The telecom industry has been divided into two major segments, that is, fixed and wireless

cellular services. In todays information age, the telecommunication industry has a vital role to play. Considered as the backbone of industrial and economic development, the industry has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionising human communication. Although the Indian telecom industry is one of the fastest-growing industries in the world, the current teledensity or telecom penetration is extremely low when compared with global standards. Indias teledensity of 36.98% in FY09 is amongst the lowest in the world. Further, the urban teledensity is over 80%, while rural teledensity is less than 20%, and this gap is increasing. As majority of the population resides in rural areas, it is important that the government takes steps to improve rural teledensity. No doubt the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony. These measures are expected to improve the rural tele-density and bridge the rural-urban gap in tele-density. Introduction - Evolution Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851 when the first operational land lines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced in India much later in 1881. Further, in 1883, telephone services were merged with the postal system. In 1947, after India attained independence, all foreign telecommunication companies were nationalised to form the Posts, Telephone and Telegraph (PTT), a body that was governed by the Ministry of Communication. The Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecommunication equipment manufacturing only. The government concretised its earlier efforts towards developing R&D in the sector by setting up an autonomous body Centre for Development of Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication technology to meet the growing needs of the Indian telecommunication network. The actual evolution of the industry started after the Government separated the Department of Post and Telegraph in 1985 by setting up the Department of Posts and the Department of Telecommunications (DoT). The entire evolution of the telecom industry can be classified into three distinct phases.

Phase I- Pre-Libralisation Era (1980-89) Phase II- Post Libralisation Era (1990-99)

Phase III- Post 2000

Until the late 90s the Government of India held a monopoly on all types of communications as a result of the Telegraph Act of 1885. As mentioned earlier in the chapter, until the industry was liberalised in the early nineties, it was a heavily government-controlled and small-sized market, Government policies have played a key role in shaping the structure and size of the Telecom industry in India. As a result, the Indian telecom market is one of the most liberalised market in the world with private participation in almost all of its segments. The New Telecom Policy (NTP-99) provided the much needed impetus to the growth of this industry and set the trend for libralisation in the industry. Current Status Globalisation has made telecommunication an integral part of the infrastructure of the Indian economy. The telecom sector in India has developed as a result of progressive regulatory regime. According to the TRAI, the total gross revenue of the Indian telecom services industry was Rs 1,524 bn in FY09 up from Rs 1,291 bn in FY08 registering a growth of 18.03% over FY08 and its subscriber base grew by 43% over FY08 to touch 429.70 mn subscribers in FY09. The telecom sector in India experienced a rapid growth over the past decade on account of regulatory libralisation, structural reforms and competition, making telecom one of the major catalysts in Indias growth story. However, much of this growth can be attributed to the unprecedented growth in mobile telephony as the number of mobile subscribers grew at an astounding rate from 10 million in 2002 to 392 million in 2009. Besides, the growth in the service and IT and ITeS sector also increased the prominence of the telecom industry in India. Telecom has emerged as a key infrastructure for economic and consumer growth because of its multiplier effect and the fact that it is beneficial to trade in other industries. The contribution of the sector to GDP has been increasing gradually (its contribution in GDP has more than doubled to 2.83% in FY07 from 1.0% in FY92). Telecom is one of the fastest-growing industries in India; on an average the industry added 8 million wireless subscribers every month in FY08. The government had set a target of 500 million telecom connections by 2010. However, according to the TRAI, the total subscriber base (wireless and wireline) in the industry crossed the 500-mn-mark and reached 509.03 mn by the end of September 2009, which took India to the second position in terms of wireless network in the world next only to China. Prior to liberalisation, the telecom sector was monopolised by the public sector and recorded marginal growth; in fact, during 1948-1998, the incremental teledensity in the country was just 1.92%. However, the

introduction of NTP99 accelerated the growth of the sector and the teledensity increased from 2.33 in 1999 to 36.98 in 2009; however, much of this growth was brought about by the NTP-99 policy changes such as migration from fixed license fee to revenue sharing regime and cost-oriented telecom tariffs. From 2003 onwards the government has taken certain initiatives such as unified access licensing regime, reduced access deficit, introduction of calling party pays (CPP) and revenue sharing regime in ADC that has provided further impetus to the sector. The Indian telecom industry is characterised with intense competition, and continuous price wars. Currently, there are around a dozen telecom service providers who operate in the wired and wireless segment. The government has been periodically implementing suitable fiscal and promotional policies to boost domestic demand and to create volumes for the industry. The Indian telecom industry has immense growth potential as the teledensity in the country is just 36 as compared with 60 in the US, 102 in the UK and 58 in Canada. The wireless segment growth has played a dominant role in taking the teledensity to the current levels. In the next few years, the industry is poised to grow further, in fact, it has already entered a consolidation phase as foreign players are struggling to acquire a pie in this dynamic industry. Role in Indias Development Contribution to GDP According to the UNCTAD, there is a direct correlation between the growth in mobile teledensity and the growth in GDP per capita in developing countries, which tend to have a high percentage of rural population. The share of the telecom services industry in the total GDP has been rising over the past few years (the telecom sector contribution in GDP went up from 2.52% in FY05 to 2.83% in FY07). Growth of IT-ITeS and Financial Sector India has entered the league of countries with the most-advanced telecommunication infrastructure after the industry was deregulated. Furthermore, deregulation has stimulated Indias economic growth through industry growth and through rise in investments. It is evident that a well-developed communication sector improves access to social networks, lowers transaction costs, increases economic opportunities, widens markets, and provides better access to information, healthcare and educational services. The growth in Indian telecom sector has been concomitant with overall growth in GDP, government revenue,

employment et al. Besides, telecommunication has increased efficiency, reduced transaction costs, attracted investments and has created new opportunities for business and employment. The NTP-99 was particularly helpful for the ITeS-BPO industry as it ended the government monopoly in international calling by introducing IP telephony. After the introduction of IP telephony, there was rapid growth in the number of data processing centres and inbound/outbound call centres, which ultimately led to the outsourcing revolution in India. The telecom sector has been instrumental in creating jobs for a vast pool of talented and knowledge professionals in the IT and ITeS-BPO industry, which thrives on reliable telecommunication infrastructure. India has become an important outsourcing destination for the world and the boom in this sector also has transformed Indias economic dynamics. The evolution of telecom sector has brought about a revolutionary change in the way some businesses operate. Another beneficiary of the telecom revolution is the financial services industry, which has been on a growth trajectory. The progress and quality of the financial sector has been a key factor that has driven the pace and diversity of the real economy. India has an extensive and well-developed financial sector with wide and sophisticated banking network. Banking in India has become service-oriented, and has matured greatly from the days of walk-in customers to the present situation when banks have migrated to a 24-hour banking platform to attract customers; however, this disintermediation in the business has led banks to be extremely prudent in terms of their internal operations and has led them to adopt newer products and delivery channels. Further, with introduction of internet & mobile banking the long ques at the banks are slowly becoming a thing of the past. Both the financial and the IT-ITeS segments rely on good domestic as well as international network connectivity; therefore, there is a need for a sound telecommunication network. Factors Facilitating Growth of the Sector The phenomenal growth in the Indian telecom industry was brought about by the wireless revolution that began in the nineties. Besides this, the following factors also aided the growth of the industry. Libralisation The relaxation of telecom regulations has played a major role in the development of the Indian telecom industry. The liberalisation policies of 1991 and the consequent influx of private players have led the

industry on a high growth trajectory and have increased the level of competition. Post-liberalisation, the telecom industry has received more investments and has implemented higher technology. Increasing Affordability of Handsets The phenomenal growth in the Indian telecom industry was predominantly aided by the meteoric rise in wireless subscribers, which encouraged mobile handset manufacturers to enter the market and to cater to the growing demand. Further, the manufacturers introduced lower-priced handsets with add-on facilities to cater to the increasing number of subscribers from different strata of the society. Now even entry-level handsets come with features like coloured display and FM radio. Thus, the falling handset prices and the add-on features have triggered growth of the Indian telecom industry. Prepaid Cards Bring in More Subscribers In the late nineties, India was introduced to prepaid cards, which was yet another milestone for the wireless sector. Prepaid cards lured more subscribers into the industry besides lowering the credit risk of service providers due to its upfront payment concept. Prepaid cards were quite a phenomenon among first-time users who wanted to control their bills and students who had limited resources but greater need to be connected. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. Further, the introduction of innovative schemes like recharge coupons of smaller denominations and life time incoming free cards has led to an exponential growth in the subscriber base. Introduction of Calling Party Pays (CPP) The CPP regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. So far India had followed the Receiving Party Pays (RPP) system where the subscriber used to pay for incoming calls from both mobile as well as fixedline networks. Shifting to the CPP system has greatly fuelled the subscriber growth in the sector. Changing Demographic Profile The changing demographic profile of India has also played an important role in subscriber growth. The changed profile is characterised by a large young population, a burgeoning middle class with growing disposable income, urbanisation, increasing literacy levels and higher adaptability to technology. These

new features have multiplied the need to be connected always and to own a wireless phone and therefore, in present times mobiles are perceived as a utility rather than a luxury. Increased Competition & Declining Tariffs Liberalisation of the telecom industry has fuelled intense competition, especially in the cellular segment. The ever-increasing competition has led to high growth of subscribers and has put pressure on tariffs, which have seen a sharp drop over the years. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war has acted as a major catalyst for attracting more subscribers. Apart from these major growth drivers, an improved network coverage, entry of CDMA players, growth of value-added services (VAS), advancement in technology, and growing data services have also driven the growth of the industry. Outlook The telecom industry in India has experienced exponential growth over the past few years and has been an important contributor to economic growth; however, the cut-throat competition and intense tariff wars have had a negative impact on the revenue of players. Despite the challenges, the Indian telecom industry will thrive because of the immense potential in terms of new users. India is one of the most-attractive telecom markets because it is still one of the lowest penetrated markets. The government is keen on developing rural telecom infrastructure and is also set to roll out next generation or 3G services in the country. Operators are on an expansion mode and are investing heavily on telecom infrastructure. Foreign telecom companies are acquiring considerable stakes in Indian companies. Burgeoning middle class and increasing spending power, the governments thrust on increasing rural telecom coverage, favourable investment climate and positive reforms will ensure that Indias high potential is indeed realised. Attempts to define broadband more specifically in terms of speed can be challenging. As a 2008 study on behalf of the European Union (EU) noted: Definitions based on data transfer speed are not able to take into account the very fast evolution in technologies and uses. Is a bandwidth of 256 kbit/s a broadband connection? Should the lower limit be set to 1 Mbit/s? There is no definitive answer as the bandwidth required to run internet applications is

continuously increasing and infrastructure standards are also continuously improving to face the growing demand. Such a definition can only be relative to a particular moment in time in a particular country. Defining broadband in terms of speed presents several difficulties. First, broadband speed definitions vary widely among countries and international organizations from at least 256 kbit/s on the low end (such as in India) to faster than 1.5 Mbit/s on the high end (such as in Canada). Second, as referenced in the abovementioned EU study, definitions based on speed may not keep pace with technology advances or with the speeds services and applications require to function properly. In other words, what is considered broadband today may be seen as too slow in the future as more advanced applications technologies. Thus, any speed-based definition of broadband will need to be updated over time. Third, such definitions may not reflect the speeds realized by end users such that the speeds advertised by commercial broadband providers may be much higher than the speeds set by the government as broadband or vice versa. For example, while Colombias broadband speed definition is 1 Mbit/s, its average broadband connection speed is already 1.8 Mbit/s. Policymakers and regulators are struggling to develop definitions of broadband that are appropriate to the time and that reflect rapidly improving technological capabilities. In July 2009, for example, Indias telecommunications regulator suggested that the government redefine broadband as connectivity of 2 Mbit/s or faster, up from the 256 kbit/s defined in the Broadband Policy of 2004. Some countries have developed different categories in addressing broadband. The Canadian Radio-television and Telecommunications Commission, for example, distinguishes between high-speed Internet service, defined as at least 128 kbit/s, and broadband service, which must be at least 1.5 Mbit/s. In addition to or in place of these definitions, a number of countries have minimized or avoided the issue of defining broadband in terms of speed and have focused instead on setting ambitious minimum speed goals. Broadband speed goals in these countries include:

Australias goal is to make connections with speeds of 100 Mbit/s available to 93 percent of homes, schools, and businesses by 2018.

Finland has the goal of making 100 Mbit/s connections available to every household by 2016. Germanys goal is 50 Mbit/s connections for 75 percent of households by 2014. The EUs Digital Agenda for Europe calls for all Europeans to have access to connections with speeds of at least 30 Mbit/s by 2020, with 50 percent or more of households having access to speeds in excess of 100 Mbit/s.

Korea, a country where broadband connection speeds already average almost 50 Mbit/s, has set the lofty goal of 1 Gbit/s connections by 2013.

Sweden aims for 40 percent of households and businesses having access to 100 Mbit/s connections by 2015, and 90 percent by 2020. The United Kingdom has relatively modest goals. Its Digital Britain plan aims for universal connections of at least 2 Mbit/s by 2012.

The United States set a goal of providing 100 million households with access to actual (not advertised) speeds of 100 Mbit/sMbit/s and all households with access to actual speeds of at least 4 Mbit/s downlink and 1 Mbit/s uplink by 2020. Given the speed and unpredictability of technological progress, the FCC plans to review and revise these goals every four years.

Some countries are moving away completely from understanding broadband in terms of speed and instead seek to define it in terms of functionality. This is because minimum upload and download numbers do not always paint the whole picture, and definitions based on bandwidth run the risk of always being a step behind. Defining broadband in terms of functionality cuts to the chase: what can and cannot be done with a certain connection. As with many information technologies, broadband has demonstrated that it is quick-to-market, continually changing and unpredictable. Customer expectations are continually ramping up as the need for more bandwidth and faster connections is driven by more advanced services and applications. For example, Brazils broadband plan avoids attaching a minimum speed to its definition of broadband. Instead, broadband is defined as the provision of telecommunications infrastructure that enables information traffic in a continuous and uninterrupted manner, with sufficient capacity to provide access to data, voice and video applications that are common or socially relevant to users as determined by the federal government from time to time. This definition identifies those Internet applications that must be accessible over an Internet connection in order for that connection to be considered broadband. At the same time, it allows for the government to adjust the set of Internet applications that serve as the benchmark. However, for some purposes, defining broadband in terms of functionality can be problematic as meeting the definition becomes more subjective. A definition based on speed is easy to apply: if broadband is defined as at least 1.5 Mbit/s, a 2 Mbit/s connection is broadband while a 1 Mbit/s connection is not. But when broadband is defined in terms of functionality, the distinction between what is and is not broadband becomes fuzzy. Admittedly, this can lead to positive outcomes, for example, if citizens of a country can appeal to operators and regulators for speeds that meet actual current usage criteria. For several contexts, being able to universally quantify broadband can be useful. If a country wants to compare itself to its peers in terms of broadband penetration, for example, it needs to follow a common metric. If it wants to be able to track its growth in broadband availability from year to year, it needs to set

a standard that can be easily and reliably measured over time. Likewise, if it wants to hold accountable telecommunications providers to their broadband deployment plans it must provide a clear definition or set of expectations for providers to meet.