DOT installed a pilot corDECT system near Kuppam town in Chittoor District of Andhra Pradesh (shown in Fig.15). With BS mounted on two towers, telecom and Internet has been being provided in about 65 villages (some of which are shown in Fig.16). This is probably the largest Internet deployment in one rural taluk in India today.
Fig.15: Kuppam taluka in Chittoor District in the state of Andhra Pradesh
Fig. 16: Telephone and Internet installation in villages around Kuppam
Fig.17: Telephone and Internet connection in Cuddalore District of Tamil Nadu
Fig.18: Deployment plan at Nellore District in Andhra Pradesh
A similar effort is on in Cuddalore district of Tamil Nadu, where n-Logue teaming with EID Parry (a company with significant commercial interest in rural areas) is providing telephone and Internet connection. The plan is shown in Fig.17. The deployment is currently going on.
Fig.18 shows a deployment plan at Nellore district in Andhra Pradesh. What is interesting is that by deploying corDECT DIU, CBS, RBS and BSD only in existing exchange buildings of BSNL (fromerly Department of Telecommunications), every village can be provided telephones as well as Internet at a very low cost.
TeNeT products, especially the corDECT Wireless in Local Loop has been licensed to be produced by several manufacturers in India, Tunisia and Singapore. The corDECT system is currently deployed in Argentina, Brazil, India, Madagascar, Nigeria, Tunisia, Kenya, Angola, Yemen, Fiji, and Iran and have been validated by the telecom authorities in several countries.
3.7 TeNeT’s Future Products
The TeNeT group continues its innovations in adding features and services to its Access Network while bringing the cost down. Both corDECT WS as well as DSU of DIAS system has been designed with a built-in DSP with spare memory and computing power. Voice on Internet can thus be added to these systems when it is legally allowed and when QOS provisions on Internet enable its proper use. The TeNeT group is examining the possibility of developing a cable access system providing voice, video and Internet, which could work in the adverse cable environment of India. The wireless connectivity on corDECT is being enhanced to provide 384 kbps packet-switched service on corDECT and multilevel modulation is being examined to enhance the rate to 1 Mbps. 3G radio interfaces are also being examined for use in the coming years. The DSL is being enhanced by addition of ADSL and VDSL. Finally, the backbone interfaces of the AC are being enhanced to incorporate QOS.
Using the technologies developed by the TeNeT group, it is possible to set up a telecom network today at a total cost between $375 in urban areas to $425 per line in rural areas. This is still far way from $250 per line cost required to make telecom affordable to almost 50% of Indian households.. But the TeNeT’s group work over the past few years confirm that the target is reachable.
4 Policy Issues and tasks
4.1 Implications of 150 to 200
million telecom and Internet connection
target
A goal of providing 150 million to 200 million telephone and Internet connections is not just a noble goal, but has several implications. The large target implies that Telecom and IT is no longer confined to large cities or amongst wealthier sections of the society, but reach each small town and rural area and to all sections of people. This could enable rural youth to receive better education and train themselves to stand up in this fast changing world. It could result in software companies being set up in smaller towns and rural areas, initially as satellites to large software companies in the city (just like the Indian companies in early 80’s attached themselves to software companies abroad), but slowly coming on their own. It could enable someone in a small town to set up a design house, carrying out most complex designs of virtually anything, a task which was hitherto confined only to a few metros. But above all, this could create a confidence amongst the youth in small towns and rural areas — the kind of confidence to deal with the world as equals, that we have started seeing in recent years in large cities of India. In fact this goal of 150 to 200 million telephone and Internet connections opens up a possibility of comprehensive social development.
But this does not imply that setting up Internet connections itself would automatically lead to all-round social development. These are mere possibilities and active intervention would be required on various fronts to achieve this. The telecom and Internet connections, however, would open up the possibilities as a potent enabler.
Another implication of the goal of having 150-200 million telephone and Internet connection is that India would have to manufacture such a large quantity of equipment, install and commission the lines and maintain them. The numbers being very large, this in itself would create an economic activity in the country which would be unparalleled. Even if we assume that $50 per year is required to service a connection, 200 million connections imply $10 billion of economic activity every year. This is by no means a mean economic program.
Yet another implication emerges from the affordability issue discussed earlier, namely that the cost of a telecom line needs to be reduced by a factor of 3 to 4. An effort to reduce cost by a factor of 3 to 4 of the internationally prevalent cost would propel the R&D in this sector to be the very best in the world. This in fact therefore is not merely a program to expand telephony and Internet; it is in fact a program to become a Technology Leader in world in this sector.
Finally, a market size of 150 to 200 million (coupled with at least as large a market in other developing countries facing similar problems) is not small. Even at a cost of $250 per line, 200 million lines implies a market size of $50 billion. The market size is comparable to the telecom market in the west. There is every reason for industry to view this opportunity with great interest.
4.2 India has the capability
As discussed in Section 3. India has the capability to take up this challenging task of significant cost-reduction. The efforts of TeNeT group (at IIT Madras), described earlier, indicates this. But even more important, India today has a large number of telecom and IT companies, which carry out major design and development tasks for the best products in the world. Bangalore, Chennai, Hyderabad, Pune, Mumbai and several other cities are full of such companies. The problem is that most of these companies are carrying out the development tasks today as service work for industries in the west. Not only are the products owned by companies in the West, but also the products are designed to primarily serve the booming market of the West. The Indian companies are definitely capable of shouldering these challenging tasks, and without the efforts from many of them, no one CDOT or TeNeT group is capable of developing what is required for 150 to 200 million telecom and Internet connections.
The question is: why do these companies not work for the Indian market? The reason is that they do not have the confidence that this potential Indian market would really materialise. They do not believe that the Government policies would allow opening up this market. They are afraid that beuracratic decision-making in India will not let them benefit from such a potential. They would rather continue the service to the multinationals, where their returns are assured.
4.3 Policy is key
Therefore a sound telecom policy is the key to generate such confidence in the Indian R&D community. The government not only has to come up with policies which enable Indian R&D to contribute towards India, but also has to be seen to promote this. Indian telecom policies have been singularly lacking in this regard.
Even though DOT started privatisation of telecom operations in 1994, with a view to liberalise the environment so that multiple players can use different technologies to help expand telecom network, the process has been bogged down. Though the National Telecom Policy 99 attempts to untangle the web, the policy does not display a basic understanding of the affordability issues. That significant reduction of cost is imperative and that access networks needs to be delicensed, does not appear to be a consideration, while formulating these policies.
The privatisation process of telecom allowed prospective operators to bid for the right to operate in a circle (whole state). States in India are large and over a billion dollars is required to attempt to build a telecom network for a state. Of course, only large corporate houses in India and multinationals could take up such a task. Furthermore, without an understanding of the paying ability of the large Indian population, these corporates have in past bid very large amounts to obtain the license. Unable to pay these amounts and faced with bankruptcy, they have prevailed upon the government to change the license fee payment to revenue sharing in NTP 99. The NTP99, formulated under this environment, did the best that was possible, but is wanting as far as serious expansion of telecom and Internet goes.
But an important question is; why should privatisation start with a state-wide operation a all? Why cannot the Access part of the network be opened up and operated by Local Service Providers. This would have enabled tens of thousands of small operators to come up each with modest investment to provide services in a community (small area), much like the cable TV operations today. Why has privatisation process not proceeded on this line? If one also leaves it to the LSPs to chose whichever technology he/she wishes to and only work out a revenue sharing and interconnect agreement, it would really unshackle the communications deployment. An R&D company, coming up with an innovative product, has to get just a few of the thousands of franchise operators to try out the product and not depend upon its acceptance by beauracrats, or Basic Services Operators with multinational tie-ups. This single approach could get many of the Indian R&D companies to start looking inwards.
Another problem that bogs down the R&D efforts towards developing products for the Indian market, is that the Indian design houses are today not big enough to take on the might of the Motorolas and Alacatels of the world. This does not mean that their technology is not good enough; in fact a reasonable part of the technologies of these multinational telecom giants is now being created in India. What they can not match is the financial muscle of the multinationals. Statewide operators need large financing to carry out the operation and vendor financing, where system vendors not only supply the equipments, but also provide financing for these equipments. This is key to the purchase decision. Most multinationals are able to arrange financing from Exim banks of their countries. The financing terms are extremely attractive – an interest rate corresponding to LIBOR + 0.5%. (nearly 6% rate) plus five years moratorium on payments. Operators are cash-starved in the first few years and the five year moratorium is extremely handy. Coupled with attractive interest rate (compared to about 15% interest rate within India with no moratorium on payments), the financing terms are such that an operator is ready to buy an imported product at 100% higher price as compared to a comparable indigenous product. Such a situation is a big barrier to Indian design houses designing for India.
Ultimately the country loses on two counts. First, India uses a high-priced product, for which payment has to be ultimately made; and the higher cost of the telecom network implies that telecom remains confined to a small percentage of India’s population. Secondly, the Indian design house is discouraged from designing for India. Undoubtedly, the Indian policy makers have to pay serious attention to overcome this situation by coming with attractive financing policies for indigenously designed products. But what would help immensely is if they make the Local Service operation lincense free. This would create thousands of small operators, who cannot be all financed by multinational vendors. These small operators depend much more on their own resources and try to minimise their costs. They are much more likely to adopt the indigenous lower-cost products, to the ultimate benefit of the consumer.
4.3.1 Other Policy Initiatives
Another policy initiative, which is a must, is an active encouragement for setting up telecom and Internet service in small towns and rural areas. A simple solution is to provide a higher revenue share (for the access franchisee) for operations in small towns and rural areas. Similarly, in order to encourage expansion of telecom and network to lower middle classes and poorer sections in the city, a higher revenue share can be provided to a franchise operator who provides connections in slums and houses of lower income groups.
It is not just enough to encourage indigenous R&D, but encouragement to indigenous manufacturing is equally necessary. It is simply not possible to import $50 billion worth of equipments. Indian manufacturing has to be strengthened and made world class if we have to achieve our target. Clear policy initiatives encouraging indigenous manufacturing is required. For example, sales tax and excise duties have to be reduced. But at the same time, we have to push our manufacturing houses to produce at world class standards at a cost comparable to that in the rest of the world. China, for example, has left us far behind in this sector and urgent action is required to rectify this situation.
Unfortunately with the budget deficit of the Indian Government reaching a mammoth amount, sectors like telecom (and telecom manufacturing) have been seen as a cash cow, and high taxes have been imposed on this sector. This itself increases the cost of telecom and makes it unaffordable to most of its population. An alternative would have been to encourage telecom growth by lower tax rates — the resulting larger volume would not only compensate for the lower tax rate, but also propel more activity in this sector, bringing in indirect revenue to the Government. Even though the large budget deficit clouds thinking in this direction, efforts have to be made to break this shackle.
To conclude, providing 150 to 200 million telecom and Internet connections could enable millions of people in India and transform India. The most important resource in this century is not going to be material resources, but human resources. The expansion of the telecom and Internet network is the key if one has to convert India’s large population into a large pool of human resources.
The expansion of the network however is not possible at the price point prevalent in the West. Significant cost reduction is required and the efforts of CDOT and TeNeT groups points out that this is indeed possible. But one need to tap the large number of Indian electronics design houses to make this possible. Appropriate policies are necessary to make this possible. Opening up Local Service operation could be an important step in promoting such an effort.
Yet, all this would be only a beginning. The article has not dealt with several other concurrent actions that are necessary. First of all, the Personal Computer, as it exists today is too costly and inappropriate to be used by hundreds of millions of people in India. Efforts to come up with a variety of low-cost access terminals and integrating these with communication devices is a must. Besides, today’s PC consumes about 150 W of power. Providing back-up power in areas, where power cut extends to 10 hours, would be prohibitively expensive. The Access terminal not only need to be inexpensive but also should consume low power. Secondly, Internet Access can not reach millions without incorporating local language and local content in a massive way. Efforts so far in this direction have been rather poor. Similarly, expecting everyone to use keyboard to access all information may limit the use of Internet. Voice-enabled Internet service (with Indian languages) must emerge soon. Finally, Internet in India requires Indian applications – applications that emerge from the Indian way of life.
In spite of all the massive efforts required, this goal is very much realisable. The very enunciation of this makes it appear to be very feasible. Only this optimism need to be converted into action.