Sunday, January 27, 2008

Satisfying India's Communications Needs

Vasu Reddy from Chicago

Hundreds of high profile applicants are lining up for spectrum in India, and there is much confusion about when there will be clarity on who will be next in providing mobile communications for the fastest growing market in the world. There is market driven valuations floated at hundreds of billions of dollars, but nothing focused on the affordability of the services for the consumers.

To draw parallels and calculate the USA and India market affordability for about 500 minutes a month per user, we estimate that approximately $40.00 per month is spent with services with basic SMS services and 500 mobile minutes in the USA. If per capita of USA is $30,000 annually, then the percentage of income spent on an annual basis is $480.00/$30,000.00 or a 1.6% of per capita income spent on the services. If we calculate One Rupee per minute for the same service or 500 Rupees per month, or 6000 Rupees, or $150.00 on an annual basis and if the per capita income is $2,000 for India, it is about 7.5% of per capita income that is costing the users. Even by reducing the cost of services in half it will still be a proportionally high per minute value paid by the Indian user.

If the USA market is almost saturated, Indian market is over 25% penetration and growing fast, and can double in a couple of years. If the communications are making the overall Indian available and competitive, imagine what it can do if the entire population can communicate, and afford the same.

Perhaps the regulators can look at the globe for examples in adaptation while encouraging the rapid growth.

Global GSM conference held in Cape Town last year was announcing the next big thing to keep an eye out for in telecommunications is 4G or fourth generation networks. India is still contemplating what to do with 2G and not yet set process in motion for 3G. There is no doubt historically telecommunications has been defined by the type of services delivered as well as by the technology that enables economic and social development. First, there were basic voice services. This was then followed by a trend to enhance voice with in-band data services. The next evolution was to separate these two networks. Then mobility was added to the mix. Finally, the fourth dimension to this equation was adding video over this new network allowing voice, video and data to be delivered any time, at any place.The two most notable growth trends in the telecommunications industry over the past decade have been mobility, as delivered by second generation networks like GSM, and fixed data services as delivered by the Internet. The freedom of mobility and the power of information are driving the telecommunications industry to a converged solution via mobile Internet services. There is news declaring WiMax as an IMT2000 standard brings a new dimension to the debate. This will effectively allow operators to be able to deploy mobile WiMax in 3G spectrum globally.

Although 4G has not yet been officially defined, it is expected that fourth generation networks will be able to deliver mobile broadband services such as mobile Internet. The mobile Internet service presents several new challenges to the telecoms world such as the ability of mobile networks to deliver broadband services, the ability of mobile terminals to support broadband services, and above all for these services to be cost effective.India has already issued multiple ISP licenses and has a reasonably good service in the urban centers.

A combination of technologies with VOIP, WiMax, GSM, CDMA and local networks will simply allow the operators to bring services to more rural places. It will also increase the value of each of the investment already made by the companies with these licenses. There is no need to keep discriminating the operators from providing services. The big money involved in mobile licenses will always be preset, but utilizing the already invested ISP and simpler services will bring more communications to the Indian market. One last thought on this is if the rural development program is of such high priority in the government’s plan, a simple plan to provide ISP and VOIP services to very village can be subsidized by the State and Local governments. With the budget sessions coming up and pork being handed out to various segments in the market, it is not a bad idea to promote simple services at the village level, while the big money players fight it our for 2G or 3G or may be even 4G networks of India. While the DOT rakes in billions, it also can allow the already available licensees to do some good, and the politicians can claim focus on rural communications.

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