Sunday, March 08, 2009

Slumdog Telecom

Vasu Reddy from Chicago

Using the “Slumdog” title in the Telecom story is not to just attract attention. It’s really a great title for the Telecom Industry in India, which has been a great story for 15 plus years now, and continues to get bigger and bigger in the Telecom success stories of the world.

Despite the extraordinary growth with the market (with over 400 million subscribers) there is continued debate amongst the network operators, policy makers, politicians and technologists. All the commotion is not all that bad with the Indian Telecom market and it for sure makes great reading. There are endless delays with new spectrum auctions, allocation of spectrum to the already approved operators, debates on value of the 3 G spectrum, more committees to decide on future, BSNL and MTNL continuing to get preferential deals, bickering amongst the CDMA and GSM operators, TRAI and DOT differences and whatever that can be remotely controversial is all on the table.

3 G story is rather cumbersome one to tell as it still continues to go back and forth with politicians and technocrats still wrangling with each other, with sidebars with incumbent network owners adding to the confusion. The initial fees will not matter in the long run if the networks load subscribers at the current rate, as the annual royalties will more then makeup for any initial fees that are being estimated. If we add at least three years of loss of interest, fees and other benefits that would have accrued by the country, and continued delays of releasing the 3 G spectrum will only be greater. The regulators should stop tinkering and get the auctions done as soon as possible to get the 3 G networks into production. The spectrum allocation must be done at close of auctions rather then a protracted delay as it has happened with 2 G networks. The long term rewards will outweigh any immediate shortfall in expected initial fees. Quick deployment expands the subscriber base by moving the premium subscribers into the new networks while allowing new subscribers who need basic services into the existing networks. Whatever the initial fees that is generated certainly supports the budgeting of defense network and allow some budget relief for programs earmarked for this new revenue. The greater impact to overall telecom revenues will be with increases the ILD and LLD traffic across the networks by adding smaller communities to the network.

While the world has gone through a peak period of valuations and now working through a recession and perhaps back into an upswing, the value of more people connected in India will help with the overall economic growth. India has been thriving even the worst years of global economic slowdown. New opportunities for expanded role of more Indians to add to the GDP growth of the country will keep this momentum in positive indices while the world will work its way back into overall positive growth.

The 30 paisa per minute termination of a call rate that is being debated between old and new network operators also should be dealt with quickly.
Incumbent’s verses new entrants should not be dealt as an adversarial situation, rather then combining the strengths to offer the best value for customers. The market should drive the pricing rather then regulation.

The early entrants have enjoyed the benefits of lower pricing on their license fees, albeit they also risked the uncertainty of the markets. But the unchanged policies which are older then 6 years and over 300 million users ago, should be dealt with the reality of today. People have recovered their initial outlay of capital and the new entrants have a bigger outlay today with lower revenue per user, and by trying to impose mechanics established many years ago in today’s environment may not be the most positive way for serving the current needs.

Rural education, mobile banking, video and voice transmission and many other areas of communications will become more prominent with higher speed wireless networks. More mobile value added service will be introduced with the new networks and will create more opportunity for developers.

It is time for all agencies and individuals to stop poking at the process and let the market define it self. There is a need to grow employments and new networks will bring in hordes of opportunities in engineering, sales, development, towers and a whole slew of new VAS development.

The Indian Telecom market is ready for continued success. Success despite the bureaucratic shenanigans and technology lobbying is simply a matter of fact. Just imagine the economic and intrinsic benefits when the subscriber count crosses 800 million in a couple of years? The benefits of well connected India with people communicating with the world will yield untold benefits to the overall economy of the country. Let the market have access to all available spectrum and let the users have the choice of technology. Let the users choose from a variety of choices of networks. Let everyone in India get connected and prosper.

March 7th 2009
Vasu Reddy
Optus Technologies, Inc.

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