1. Amazing Outcomes of Telecom De-monopolisation in India By 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 @ BSNL, Vijayawada : 15 Feb 2008

2. THC_CTMSS376_Feb'082 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

3. THC_CTMSS376_Feb'083 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

4. THC_CTMSS376_Feb'084 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.

5. THC_CTMSS376_Feb'085 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.

6. THC_CTMSS376_Feb'086 Telecom Overview (5/5) Internet Service Providers (ISPs) - Licences issued >400 Internet Kiosks: 100,000 Internet Subscribers: Dial-up: 9.3 million Broad-band: 2.5m(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 Telcos Investments $ 10 bln/yr BSNL/MTNL share 28% (declining) of telephones

7. THC_CTMSS376_Feb'087 Teledensity IndiaMetros (4 cities) Other Urban ( about 6000 towns) Rural 23%85%55%2.3%

8. THC_CTMSS376_Feb'088 Mobile Subscribers Prepaid: 85% Churn: 15% ARPU/month Year20002001200220032004200520062007 $29.3124.7319.6414.0811.689.508.337.44

9. THC_CTMSS376_Feb'089 Sale of Cell Phones Year2001‘05‘06’07 mlns2317490 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

10. THC_CTMSS376_Feb'0810 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 Bureau FAX: BSNL : 0.7 mln (declining) INDIA

11. THC_CTMSS376_Feb'0811 Internet & Broadband: Growth Month/YearInternetBroad-band March 19980.14NA 1999*0.28NA 20000.90Na 20013.00NA 20023.2NA 20033.60.008 20044.50.019 20055.650.180 20067.001.35 Sept 20068.81.82 Sept 200712.42.50 * Open to private sector & competition

12. THC_CTMSS376_Feb'0812 Amazing Outcomes (1/4) 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%

13. THC_CTMSS376_Feb'0813 Growth of Phones in India Source : DOT Annual Report 2003 Total 278 mln = as of Jan’08

14. THC_CTMSS376_Feb'0814 AMAZING OUTCOMES (2/4) Tele-density up from under 2% in 1994 to over 22% (Sept 2007) Over 70 million mobile phones being added per year (under 2 million fixed telephones, mostly fixed WLL phones) 170 mln persons use mobiles only Mobiles exceeded fixed phones in Oct 2004 Rural demand exceeding Urban demand For most, first telephones are mobiles

15. THC_CTMSS376_Feb'0815 AMAZING OUTCOMES (3/4) Pre-paids are 85% in mobiles Churn about 15% BSNL losing customers- Public Grievance cell under Minister directly Reliance’s “disruptive”market penetration 600,000 route kilometres of Optical Fibre Cables by competing Telcos link up 5000 + towns and cities.

16. THC_CTMSS376_Feb'0816 AMAZING OUTCOMES (4/4) 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

17. THC_CTMSS376_Feb'0817 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

18. THC_CTMSS376_Feb'0818 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.

19. THC_CTMSS376_Feb'0819 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)

20. THC_CTMSS376_Feb'0820 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

21. THC_CTMSS376_Feb'0821 National Do Not Call (NDNC) Register Junk mail in the post, spam in the e-mail are familiar menaces Unsolicited calls; SMS; by tele-marketers are the new menace, especially for cell phone users NDNC Registry designed & implemented by the Regulator, TRAI. All telemarketers ( 15,000 having 450,000 lines by Sept’07) required to register with TRAI. India’s National Informatics Center (NIC) on contract with the TRAI installed the NDNC Registry; operates & maintains it.

22. THC_CTMSS376_Feb'0822 National Do Not Call (NDNC) Register (2) Subscribers not wanting to receive unsolicited calls/SMS, have to register (free) with their service provider Telcos The NIC prepared a scrubbing module. Tel- marketers have to get the numbers (lists) they wish to call, scrubbed by the NIC. Numbers in the NDNC Registry are scrubbed (deleted) from the tele-marketeers’ lists. All this is an on-line operation If after 45 days of a subscriber registering in the NDNC; he receives a call the caller is fined $ 12.5 for every call!

23. THC_CTMSS376_Feb'0823 National Do Not Call (NDNC) Register (3) India’s largest tele-marketer, Info Vision has 9000 people across 23 cetners in India an d 1000 people in US operation A telemarketer makes 100 to 120 calls/day There are about 300,000 employees of telemarketers ( 15,000) 5% of telephone subscribers are receiving at least one call from telemarketers Tel-marketers’ calls in India now are about 30mln / day!

24. THC_CTMSS376_Feb'0824 Telecom Outcomes From “Apply, apply - No Reply” To bounteous supply We now have 240mln phones, 85% mobiles – far in excess of 11 th plan target Teledensity increased from 0.9 in 1994 to 21% now (2007) Telephones work during rains and floods and storms – New Technologies OF cables and Wireless

25. THC_CTMSS376_Feb'0825 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

26. THC_CTMSS376_Feb'0826 Telecom Outcomes Demonopolisation brought 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.....]

27. THC_CTMSS376_Feb'0827 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

28. THC_CTMSS376_Feb'0828 Telecom Outcomes Demonopolisation brought contd.. We are the lragest(7.5 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. 1,10,000 cr

29. THC_CTMSS376_Feb'0829 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!)

30. THC_CTMSS376_Feb'0830 Reforms in Power & Telecom Sectors What must be done in Regulation:  Revamp body to make it consumer-caring  Build expertise/ capacity  Fill with talents  Avoid civil servants, ex-monopolists  Make Appointments Transparent  Constitute Regional & National Consumer Councils  Publish Consultation Papers  Assist Research by Consumer bodies & Professionals  TRAI to have offices in State capitals  Fund consumer bodies to build them into counter wailing power against companies 16/16

31. THC_CTMSS376_Feb'0831 Universal Service or Universal Access to Telephone Universal Service = A telephone in every home Universal Access: A public telephone within easy reach of users, usable non- discriminatorily by any body, at any time. Eg: coin-boxes in public places ( Malls, shops, Rail/Bus stations, Post-offices etc.,)

32. THC_CTMSS376_Feb'0832 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

33. THC_CTMSS376_Feb'0833 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

34. THC_CTMSS376_Feb'0834 Affordability of Electronic Devices: Ratio of Price of Device to Per Capita Income 1951197419942007 Radio2.00.50.020.005 TV SetNA1.91.20.37 Year’s Telephone Service 2.51.0 0.12 PCNA 6.00.75

35. THC_CTMSS376_Feb'0835 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

36. THC_CTMSS376_Feb'0836 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.)

37. THC_CTMSS376_Feb'0837 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

38. THC_CTMSS376_Feb'0838 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

39. THC_CTMSS376_Feb'0839 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)

40. THC_CTMSS376_Feb'0840 Dhanyawad: Thank You