The Hindu : Business : Death of distance

Online edition of India's National Newspaper
Monday, Jan 31, 2005

Business

Business

Death of distance — Indian telecom scenario

Indian telecom companies like Reliance, Tata and Bharti are now competing on international bandwidth. Unless such companies offer competitive rates for their home turf, they may lose out in the global market, says Sugato Hazra.

The introduction of broadband services in a big way by BSNL and MTNL will result in accelerated expansion of e-commerce, entertainment on tap and business process outsourcing.

QUICK COMMUNICATION is the essence of modern civilisation. The telephone brought mankind closer by allowing people to talk from one end of the globe to the other. It also helped them to exchange copies of documents. But the ingenuity of mankind and the pressure of modern civilisation have increased the range and sophistication of communication needs.

Broadband is one of the technology means to satisfy the craving for such facilities.

Broadband allows one to send and receive pictures, songs, films and heavy documents containing all these at high speeds. Thus, with broadband distance dies virtually. Sitting in Delhi, a designer can cater to a client in New York or London.

The benefits of such a technology could be seen when the outsourcing business started booming to India's advantage. But that was between businesses, in selected areas of nations and, more important, between Indian entities and overseas clients. Within India, distance still remained a bother.

BSNL/ MTNL initiative

Now the state-owned telecom companies — Bharat Sanchar Nigam and Mahanagar Telecom Nigam — have attempted to correct a vital gap in the communications area.

The broadband services launched on January 14 this year promise to bring numerous small companies and households into the fold of this technology.

The introduction of affordable and high speed broadband is expected to revolutionise the economy.

Chronologically speaking, the first seed of the telecom boom in the country was sown in 1994 when the private cellular mobile telephone was introduced. The year 1999 saw the unshackling of the potential dormant at that time and both mobile and fixed line telephones were set on the road of rapid growth.

The current year, 2005, will prove to be another landmark in the telecom revolution sweeping India. The introduction of broadband services in a big way by the two telecom public sector undertakings will result in accelerated expansion of e-commerce, entertainment on tap and business process outsourcing within the country.

Boon to many

In one stroke, BSNL and MTNL have slashed the cost of broadband connection. Ordinary households can now subscribe to the broadband Internet and opt for the services available. This will help students, teachers and even small traders to remain in touch with the rest of the world.

Information for them will be literally at their fingertips. Education, for example, is on the verge of going off-campus and online. Students in far-flung areas and professionals who need to acquire new skills in various fields can now use the technology for their betterment. In particular, BSNL's foray into broadband in a big way will help numerous Indians living away from the metros and other major cities. This indeed is a new window of opportunity for them.

At present the size of broadband subscribers in India is small. Except in big offices and establishments, mostly in thriving BPO centres of Bangalore, Delhi or Mumbai, Internet surfing at reasonable speed is a problem for most Indians.

Dial-up connections through telephone lines take very long to download large files with graphs or pictures.

For ordinary households the telephone bills for net surfing could be huge. Even if they can afford a computer, they cannot afford the present high cost of connecting to the worldwide web.

The BSNL broadband facility will reduce the cost sharply. In fact, most households need to pay a modest fixed charge of around Rs. 500 a month for net surfing.

The benefit to educational institutions in small towns will be immense. Their students will gain from the cheaper connectivity to the Net and equip themselves for future global challenges.

The moves of the PSU telcos coupled with the recent announcement of the Telecom Regulatory Authority of India (TRAI) of a unified telecom licence may prove the harbinger of a new information revolution in the country. With such unification, the much-needed consolidation of licences can take place.

Operators with subsidiaries can now migrate to the unified licence regime as a single entity. This will help create big economically viable operators who will find it easier to tap the market for their future plans.

Further, they will have enough resources to branch into new and related activities. For example, a broadband operator can even bundle telephone and Internet with cable TV services. The new telecom policy will lead to a new generation of hardware in the market. It will now be possible to integrate broadband hardware with personal computers. Already such trends are noticeable in China, Korea and Taiwan.

Thus, once unification takes place, consumers will get telephone, data transmission, video and entertainment, all from a single telephone connection. The prospect will encourage many middle-class households now without a computer to go in for the same.

It will see convergence in technology with the same machine doubling up as TV, music system and computer — in short as the knowledge centre in the household. When the TRAI announced the broadband policy last year, it was expected that by the end of 2005 there would be three million subscribers. The number was expected to triple by 2007. The projections however required a push from the operators by way of reduced tariff to make the service affordable. The state-owned telcos have now done that. In fact, taking the cue, even the private operators have dropped their prices sharply.

In the business of broadband now volumes will rule, costs will tumble and India will have subscribers at every corner. The seed for a new information explosion has been sown on January 14.

Unfinished agenda

This will receive further boost if TRAI's 2004 recommendations on open skies too are implemented. The TRAI had suggested relaxation of antenna-size restrictions, removal of data rates ceiling, increased interconnection, streamlining site clearance procedures and reduced licence fee.

In fact, the reduction in access deficit charges (ADC) announced recently is yet another move towards dropping call charges and encouraging telephone subscribers to use their services more than before.

The collections from ADC go to the fixed line operators who provide ordinary connectivity to areas deficient on access. However, the same objective — that of providing subsidy for rural connectivity — is also served by the universal service obligation (USO) fund.

It is, therefore, imperative that eventually ADC and USO charges are combined. This will substantially reduce the cost of long distance and international calls, the services which bear the brunt of ADC. The critical point here is that with fast development of technology, it is becoming increasingly difficult to segregate local, long distance and international calls.

More important, Indian companies like Reliance, Tata and Bharti are now competing on international bandwidth — they own undersea cables globally or to India. Unless such companies offer competitive rates for their home turf, they may lose out in the global market. The telecom policy, therefore, cannot merely stare at the tele-have-nots and ignore Indian investment in the sector. Further, Indian enterprise must receive nimble-footed response on growth of technology and thereby death of distance. Thankfully, the regulator and the Government have so far been responsive to the needs of the day. The telecom policy will continue to broaden the horizon to embrace the changes, even if it is disliked by some hostile to investment. With fast development of technology, it is becoming increasingly difficult to segregate local, long distance and international calls.

The author is a Telecom Analyst.

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