1. THC_CTMS S390 July '081 DR T.H. CHOWDARY Director: Center for Telecom Management and Studies Chairman: Pragna Bharati (intellect India ) Former: Chairman & Managing Director Videsh Sanchar Nigam Limited & Information Technology Advisor, Government of Andhra Pradesh T: +91(40) 6667-1191/ 2784-6137(O) 2784-3121® F: +91 (40) 6667-1111, 2789-6103 hanuman.chowdary@tcs.com thc@satyam.com Talk at Rajiv Gandhi University of Knowledge Technologies 23 rd July, 2008 ‘Telecom & IT Miracle’

2. THC_CTMS S390 July '082 From “Apply, Apply………” From “Apply, Apply – No Reply” to Supply, Supply – Apply, Apply for more From one million phones per year in 1993 to One million phones per month since Y 2007 From: Prices up and up ever to prices down and down still

3. THC_CTMS S390 July '083 Liberalisation Since 1991 Demonopolisation Private Sector Entry F.D.I.s Competition Independent Regulation Corporatisation of DoTs telecom services New Technologies – Wireless, Optical Fiber Cables, Communication Satellites & the 8 th wonder – INTERNET

4. THC_CTMS S390 July '084 Telecom Policies While in DoT –Separation of Telecoms from Posts – 1974; 1985 –Corporatisation: 1986; MTNL, Videsh Sanchar Nigam Ltd ; Y 2000 BSNL National Telecom Policies & Laws –NTP 1994; NTP-1999 –TRAI – Y1997; TRAI & TDSAT – Y2000 –Universal Service Fund

5. THC_CTMS S390 July '085 While Still P & T/DoT People & Service Orientation – Struggles; trials & triumphs –Public telephones – away from Post Offices to –Grocers & Physically disabled –Gali Gali Mein, anywhere, everywhere –Ghar Ghar mein Radio & Gaon Gaon mein telephone – VPTs (1978-83….) & since –Haath, haath mein telephone; Gaon, gaon mein Internet

6. THC_CTMS S390 July '086 Telecom Overview (1/5) 41 licenced private companies besides the state-owned MTNL and BSNL in 23 licenced areas Total number of P-Telcos providing services are 12 Licences for all inland telephone services are state-wide National long-distance (NLD) & international subscriber dialing (ISD) are whole country Some P-Telcos operate only cellular mobile telephone services Some only in a few states State-owned MTNL operators only in 2 cities ( Delhi& Mumbai) Some ISPs have taken NSD & ISD licences to cover their VPN services

7. THC_CTMS S390 July '087 Telecom Overview (2/5) Indian Telephone Industries (ITI) is the state-owned manufacturing company under the administrative control of the DOT. The state-owned BSNL/MTNL are having 95% of the local loop for the 39.5 mln fixed lines BSNL/MTNL have a telephone market share of 28% of the 250 mln phone; their share is declining. There are 3 long distance band-width only ( on O.F cables) providers – National Power Grid Corporation, Rail Tel & ONGC

8. THC_CTMS S390 July '088 Telecom Overview (3/5) ISRO’s INSAT (Indian Satellite) enterprise sells bandwidth for telecoms ( and TV broadcasters) 3 Telcos (VSNL; Bharati & Reliance – all private) own undersea cables providing global connectivity There are 130 active Internet Service Provider (ISPs) offering dial- up to broad-band; their number can be unlimited; they provide VPN, NLD & ISD; VOIP etc. services. (more than 400 were licensed but they are ineffective) CDMA using companies have, as of Sept 2004, 54 mil users GSM using companies have 152 mln subscribers Fixed (wired & wireless) subscribers are 39 mln.

9. THC_CTMS S390 July '089 Telecom Overview (4/5) Optical Fiber transmission systems of 650,000 (520,000 RKH of BSNL) route kms connect about 6000 towns. Coaxial ( 6,024 km) and terrestrial microwave and UHF ( 95,330 RKM) are frozen No more construction since 1997 ISPs are deploying WiFi and WiMAx in cities Some state governments like Andhra Pradesh and Gujarat have dedicated State Wide Area Networks ( SWANs) for their e-governances schemes.

10. THC_CTMS S390 July '0810 Telecom Overview (5/5) Internet Service Providers (ISPs) - Licences issued >400 Internet Kiosks: 100,000 Internet Subscribers: Dial-up: 9.3 million Broad-band: 3.0m(for 256 kbps-2.0 mln & 2MBP -0.5 mln) Users: 50 mln [over 35 mln access Internet thro cell-phones] Telcos Revenues: $ 31.0 bln/yr (Rs.1,25,000 cr) Telcos Investments $ 10 bln/yr (Rs.42,000 cr) BSNL/MTNL share 28% (declining) of telephones

11. THC_CTMS S390 July '0811 Teledensity* IndiaMetros (4 cities) Other Urban ( about 6000 towns) Rural 30%85%60%3.5% *Telephones/100 people

12. THC_CTMS S390 July '0812 Mobile Subscribers Prepaid: 85% Churn: 15% ARPU/month Year 200020052008 Rs.1,350Rs.430Rs.300

13. THC_CTMS S390 July '0813 Sale of Cell Phones PCs sold/year: 7 mln PCs in use : 25 mln There are 60,000 retailers of cell phones A cell phone is changed on eh average in 9 months! Nokia, Ericsson, Motorola, LG are the leading vendors Year2001‘05‘06’07‘08 mlns2317490130

14. THC_CTMS S390 July '0814 Villages (habited): 600,000 % Electrified: 87% (public) telephoned: 92% (545/600,000) Public Telephones: Along National Highways : 30,000 Local only: 1.12 mln NLD & ISD: 887,000 Total: app: 2.1 mln Telegraphs – dying : 12 mln/yr Telex: Dead Bureau FAX: BSNL : 0.7 mln (declining) Radio-paging : Dead Fax : Dying Post : Declining E-MAIL: GREATLY LEAPING INDIA

15. THC_CTMS S390 July '0815 Internet & Broadband: Growth Month/YearInternetBroad-band March 19980.14Non-Existent 1999*0.28Non-Existent 20000.90Non-Existent 20013.00Non-Existent 20023.2Non-Existent 20033.60.008 20044.50.019 20055.650.180 20067.001.35 200812.42.50 * Open to private sector & competition

16. THC_CTMS S390 July '0816 Amazing Outcomes (1/3) Telephones available on demand 4/5 ( 7 in some states) Telcos canvassing you to take a phone 80% decline in long-distance call and lease charges – India ONE service –@#7.5/month and –call anywhere @ US 2.5 cents per4 mnt. Several price-service packages to suit customers pocket Carpenters, masons, electricians, vegetable vendors, farmers, students …… sporting mobiles Capital ( for network) cost/line came down by 86% Return on investment 33 1/3%

17. THC_CTMS S390 July '0817 Growth of Phones in India Source : DOT Annual Report 2003 Total 278 mln = as of Jan’08

18. THC_CTMS S390 July '0818 Employment in Indian IT &ITES sectors*,’000 (* Years ending March; + Estimate @ break-up: NA)

19. THC_CTMS S390 July '0819 Share of India in Global BPO & KPO Markets Year 2003-’04 2010-’11 BPO 36% 55% KPO 56% 71% Leaders: Eng. Design Basic Data Biotech & Search Pharma Integration & Mgment 400m $ 300m $ 280 Education coming up

20. THC_CTMS S390 July '0820 Foreign Companies Engaging Indian intellect GE – Largest R&D center outside USA is in India in Bangalore with 2300 researchers, double that in Shanghai GE put in $ 80 mln in the Bangalore R&D facility GE’s Bangalore R&D field for 260 patents in the USA (37 already approved) Boeing USA is outsourcing Aircraft design to Russia ($ 120/ Hr) Russians are outsourcing parts of the design to HAL (BG) at $ 30/Hr Gorbachev went to USA to recommend Moscow as Bangalore’s rival! An Indian retained does the work of 2 or 3 Europeans; does not take 6 weeks of holidays & costs one-fourth

21. THC_CTMS S390 July '0821 Some Foreign Companies’ Employees in India GE Caps GE DevIBMOracleEDSTexas 16,0001,80010,00060003,500900 IntelJP Morgan HUWAISiemensMotorola 1,7001,2001,50020001,500

22. THC_CTMS S390 July '0822 PCI A X TSP Time (a) Affordability A PCI/ Tele-Service Price - PCI: Per Capita Income - TSP: Telephone Service Price - A: Affordability Bring down price to increase affordability

23. THC_CTMS S390 July '0823 Affordability of Telephone 195119942007 Revenue/Line * at current exchange parity $ 125$250$125 Rev. as% of PCI 2.51.00.12 Affordability PCI Tel. Svce.Price

24. THC_CTMS S390 July '0824 AMAZING OUTCOMES (1/2) Tele-density up from under 2% in 1994 to over 30% in 2008 July About 120 million mobile phones being added per year 270 mln persons use mobiles only Mobiles exceeded fixed phones in Oct 2004 Rural demand exceeding Urban demand

25. THC_CTMS S390 July '0825 AMAZING OUTCOMES (2/2) New services No waiting for phones Private companies invested $ 40 bln in a 10y period. Private companies are investing $ 7.5 bln/year Foreign direct investment (upto 74% of equity) Transformation into electronic-photonic information infrastructure for a knowledge society: e-education; e- governance; e-sevas (services); e- commerce, e-democracy (advocacy, balloting) IT & software and outsourced services to the world

26. THC_CTMS S390 July '0826 Economic Impact (1/2) Thousands of BPO; KPO; ITeS & e-Media Businesses are born Job Opportunities for the hitherto educated unemployed increased fantabulously – well paid [10 times the per capita income] Over 2.0 mln engaged growing 20/25% p.a. Huge demand for University education-[to go up from < 8% to 15% in 11 th plan 2007-2012

27. THC_CTMS S390 July '0827 Economic Impact (2/2) Exports of IT; ITeS; BPO, KPO growing by 30% p.a.; would go up from $ 40.0 bln in 2007 to $ 60 bln in 2010 Indian employees of foreign companies (IBM, GE, EDS, Deloitte, Cap Gemini, CSC, Accenture...) are tens of thousands Indian companies are recruiting foreign talents-Global bench-marking of talent to sensitise Indians to Excellency Indian companies are acquiring BPOs in EU; US; Hungary; Philippines, Sri Lanka, Vietnam...

28. THC_CTMS S390 July '0828 Missing Link – No More Over 585,000 (92%) villages have a public telephone, each attended by helpful, self - employed people. 90 % of the territory and 99% of the population has access to telephone 38% of territory covered by mobile telephony STD/ ISD public phones - more than a million in street afford private subscription. corners, grocer shops and other public places and residential complexes for the not so affluent who can’t

29. THC_CTMS S390 July '0829 Bridging the Digital Divide Internet Kiosks by private companies, ISPs and Bharat Sanchar (SOE) for public use. Universal Access/ Service Fund and Administrator Government (s)putting subsidised public Internet Kiosks in villages Content in Indian languages and machine translation of spoken and written English into Indian languages being developed Attendants (physically disabled persons, self- employed young) assist seekers for a fee provide e-mail addresses; browsing; video interviews.

30. THC_CTMS S390 July '0830 Internationally P-Telcos are also laying and using undersea cables Thousands of Satellite Earth Stations (SES) including V-SATs providing global connectivity through INTELSAT, INSAT and private Comsats. Greatest outcome - helping over five thousand ( and increasing ) software BPO and call center companies serve global companies ( export earning in the year 2006-’07 : $ 31 billion)

31. THC_CTMS S390 July '0831 Telecom: Employment Productivity Prior to 1994 – 450 K employees & 1 employee for 15 phones In 2007 for PSUs 1 employee for 200 phones P-Telcos: 1 employee for 2000 phones (New Business Model of Franchisees & outsourcing For PSUs: 80% Tech & 20% A/C 2 Adm P-Telcos: 80% Fin; Mktg; H R 20% Technical

32. THC_CTMS S390 July '0832 Telecom Outcomes contd.. Cell-phones are now mass consumption appliances. Their prices came down to one-tenth to one-fifteenth in eh last 10 years 85% cell subscriptions are prepaid - no billing; revenue before costs/ service! - Users control expense Affordability increased 15 fold sine 1951; 6 fold in the last decade Electricians, drivers, plumbers, carpenters, masons, welders, street-vendors; mazdoors have phones! 600k/650k villages have telephones

33. THC_CTMS S390 July '0833 Telecom Outcomes Demonopolisation brought We beat the USA in number of telephones – China1st; India 2 nd; USA 3 rd. New technologies Capital costs came down (by 90% from Rs.40,000/line to less than Rs.4,000/-) Prices came down ( by 97% for ISD calls 90% for others) Myriad new services ( on the cell-phone-digital cameras, Internet Access) 90% reduction for global tele-links; enabling India’s software companies to be competitive spread to Tier II cities [like Visakhapatnam, Mangalore, Coimbatore.....]

34. THC_CTMS S390 July '0834 Telecom Outcomes Demonopolisation brought contd.. BPO, KPO & Call Center companies enabled to be born & remain competitive due to drop in band-width price & bandwidth even in II tier cities E-governance, e-procurement, e- education, anytime, anywhere banking; e- public relations India becoming R&D & design center for the world

35. THC_CTMS S390 July '0835 Telecom Outcomes Demonopolisation brought contd.. We are the largest(9.0 mln cell phones / month) market in the world-larger than China (5 mln/m) Rs. 90,000 cr of private investment came into the sector P-Telcos are investing about Rs. 40,000/yr Telecom revenues are Rs. 1,20,000 cr

36. THC_CTMS S390 July '0836 Down side of Telecom Liberalisation Indian equipment manufacture almost dead Indian R&D – reduced to “nominal”; hardly any user Indian contribution to network construction Low-end; labour intensive (towers, batteries, A/C; shelters, trenching & cable –laying…) All network equipment imported/India Assembled Indian R&D personnel creating IPR for foreign owners ( i/c Chinese!)

37. THC_CTMS S390 July '0837 Universal Service Fund (USF) All companies to contribute 5% of revenues to the USF (Currently Rs. 60 bln ($ 1.5 bln) USF Administrator (USFA) in the DOT District-wise (>700 in India) villages without phones listed; estimates of capital cost,maintenance & operations are made for providing the VPTs in designated villages USFA invites bids from enterprises; criterion for selection; Least subsidy demanded Services to be provided as well as where interconnection is available specified Amount available: $ 2.5 bln

38. THC_CTMS S390 July '0838 USF Objectives Telephone (s) in the village; school; library Internet connection (s) Subsidised service to certain categories ( farmers, welfare institutions-child care & old age home) E-governance ( services and information to farmers, job-seekers etc.)

39. THC_CTMS S390 July '0839 Territorial Coverage To extend cellular mobile telephone coverage through out the national territory ( 3.3 mln km 2 ) 330,000 RBSs are required 110,000 RBSs exist covering 38% of the territory USFA is inviting bids to put up RBS towers, antennae, shelter, power; A/C and connect by Optical Fiber Cable to the nearest RBS Controller & Mobile Switching Center (MSC) USFA would lease them to Telcos

40. THC_CTMS S390 July '0840 Territorial Coverage (2) RBS tower provision is a new business line & many Telcos and non-Telcos are entering this business In the Y 2007 program USAF is funding 7,871 towers (RBS) to connect 3.0 mln subscribers. 4 companies are engaged now. BSNL, the PSU won 75% of the contracts. USF subsidy planned for 20,000 RBSs @ $ 2.5 bln

41. THC_CTMS S390 July '0841 A scheme in which BPO work is taken to rural areas to create job opportunities there. Broad-band connectivity from infrastructure providers (NPGC, RaiL Tel, GAIL, besides Telcos) to villages Selected village graduates, intensively trained in communication skills, English and computer skills & engaged Groups of 100 graduates per villages cluster ( within 7 km radius- bicycling distance) assigned BPO work Audio-video conferencing in work-places Urbanizing the village without moving people to cities Prosperity to the village-up grades for schools, in health, housing water and sanitation; roads; electrical power etc. Coastal Villages in Andhra Pradesh show the way led by Satyam computer Services thro’ a philanthropic foundation (By raju) GRAM IT (IT & ITES)

42. THC_CTMS S390 July '0842 Foreign Companies Engaging Indian intellect GE – Largest R&D center outside USA is in India in Bangalore with 2300 researchers, double that in Shanghai GE put in $ 80 mln in the Bangalore R&D facility GE’s Bangalore R&D field for 260 patents in the USA (37 already approved) Boeing USA is outsourcing Aircraft design to Russia ($ 120/ Hr) Russians are outsourcing parts of the design to HAL (BG) at $30/Hr Gorbachev went to USA to recommend Moscow as Bangalore’s rival! An Indian retained does the work of 2 or 3 Europeans; does not take 6 weeks of holidays & costs one-fourth

43. THC_CTMS S390 July '0843 Some Foreign Companies’ Employees in India GE Caps GE DevIBMOracleEDSTexas 16,0001,80010,00060003,500900 IntelJP Morgan HUWAISiemensMotorola 1,7001,2001,50020001,500

44. THC_CTMS S390 July '0844 Dhanyawad: Thank You