EXPLORING RURAL EXPLORING RURAL TELECOM OPPORTUNITYTELECOM OPPORTUNITY

PRESENTED BYPRESENTED BY

ALPANA RAJ SHARMAALPANA RAJ SHARMA VANI KAPOORVANI KAPOOR

INTRODUCTIONINTRODUCTION The Indian Telecommunications network with 110.01 million The Indian Telecommunications network with 110.01 million

connections is the fifth largest in the world and the second connections is the fifth largest in the world and the second largest among the emerging economies of Asia.largest among the emerging economies of Asia.

Presently, the Indian telecom industry is currently slated to Presently, the Indian telecom industry is currently slated to an estimated contribution of nearly 1% to India’s GDP.an estimated contribution of nearly 1% to India’s GDP.

In the last 3 years, two out of every three new telephone In the last 3 years, two out of every three new telephone subscribers were wireless subscribers. Consequently, subscribers were wireless subscribers. Consequently, wireless now accounts for 54.6% of the total telephone wireless now accounts for 54.6% of the total telephone subscriber base.subscriber base.

The wireless technologies currently in use are Global The wireless technologies currently in use are Global System for Mobile Communications (GSM) and Code System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). There are primarily 9 Division Multiple Access (CDMA). There are primarily 9 GSM and 5 CDMA operators providing mobile services in GSM and 5 CDMA operators providing mobile services in 19 telecom circles and 4 metro cities, covering 2000 towns 19 telecom circles and 4 metro cities, covering 2000 towns across the country.across the country.

Evolution of the industry-Evolution of the industry-Important MilestonesImportant Milestones

History of Indian TelecommunicationsHistory of Indian TelecommunicationsYearYear 18511851 First operational land lines were laid by the government near First operational land lines were laid by the government near

Calcutta Calcutta 1881 Telephone service introduced in India1881 Telephone service introduced in India 18831883 Merger with the postal system Merger with the postal system 19231923 Formation of Indian Radio Telegraph Company (IRT) Formation of Indian Radio Telegraph Company (IRT) 1932 Merger of ETC and IRT into the Indian Radio and Cable 1932 Merger of ETC and IRT into the Indian Radio and Cable

Communication Communication Company Telephone and Telegraph (PTT)Company Telephone and Telegraph (PTT) 1985 Department of Telecommunications (DOT) established, an exclusive 1985 Department of Telecommunications (DOT) established, an exclusive

provider of domestic and long-distance service that would be its provider of domestic and long-distance service that would be its own own regulator (separate from the postal system) regulator (separate from the postal system)

1986 Conversion of DOT into two wholly government-owned companies: 1986 Conversion of DOT into two wholly government-owned companies: the Videsh Sanchar Nigam Limited (VSNL) for international the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limited telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for service in metropolitan areas. (MTNL) for service in metropolitan areas.

1997 Telecom Regulatory Authority of India created.1997 Telecom Regulatory Authority of India created. 1999 Cellular Services are launched in India. 1999 Cellular Services are launched in India. 20002000 DoT becomes a corporation, BSNL DoT becomes a corporation, BSNL

Major PlayersMajor Players

There are three types of players in There are three types of players in telecom services: telecom services:

State owned companies (BSNL and MTNL)State owned companies (BSNL and MTNL) Private Indian owned companies (Reliance Private Indian owned companies (Reliance

Infocomm, Tata Teleservices,)Infocomm, Tata Teleservices,) Foreign invested companies (Vodafone, Foreign invested companies (Vodafone,

Bharti Airtel, Idea Cellular, BPL Mobile, Bharti Airtel, Idea Cellular, BPL Mobile, Spice Communications)Spice Communications)

Telecom Policy EnvironmentTelecom Policy Environment In the 1980s, Rajiv Gandhi proclaimed his intention of “leading India In the 1980s, Rajiv Gandhi proclaimed his intention of “leading India

into the 21into the 21stst century,” and carved the Department of century,” and carved the Department of Telecommunications (DOT) out of the Department of Posts and Telecommunications (DOT) out of the Department of Posts and Telegraph.Telegraph.

He also even considered corporatizing the DOT, before succumbing He also even considered corporatizing the DOT, before succumbing to union pressure. In a compromise, Gandhi created two DOT-to union pressure. In a compromise, Gandhi created two DOT-owned corporations:owned corporations:

Mahanagar Telephone Nigam Limited (MTNL), to serve Delhi and Mahanagar Telephone Nigam Limited (MTNL), to serve Delhi and Bombay, andBombay, and

Videsh Sanchar Nigam Limited (VSNL), to operate international Videsh Sanchar Nigam Limited (VSNL), to operate international telecom services.telecom services.

He also introduced private capital into the manufacturing of He also introduced private capital into the manufacturing of telecommunications equipment, which had previously been a DOT telecommunications equipment, which had previously been a DOT monopoly.monopoly.

Contd...Contd...

In 1994, the government released its National In 1994, the government released its National Telecommunications Policy (NTP-94), which Telecommunications Policy (NTP-94), which allowed private fixed operators to take part in the allowed private fixed operators to take part in the Indian market for the first time (cellular operators Indian market for the first time (cellular operators had been allowed into the four largest had been allowed into the four largest metropolitan centers in 1992). metropolitan centers in 1992).

Under the government’s new policy, India was Under the government’s new policy, India was divided into 20 circles roughly corresponding to divided into 20 circles roughly corresponding to state boundaries, each of which would contain state boundaries, each of which would contain two fixed operators and two mobile operators.two fixed operators and two mobile operators.

Exploring rural areasExploring rural areas About 70% population of India live in the About 70% population of India live in the

villages.villages. Emphasis in connecting the unconnected India Emphasis in connecting the unconnected India

presents the next big challenge and opportunity presents the next big challenge and opportunity for operators and the Government alike.for operators and the Government alike.

It is expected that over 30% of the next 250 It is expected that over 30% of the next 250 million new subscriber additions are likely to be million new subscriber additions are likely to be from rural India. The impact of connectivity on from rural India. The impact of connectivity on rural areas is much greater than it is on a rural areas is much greater than it is on a consumer in the urban markets. consumer in the urban markets.

The teledensity in rural areas is only 1.14 The teledensity in rural areas is only 1.14 against 10.16 in the urban areas.against 10.16 in the urban areas.

Teledensity is the number of telephones per hundred of Teledensity is the number of telephones per hundred of the population in the country and one of the important the population in the country and one of the important parameters to assess the level of connectivity in the parameters to assess the level of connectivity in the country.country.

The main factors affecting the Teledensity are socio-The main factors affecting the Teledensity are socio-economic conditions, per capita income, literacy rate, economic conditions, per capita income, literacy rate, terrain conditions, availability of infrastructure etc.terrain conditions, availability of infrastructure etc.

Most companies are targeting their sale of Most companies are targeting their sale of product and services in the rural areas.product and services in the rural areas.

Due to hype in the geographical coverage Due to hype in the geographical coverage of mobile telephony there is increase of of mobile telephony there is increase of about 39% from 13%in mobile users in about 39% from 13%in mobile users in rural areas. rural areas.

Future Trends

further liberalization, I ncrease in the Spectrum.Consolidation of the smaller players.convergence of technologies & the

ability of private players to offer it to the market faster than the incumbent operator.

Most telecom providers are launching Most telecom providers are launching customized, affordable and attractive customized, affordable and attractive products and services,products and services, such as:-such as:-

Airtel has tied up with IFFCO to reach Airtel has tied up with IFFCO to reach farmers directly.farmers directly.

Through this tie up farmers would Through this tie up farmers would receive free voice messages twice receive free voice messages twice daily on farming techniques, weather daily on farming techniques, weather forecasts, dairy farming, rural health forecasts, dairy farming, rural health initiatives, fertilizer availability, loan initiatives, fertilizer availability, loan information and market rates.information and market rates.

In addition, farmers can also call a In addition, farmers can also call a dedicated helpline, manned by dedicated helpline, manned by experts from various fields, to get experts from various fields, to get answers to their queries.answers to their queries.

Information like these will help Information like these will help farmers plan their cultivation services farmers plan their cultivation services and will guide them where to sell their and will guide them where to sell their productsproducts

Reasons for not developing of Reasons for not developing of TelecommunicationsTelecommunications

in rural areas: in rural areas:

Telecom is considered a key sector with a significant Telecom is considered a key sector with a significant impact on promoting economic development, but still impact on promoting economic development, but still there are reasons of not developing telecommunications there are reasons of not developing telecommunications in rural areas:in rural areas:

Inadequate Business Models due to various reasons. Inadequate Business Models due to various reasons. Low Population Density Low Population Density Low Income Levels Low Income Levels Lower Literacy Levels Lower Literacy Levels Preference of operators for high earning areas initially. Preference of operators for high earning areas initially. Technology Limitations and High Costs of Delivery and Technology Limitations and High Costs of Delivery and Some other factors related to policies and priorities Some other factors related to policies and priorities

Rural India Set to Ring in 3G Rural India Set to Ring in 3G mobile Technologymobile Technology

3G networks enable network operators to offer 3G networks enable network operators to offer users a wider range of more advanced users a wider range of more advanced services while achieving greater network services while achieving greater network capacity through improved spectral efficiency.capacity through improved spectral efficiency.

3G mobile or third generation mobile is the 3G mobile or third generation mobile is the networks where high speed data, voice and networks where high speed data, voice and video can be exchanged , it allow high- speed video can be exchanged , it allow high- speed mobile broadband access at a speed of more mobile broadband access at a speed of more than 386 kbps.than 386 kbps.

A specialized group drawn from several A specialized group drawn from several departments of the prestigious Indian Institute of departments of the prestigious Indian Institute of Technology-Madras, the TeNeT has been tasked Technology-Madras, the TeNeT has been tasked with research and product development for the with research and product development for the Indian telecom and networking industry as well as Indian telecom and networking industry as well as driving information technology policy. driving information technology policy.

Current TeNeT missions include building 50 Current TeNeT missions include building 50 million broadband connections over the next five million broadband connections over the next five years, helping to double the rural GDP of India, years, helping to double the rural GDP of India, making high-quality distance education possible making high-quality distance education possible and driving the next generation of wireless and driving the next generation of wireless standards. standards.

TRAI policies are structured in such a way as TRAI policies are structured in such a way as to ensure that private mobile operators are to ensure that private mobile operators are compelled to take their services to millions of compelled to take their services to millions of rural consumers because that is the only way rural consumers because that is the only way they can recover the high costs of buying 3G they can recover the high costs of buying 3G spectrum at government auctions, which are spectrum at government auctions, which are due to be completed by November. One such due to be completed by November. One such policy requires the conduct of auctions. policy requires the conduct of auctions.

Mobile 3G services can make Internet services more Mobile 3G services can make Internet services more easily accessible compared to using a PC, which easily accessible compared to using a PC, which needs steady electricity supplies, maintenance, needs steady electricity supplies, maintenance, broadband services and other infrastructure which are broadband services and other infrastructure which are missing in large swathes of rural India .missing in large swathes of rural India .

With the advent of 3G, fishermen can negotiate prices With the advent of 3G, fishermen can negotiate prices for their catch before heading for shore by sending in for their catch before heading for shore by sending in pictures of the type of fish they have on board. pictures of the type of fish they have on board. Similarly, farmers and horticulturalists who have Similarly, farmers and horticulturalists who have perishable produce can take advantage of 3G services perishable produce can take advantage of 3G services to bargain for the best prices before harvesting, to bargain for the best prices before harvesting, bypassing middlemen.bypassing middlemen.

SWOT ANALYSIS OFSWOT ANALYSIS OFTELECOM IN RURAL TELECOM IN RURAL

AREASAREAS

STRENGTHSTRENGTHAccess to health care and other allied Access to health care and other allied

services.services.Timely information on business, price, Timely information on business, price,

market, and demands.market, and demands.Better coordination for delivery of Better coordination for delivery of

administration and public services.administration and public services.Information about employment.Information about employment.Interacts with neighboring market regarding Interacts with neighboring market regarding

business expansion.business expansion.Creates atmosphere of national and regional Creates atmosphere of national and regional

integration.integration.

WEAKNESSWEAKNESS

Lack of better connectivity Lack of better connectivity Slow pace of the reform process .Slow pace of the reform process .It would be difficult to make in-roads into the It would be difficult to make in-roads into the

semi-rural and rural areas because of the semi-rural and rural areas because of the lack of infrastructure. lack of infrastructure.

The sector requires players with huge The sector requires players with huge financial resources due to the above financial resources due to the above mentioned constraint.mentioned constraint.

Problem of limited spectrum availability and Problem of limited spectrum availability and the issue of interconnection charges between the issue of interconnection charges between the private and state operators.the private and state operators.

OPPORTUNITIESOPPORTUNITIES

There is more opportunities for telecomm There is more opportunities for telecomm industry to cover up the remaining rural industry to cover up the remaining rural areas and spread their network.areas and spread their network.

THREATTHREAT

Profit earned by intermediaries .Profit earned by intermediaries .Misuse of telecom facilities.Misuse of telecom facilities.