Affordability is what hinders telecom revolution, finds seminar

Chennai: The Reliance group’s out-of-the-box thinking was evident at the one-day workshop on ‘201 Million Connections by 2010 — Making a Business Case.’ The workshop was part of the ninth National Conference of Communications 2003, organised by the Joint Telematics Group of Indian Institute of Science, Bangalore, and all the IITs (Indian Institutes of Technology).

While others spoke about offering telecom services for a monthly charge of Rs 300-Rs 350, Reliance Infocomm official went one step ahead.

“A monthly telecom spend of Rs 250 would usher in a telecom revolution in India. At that rate, the telecom market will be around 600 million lines,” said B D Khurana, group president, Reliance Infocomm.

Presently India has around 50 million telephone lines, making it the 12th largest in India and fifth in Asia. However, the tele-density is just 5 per cent as against the world average of 15 per cent.

Inaugurating the conference held at IIT-Madras, he called for the removal of those regulatory issues that hinder growth in telecom penetration. “The slicing of the market into different circles resulted in artificial shrinkage of market size and increased the capex [capital expenditure]. Further stipulating that GSM (global system for mobile) as the only mobile technology, the fixing of telecom tariffs by the regulators and the focus on average revenue per user (ARPU) than expanding the market, stifled the industry’s growth.”

“According to estimates, there are around 320 million households with an annual income of Rs 1.5 lakh. Out of that, half are in rural area with similar purchasing power. And this segment is expected to grow to 478 million by 2007 and to 602 million by 2010,” Khurana added.

“We need to look at capital and operating expenditure to make telecom services affordable,” he added. According to him, in developed countries human resource cost account for 22 per cent of a telcos operating cost as against 5 per cent in India. “But we deploy in large numbers.”

Citing Reliance Infocomm’s strategy, he said: “Eighty per cent of our administration and operation is centralised. Compared to the best telecom networks in the world we have deployed only half the number of people per 1,000 lines making our HR the highest productive resource.”

Agreeing with him, Dr Ashok Jhunjhunwala, head, department of electrical engineering, IIT-Madras, said 200 million connections by the next decade would remain a dream unless capex and opex (operating expenses) are not brought down. “Multiple operators will then end up competing for a small consumer base, leading to an undesirable high-cost, low-volume operating point.”

Referring to the per line capex, Dr Roopa Rahulan Joshi, economic advisor, Telecom Regulatory Authority of India, said it should come down at least by 5 per cent to achieve a tele-density of 7 per cent by 2007.

According to her, Bharat Sanchar Nigam’s (BSNL) per line capex (Rs 26,112) is higher in the case of basic telephony by Rs 8,105 compared to private players. However, BSNL’s operational expense per line is lower by Rs 260 at Rs 2,081 as against private players’ figure of Rs 2,341.

On the other hand in the case of wireless in the local loop (WLL), BSNL’s per-line investment is Rs 8,149, which is lower by a whopping Rs 5, 355 compared with private players. “All the private service providers [basic and cellular] focused on urban market to have better initial cash flow to repay their loans,” she added.

Citing Moore’s Law — cost of processing power halves every 18 months — Kumar N Sivarajan, chief technology officer, Tejas Networks India, predicted that the optical backbone network costs to go down drastically with technological improvements.

“Then it will be only the bandwidth and distribution costs that would dominate.
Bandwidth is a free commodity like water and not like power. So the distribution cost should not be high,” he added.

Speaking about the rural telephony, Asha Thambi R, deputy administrator, Universal Services Obligation Fund, reiterated the importance of the private sector’s active contribution in achieving the targets. “Out of 5.12 lakh village public telephones, only 8,000 is set up by private service providers.” The service providers through franchising arrangements could also meet their licensing obligations.

She added: “The long-term solution is to improve the infrastructure facilities — road, water, power supply — in rural areas so that economic activity picks up. Just a telephone line is not sufficient for the rural populace. A need for them to use the telecom services should be created with the active participation of non-governmental agencies and state governments.”

“Content that is useful for rural populace should be created for making them to use the telecom services,” summed up Shubhendu Ghosh, deputy director general, Strategic Planning.