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Regulation of Indian Mobile Network Industry: Enabler or Disabler
1. INTRODUCTION
With the advent of new technology the way of communication has altered. In
the past pigeons were the mode of communication. After that post was introduced
were people wrote letters and sent them by post, and later came the telephone and
today its is an era of wireless communication which has given the world a new form
of communication. Cellphones are the most simple way of communicating in todays
life.
Mobile phones are long range, portable and wireless electronic device of
communication. Mobile phones are now very cheap, user friendly, and comfortable
and operational with all the new features and facilities that we require. Cellphones
now have facilities like video conferencing and interent with which people can
download stuff and can make life much more simple. It has also programs which can
alert the user about natural disasters for exemple in japan cellphone industries
propvide information on earthquakes without any additional charge. The cell-phone
novel is the first literary genre to come out with something that can via text to a
website that gathers the novels as complete (New Yorker, 2008). In good quality
online computer games, users can play games as first person. The novels make a
personal space for every reader. Paul Levinson, in Information on the Move (2004),
says "...nowadays, a writer can write just about as easily, anywhere, as a reader can
read" and they are "not only personal but portable".
Mobile communications play an important role in any modern society and economy.
Mobile accounted for 51 per cent of household spend on Telecoms (Yahoo surveys,
2008). Mobile services are also a major contribution for business, with cellphones
communications now a fundamental part in an even more services-based economy.
Being one of the fastest emerging economies in the world, India has come up in
leaps and bounds in all aspects of development. Communication is one of the mostimportant sectors for high-speed growth and technological advancements are
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quintessential for punctuating the progress. The mobile industry has played a great
role in channelizing access to communication into the width and depth of India. The
prospect of catering to a population of one billion people has attracted a flowing
number of entrants in the mobile phone industry in India.
Such an attractive market and suitable business environment has resulted in
fierce competition among the players and overloading of customers using mobile
phone services. The fierce rivalry and potential for overwhelming business has
upshot different business models and strategies in the industry. With international
handset and service providers sneaking in, there has been constantly changing
strategies to adapt to the changes in the competitive environment.
Inspite of all the quick spurge in the industry, customers are largely finding it
difficult to enjoy hassle-free services and connectivity. Users find it difficult to access
destination numbers, consistent internet, speedy Short Messaging Services (SMS) at
busy times in the urban areas and most of the time in rural locales. This can be due
to a lack of proper network scope and/ or number of issues that prevent the existing
network from functioning at its optimum level. While the network infrastructure is a
vital part of the development, there are a number of factors controlling the latent
development.
Since the sector has been opened up for privatisation, there have been many local
and international operators flooding the market like Vodafone in 2007, Virgin in 2008,
etc. This has lead to an over-crowded sector with limited infrastructure. Added to this
is huge no. of customers in the customer list and few more in the potential list in the
form of target audience. There are also many examples of an individual with more
than one mobile phone connection.
Another controlling factor is the management and involvement of regulation of the
mobile telephone sector. As in the case of most sectors in India, regulation plays a
very important and influential role in determining the evolvement and success of the
mobile industry. There have been disputes over the sharing of infrastructure between
the government owned BSNL and the private operators. There are constant revisionsin the way the tariff is shared and managed regarding roaming services provided.
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There was a serious debate surrounding the privatisation of this sector. There is an
on-going discussion regarding the adoption of better frequency bands and further
liberalisation of the mobile telephone sector.
Thus, there are a number of important factors determining the performance of
infrastructure development and the mobile telephone sector. I shall analyse them one
by one and see how they affect the network infrastructure and in turn, the mobile
industry development in the country.
1.1 Structure
My report will take the following structure which is based on Fishers ideal structure
of a dissertation (Fisher, 2007). First, I shall make clear the Area of my interest, the
aims and objectives of the research, the research question and the significance this
research carries for the industry players, regulators and for future researchers to
evaluate the industry performance. Then, I shall perform a critical literature review of
the definitions, their scope and all other existing literature in the area. This will
include the analysis of many theoretical framework and they shall form the foundation
on which I shall base my analysis upon. After the literature review, I shall lay out my
hypothesis that is to be tested in this research. This will be based on the gaps
identified in the literature review section. In this section, I shall also depict the
research design that includes the research methodology to be adopted, the data
sources used to collect relevant information for the research. It will include the
reasons for adopting all of the above techniques. Next, I shall present the analysis of
the data collected using the methodology defined and present the findings born out of
the analysis. This will lead on to the conclusion of the research, revealing the results
of the hypothesis test and establish any recommendations and suggestions that I
intend to make out of my research. In the last section, I shall display a summary of
the findings, any suggestive conclusion and comment on what needs to be done
further in this area.
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Figure 1.1 Dissertation Structure
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2. Research Overview
2.1 Area of Interest
An important feature of Asian cellular markets that does not find a strong
parallel in America and the EU is that existence of more than one competing but
compatible wireless standard. Whereas the dominant cellular standard is still GSM,
CDMA networks may be found coexisting with GSM in numerous markets in India,
China, Indonesia, Malaysia, Hong Kong, Korea and Japan.
Frequency bands are an important determinant of such differences. They go
on to decide the quality of the waves that are diffused to the cellular mobile phones.
Operators have to make sure that the customers are happy and are have minimumtrouble using this frequency bands as per the growth for demand and technology.
With the technological part on one side, there are other factors that also affect
the mobile telephone industry. But, this being a technology-based industry, I believe
that it is technology that needs to co-ordinate with other factors in order to facilitate
development. Hence, my research will revolve around the area of technology and the
ancillary network infrastructure imparting the existing technology in order to beutilised to render efficient services to the public.
2.2 Aim & Objectives
Primary aim is to further the interests of consumers in relation to mobile
communications services, with mobile network infrastructure being a key focus.
In addition to this overall duty to consumers, we also have specific duties to
ensure optimal use of the mobile infrastructure regarding radio spectrum and topromote competition.
These are particularly important in the context of the mobile sector because
availability, and efficient use of, spectrum, and competition between providers, are
pre-requisites for realising the full benefits of mobile communications. Thus primary
objectives are:-
To study the implications factors like competition and regulation haveon the mobile network infrastructure.
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Establish how the above factors can be reformed in order to benefit the
industry infrastructure.
Analyse the effect the mobile network infrastructure has on the mobile
telephone industry in India.
2.3 Research Question
How does the mobile network infrastructure enable or constrain mobiletelephone industry in India?
The advent of cellphones faces an engineering difficuty that can overcome well-
organized and consistent wireless communication. The requirement for wirelesscommunication have developed in a very stylish way which has paved the way for
understanding the primary issues in communication theory and electromagnetism as
well as the and their propositions for the planning of highly-capable wireless systems
(Kekas, 2003).
Among the influencing factors, I shall focus on the network infrastructure in the Indian
mobile industry. The other factors shall be feeders to the main variable identified andshall interpret as issues affecting the main variable. I shall then conclude on how the
combination shapes the overall industry and go on to establish my recommendations
2.4 Significance of the Research
At a critical stage of its economic development, India is under serious
pressure from China to improve its internal infrastructure in all sectors.
Communications being such an important part and mobile telephone seemingly the
future, it is important for the Indian policymakers to give importance to the mobile
network infrastructure in order to develop a competent mobile telephone service
sector.
A recent report, Indias international bandwidth sector 2007-11 by India
Bandwidth analysed the upcoming trends in the Indian telecom industry. The report
stated that the network availability and quality in the Indian mobile connections would
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improve up to capable standards after its privatisation. Unfortunately, the consumers
continue to face poor signals and there seems to be other indulgent factors that need
to be addressed collectively to solve this issue. This paper will throw light on those
factors and show to what extent these factors are influencing the network framework.
Also, it will test the possibility of liberalisation in the industry and its probable benefits
and drawbacks. This will be a consideration before the regulatory bodies eventually
liberate the sector.
2.5 Implications for Organisations
The main implication of this research will be for the regulatory authority in
India Telecom Regulatory Authority of India (TRAI). The report analyses issues like
existing competitive structure, frequency sharing & distribution, bandwidths offered
and customers logged in, etc. It shall go on to include an examination of the potential
reasons, methods and consequences of implementing further liberalisation of
competitive policies and frequency generation in India. My research shall highlight
where the probable glitches lie as far as troubled mobile telephone service is
concerned. For operators, it will show the potential benefits of better frequencyavailability as a result of liberalisation and the option it would generate for them in
terms of product variety, innovation and quality distribution of services. It also bears
significant implications for handset manufacturers who might have to customize their
handsets to the new technical scene. They could enjoy added opportunities in the
form of more possible applications and facilities supported by the reformed network
design. Other dependent divisions like broadband which is inclined towards going
mobile in the near future, mobile gaming which is already very popular in the sectorand mobile novels and offices mentioned in the introduction will also have noteworthy
connotations out of this paper.
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3. CRITICAL LITERATURE REVIEW
3.1 Introduction
The purpose of the critical literature review is to introduce some of the
concepts and theories that would be using in the research. The relevance of these
theories to the research shall be re-examined and critically assess their link to the
work. It shall include a comprehensive review of the conclusions and findings
established in previous work in this field and use this to gain a better understanding
of the mobile industry in general and the development of the network infrastructure in
specific. The researcher shall then extend this to include the aspects covering the
Indian context.
First, The Researcher shall sketch a map of the source of the literature The
Researcher am going to review in this section and the reasons for choosing them.
Then, The Researcher shall pick the areas within the selected literature that The
Researcher am going to examine in detail. Then, The Researcher shall present his
critical analysis of the literature. This will start with defining the variables involved and
the scope of the terms used in this report. Then The Researcher shall analyse the
characteristics of the industry according to theory and explicitly depict the likely
issues identified by previous authors as ones affecting the industry and the network
infrastructure in particular. This will be a followed by a detailed analysis of the issues
identified individually and review how these issues have looked upon by researchersin their frameworks so far. Under every topic, The Researcher shall start with the
theories relating to the mobile industry in the global scenario and then prolong the
discussion of the frameworks to include its link to the Indian mobile industry context.
All this shall lead to a conclusion regarding what needs to be done further and
this shall form the basis of his hypothesis.
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Figure 3.1 Critical Literature Review Structure
Mapping the Literature
Identifying Areas within Literature
Critical Analysis Definition and Scope
Related Terms
Characteristics of the Industry
Likely Issues Identified
Competitive Structure
Technology
Regulation & Role of government
Conclusion
Hypothesis
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3.2 Mapping the Literature Review
The mobile industry is a field that has been frequented a lot by researchers in
the field of telecommunications. Many of them have even paid close attention the
development of network infrastructure. The literature the researcher is going to
review shall be ones that bear close resemblance in their content to his perspective
of research. At the top his list are the papers in the field by Klein (1999) and
Chakravarthy (2007). Also, since this is a field with constant developments and large
coverage, The Researcher has referred to a lot of journals which have a say on the
overall industry or the issues in specific. The Telecommunication Policy journal is themain supply, closely followed by market reports on specific issues coherent with his
research. The Researcher has also reviewed the articles by industry experts to get a
view of what they think is and should be happening in the industry. The Researcher
shall critically look into all the concepts and ideas established in these sources of
literature to bring out what has been found out so far about the sub-division The
Researcher am researching in and how valid they are to the network development
scene in India and the Indian mobile telephone context.
3.3 Area to be reviewed
Breaking down his research question into three parts, The
Researcher recognises three variables the network infrastructure, the mobile
telephone industry and the Indian milieu to both of these. His analysis of the literature
collected shall be from the perspective of the variables identified above. They are
connected to each other and this linkage between them shall help me determine how
they enable or constrain the development of the Indian mobile telephone industry.
So, The Researcher shall be concentrating on areas concerning these variables and
analyse the theories about them in detail. The Researcher shall evaluate the validity
of these concepts to his research and say to what extent they have covered ground
in the path leading to his research objective.
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3.4 Critical Analysis of Theoretical Framework
Within the area identified in the above section, The Researcher
shall now give his critical review of the relevant concepts and theoretical frameworks
formed before and link them to his research. The mobile industry has been
frequented by academics and researchers and hence, a lot of derivations have to be
drawn from related work to ensure that all the established theories have been
covered.
3.5 Definitions and Scope
In this section, I shall clearly state the definitions that I refered to
while researching are used in the following terms in his report. It shall define the
scope they cover and any are picked to suit his research objectives.
The mobile industry is considered to be a part of a much bigger
sector that is collectively termed as the Telecommunication sector. The New
American Oxford Dictionary (2005) defines telecommunications as:
the science and technology of communication at a distance, especially the electronic
transmission of signals. In this definition, the distance factor and the sector
involving the broadcast of electronic signals are prominent. This highlights the
importance of transporting information on the electronic format over a distance of
kilometres in the industry and is relevant for the mobile telephone sector as well.
A basic telecommunication system consists of three elements:-
a transmitterthat takes information and converts it to a signal;
a transmission medium that carries the signal; and,
a receiver that receives the signal and converts it back into usable
information.
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For example, in a radio broadcast the broadcast tower is the transmitter, free
space is the transmission medium and the radio is the receiver. Often
telecommunication systems are two-way with a single device acting as both a
transmitter and receiver ortransceiver. For example, a mobile phone is a transceiver
(Haykin, 2001).
Telecommunication over a mobile phone is called point-to-point communication
because it is between one transmitter and one receiver. Telecommunication through
radio broadcasts is called broadcast communication because it is between one
powerful transmitter and numerous receivers and hence referred to as a radio
broadcast.
Network Industry
From the above definition, it can be observed how the
telecommunications sector itself is a part of a much larger network industry. ATIS
Telecom Glossary (2000) defines a network as a collection of transmitters,
receivers and transceivers that communicate with each other.
Digital system is a combination more than one routers which collectively passes data
to the required user. An analogue network contains more than one switch that helps
to set up a link between users. In both the cases repaters are required to amplify or
restore signal while it is being send out over long distances (Solderblom, 1974).
The network industry is a dense one and consists of many more terminologies that
are defined below.
Analogue or digital
Signals can be both analogue or digital. The signal that changes constantly
according to the information is an analogue signal. Whereas in a digital signal data is
fixed as a set os separate values (for example ones and zeros). At the time of
transmission the data enclosed in analogue signals is ruined by noise. Equally,
except the sound goes over a certain limit, the data enclosed in digital signals will be
undamaged (Ambardar, 1999).
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Spectrum
Cave et al. (2007) define: Spectrum is a term to describe a band of electro-
magnetic frequencies. It is often used to refer to a specific band and this is further
divided with various different parts which are being used for different application. A
user can get a license which will help the user to access or broadcast on some part
of this spectrum, e.g. 800 MHz 850 MHz (Cave et. Al, 2007).
3.6 Related Terms
The mobile sector is one which contains a lot of jargons and terminologies that
one does not come across outside the field. Hence, The Researcher am laying down
a list of terms that are closely related to his research and shall be repeatedly used in
literature review and the consequent analysis of his dissertation report. Throughoutthis document the a lot of technical terms are used. A list of technical terms with their
description is provided in Appendix 1 (OfCom Report, 2009).
3.7 The Indian Context
Indian Telecommunication Sector has gone through a major
development of change form time to time by having new important policy reforms,
process undergone a major process of transformation through significant policy
reforms, mainly with the declaration of NTP 1994 which was consequently
highlighted and passed forward under NTP 1999. The indian telecommunication has
observed a whole new change in the last decades by the different policy schemes.
As per licensing conditions:-
Any dispute, with regard to the provision of SERVICE shall be a matter
only between the aggrieved party and the LICENSEE, who shall duly notify
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this to all before providing the SERVICE. And in no case the LICENSOR
shall bear any liability or responsibility in the matter. The LICENSEE shall
keep the Licensor indemnified for all claims, cost, charges or damages in
the matter.
Telecom Regulatory Authority of India, shortly known as TRAI in the industry, an
independent legal entity, was established to regulate the telecommunication
services and discharge the various functions, two of them are as follows :-
To ensure compliance of terms and conditions of license which includes
customer service, Quality of Performance, Tariff also apart from other
conditions.
To lay down the standards of quality of service to be provided by the service
providers and to ensure the quality of service and to conduct the periodical
survey of such service provided by the service providers so as to protect
interest of the consumers of telecommunication services.
3.8 Characteristics of the Industry
In the above section, it was seen how the mobile industry falls under the
telecommunications sector. The telecommunications sector, in turn, comes under the
network industry that consists of a lot of other sectors included in its scope. In this
section, The Researcher present a review of the framework theorising the
characteristics of the network industry and then connect it with the possible features
of the mobile industry.
According to Bergman et. al (1998), network industries have three key
elements: upstream production; an infrastructure; and downstream service provision.
The Upstream production is one which involves the production of the
product or service. This is more related to heavy-industries like Electricity generation,
Aircraft manufacturing, etc and not is completely applicable to the
telecommunications sector.
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The Infrastructure is the building block that merges with the product from
the upstream stage to be delivered successfully in the downstream region. It is the
medium that connects both ends of the industry and enables deliverance of the
service to the end customer. From this, it can be understood that the presence of an
efficient infrastructure in a network industry is very essential for its successful
performance. In the mobile industry, it will refer to the availability of spectrum and
the ancillary physical infrastructure like frequency towers, etc.
The Downstream constituent part of three elements refers to the part
where the generated product or service is actually delivered to the customer. This
includes the service part that is dominant in a mobile sector and forms the
characteristic for it to be referred as a service industry. The players are referred to
as service providers.
In their Chapter talking about the Structure of network industries,
Bergman et. al (1998) say that there are many possible structures that network
industries such as the mobile industry could take. They provide five cases that differ
from one another based on competition in the infrastructure element. They are:-
(i) Vertical integration and monopoly, in this there is only one company which
manages the the upstream and downstream mechanism and the network
infrastructure.
(ii) Vertical integration with struggle in the downstream or upstream mechanism. This
is similar to (i) except that the vertically integrated firm faces resisitance in the
downstream or the upstream mechanism.
(iii) Vertical partition with upstream and/or downstream competition, but the
organization working on the network infrastructure does not function in either the
upstream or downstream mechanism.
(iv) Joint ownership, where the infrastructure is owned jointly by firms competing in
the upstream and / or downstream components.
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(v) Infrastructure or facilities-based competition: competing vertically integrated firms
that may or may not be interconnected.
In the first four cases, there is only one network infrastructure provider
due to a case of a natural monopoly condition, where the regulators might need to
step in to regulate it. In the last case, there is room for competition in the
infrastructure component of the industry.
Core Products Core Products
Infrastructure Infrastructure
Customer Service Customer Service
Provision Provision
Figure 3.2: Facilities-Based Competition
Adapted from: Bergman et. al (1998: 15)
The mobile telephone industry belongs to the fifth case Infrastructure
of Facilities-based Competition. The service providers may be having their own
infrastructure components and competing with each other on the basis of
infrastructure that forms the foundation for the delivery of their products and services.
The services rendered to the customers by the mobile phone operators are enabled
by the infrastructure bridging them and hence, the quality of this infrastructure is adetermining factor in the quality of service that reaches the customer using their
service. This, further, insists the significance of network infrastructure in the mobile
industry. In the Indian context, it is to be noted that the mobile telephone industry was
an example of the fourth case. There was a natural monopoly in the infrastructure
with the government-owned BSNL owning most of the network infrastructure and all
the other operators jointly sharing it. After the first phase of liberalisation, the Indian
Mobile Industry has moved on to the fifth case cited.
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Bergman et. al (1998) say that the relation between network industries
and economic development is difficult to measure quantitatively and this topic has
generated a lot of debate. Most of the studies examining this relationship has been in
the context of the United States. So, The Researcher shall use this as a foundation
and build his analysis for the Indian industry on this.
Premature studies by academics like Aschauer (1989) on the impact of
network industries on economic performance found a significant connection. As far
as the infrastructure constituent of the network industry is concerned, most of them
have not found any useful link. Hulten and Schwab (1984, see also their 1991 study)
concluded that technological infrastructure in homogeneous and hence, only other
parts of the infrastructure system like public transport affect productivity more.
Being more specific in the area, there have been studies relating the
investment in the telecom and information technology infrastructure with the
economic development. Resting on US data again, Greenstein and Spiller (1995)
studied the impact of telecom infrastructure on economic growth measured by the
amount of fibre-optic cable employed. He found a positive effect and a significant one
in some of the industries.Lichtenberg (1995) uses firm level data on information technology investments
and finds very high growth effects. Roller and Waverman (1998) investigate the
impact of telecoms infrastructure (as measured by the penetration rate of exchange
lines) on economic growth. Using a sample of OECD countries and accounting for
the simultaneous interaction between growth and telecoms infrastructure, they find
evidence that there is a positive causal link, with telecoms infrastructure accounting
for as much as a sixth of economic growth.
All this said, all the effort and investment in the Telecom industry is worth it
only if the network infrastructure lies above a certain critical mass (Bergman,1998). In
spite of the severe studies detecting the exact relationship between network
industries and economic performance, it is beyond doubt that these industries hold
the key in competitiveness. Thus, for an emerging country like India, it is very
important for the mobile infrastructure to improve if India has any ideas of climbing up
the ladder and facilitating economic augmentation.
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Telecommunication has a significant social, cultural and economic impact on
modern society. In 2006, estimates placed the telecommunication industry's revenue
at $1.2 trillion (USD) or just under 3% of the gross world product (VoIP Magazine,
2006).
On the microeconomic scale, companies have used telecommunication to
help build global empires. according to academic Edward Lenert, even the
conventional retailer Wal-Mart has benefited from better telecommunication
infrastructure compared to its competitors (Journal of Communication 48 (4): 323).
Even relatively poor communities have been noted to use telecommunication to their
advantage. In Bangladesh's Narshingdi district, isolated villagers use cell phones to
speak directly to wholesalers and arrange a better price for their goods. In Cote
d'Ivoire, coffee growers share mobile phones to follow hourly variations in coffee
prices and sell at the best price (Samaan, 2003).
Because of the economic benefits of good telecommunication infrastructure,
there is increasing worry about the inequitable access to telecommunication services
amongst various countries of the worldthis is known as the digital divide. A 2003
survey by the International Telecommunication Union (ITU) revealed that roughly
one-third of countries have less than 1 mobile subscription for every 20 people and
one-third of countries have less than 1 fixed line subscription for every 20 people.
Given the economic importance of the mobile phone industry, it is now
essential to recognize the factors that affect them and analyse them one by one. This
shall give a direction regarding what needs to be done next in the journey towards
complete development of the Indian mobile industry.
3.9 Business Theories on Network Industry Management
Considering the competitive nature of the Indian Mobile Telephone Industry, it
can be clearly seen that competition and regulation are two decisive factors in an
otherwise technology-oriented business. Regarding the concentration on regulation
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in this research, it might be of interest to point out that regulation of network
industries have undergone changes over an era and liberalisation and technological
innovations demand a different pattern of regulation. Buigues (2006) says that the
prominent kinds of regulation of network industries are still debated and their
consequences are yet not clear.
3.9.1 Ex Ante Approach versus Post Ante Approach
Ex Ante approach refers to the regulatory approach whereby regulatory agencies
are pro-active in nature, intervene and seek actions before events take place like
imposing price controls, defining network sharing, etc. Due to this, enterprises are
controlled in their movements by the regulatory authorities but there is less
uncertainty involved in the style as a clearly defined set of regulations exist.
The post ante approach is the competitive approach whereby there are no set rules
to abide by for the companies but if the regulatory body finds any conduct as
inappropriate or exploiting, they shall intervene and seek action on the company. The
companies, in this mode, are much freer to indulge in various market combinations
but there is uncertainty of whether the authority will penalise their actions later
(Derker C and Yarkabots, 2000).
Ex Ante Approach Market Event Post Ante Approach
In his contribution, Buigues (2006) takes a business-case scenario of pricing. In the
mobile telephone industry, one of the most pertinent issues is the pricing of
interconnection among competitors (OECD, 2004). He opines that it is important for
new entrants to know what price they are paying for a particular service or agreement
when they are making the initial outlay. In such a case, it would be easier to take a
post ante view and decide if the price charged was exorbitant rather than taking a ex
ante approach and pre-deciding a price. But again, the former will create uncertainty
for the new entrant as to how much they need to shell out. These approaches will
have to be considered while reviewing the Indian regulatory scenario in the analysis.
It should also be kept in mind that the Indian Mobile Industry is still maturing in terms
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of development. So, any current approach from the authorities is not necessarily the
permanent one and it could be to assist a growing industry coming of age.
The IDEI Report (1999) mentions that to design an effective networking policy
requires not only: (a) a sophisticated understanding of economic incentives and
effects, but also and to a varying degree depending on the regulatory mode, (b)
substantial technology expertise and (c) considerable cost and demand information.
The ex ante or Sector-specific regulation approach makes sure that the consumer is
not harmed while the post ante or competition policy approach makes sure that
companies do not mis-use their dominant positions and engage in improper business
conducts. The former implies high costs to companies and is based on the forward-
looking ability of the regulatory body. Their general lack of economic knowledge
(Buigues, 2006) and the excessive speed of technological development are hurdles.
The latter does not prevent opportunities for companies by restricting access or
controlling prices but abuse of dominant positions may take deep investigation and
time to be penalised. A summary of the two approaches is provided in Table 3.1.
Table 3.1 summarizes the differences between competitive policy approach and
sector specific regulation.
Competition policy
approach
Sector-specific
regulation
General approach Ex-post, harm based
approach
Ex-ante, prescriptive
business conductAmount and nature of
information required
Only information on the
allocated abuse
General and detailed
information on the sectorNature of the remedies
imposed on undertaking
Structural remedies
addressed to specific
conduct
Detailed conduct
remedies requiring
extensive monitoringNature of public
intervention
Permanent based on
general competition policy
principles
As competition is more
effective, part of sector
specific regulationreplaced by competition
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law
Table 3.1: Differences between competition policy approach and sector-specific
regulation (Adapted from: Buigues, 2006:11)
An observation made by industry experts is that sector-specific regulation is
effective in the initial phases of network industries when there are chances of a
monopolistic situation due to technological innovation (Buigues, 2006). The aim of
the ex ante approach is mainly to ensure that there are no market failures and once
competition is flowing in the sector in line with other industries in the economy, the
approach should shift towards competition. In the initial phase, when there was a
domination in the Indian mobile telephone industry by players like BSNL and VSNL,
regulation intervention was necessary to prevent abuse and more importantly to
enable new entrants into the market in a smooth process. In the long term, when
there are established players like Airtel, Vodafone, Reliance, it becomes better to
switch to the competition policy as it will result in price equilibrium, efficiency, better
customer treatment and offers, etc. Hence, at some point, the TRAI has to draw a
balancing line and decide to liberalise the mobile telephone industry further.
3.9.2 Market Failures
Market failure in an industry results in a situation where a competitive
structure is not possible or if possible, it would not be efficient (Kay, 1996). Other
than creating a monopoly with too much of market power with one player, there are
factors like pricing, capital regulation and product offering which makes way for
regulation of an industry. Another cause might be information asymmetry, whereby
the seller knows more than the buyer resulting in exploitation.
With the factors for regulation in mind, a look at the telecommunications
industry will reveal that market failures are more likely to occur in an industry at its
start-up stage. Especially with a technology-based product, occurrences of
information asymmetry have high probability and the resultant over-pricing of a new
service is also possible. Moreover, in a globalised world, it also becomes important to
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protect upcoming industries from international leaders. These can be accepted as
strong reasons for regulation at the initial phase in the Indian telecom industry.
But as Kay (1996) and Buigues (2006) say, as the industry moves ahead and
competition is more spread out and pricing has been stabilised, it is important for
regulation to be eased (liberalised) in order for the industry to grow beyond normal
levels.
Kay (1996) talks of two kinds of issues that companies encounter with regulation. He
says that as per business economics, companies have to manage the regulation,
whereby businesses have to look to manage regulatory and government actions and
make sure that their statute is met. The second issue is that companies have to
manage regulation and competition. Stressing on the latter, it can be inferred that
companies with excellent resources and know-how are limited in their growth by
regulatory action that restricts their development in the name of controlling market
power. This is highly possible in a growing industry like the Indian mobile industry,
where the authorities are still holding on to regulations that were laid out at the initial
phase. This kind of stunted growth can result in missing the peak time for company
growth and in turn, the industrys growth. Kay (1996) agrees with this and says that
companies will gain competitive advantage based on market share and not historic
strength. For this market share to evolve on a true and competitive basis it is
important for an industry to be liberalised or their resources wouldnt be converted to
productive efficiency on time. Such a phenomenon would delay the growth of the
overall industry.
Market Regulation - Dynamic
There are reasons for and against the need for market regulation. While talking of
regulation in the telecommunication industry, Buigues (2006) has mentioned the
existence of static and dynamic criteria. Static criteria refer to the existence of natural
monopolies due to high initial investment and infrastructure barriers preventing new
entrants. It involves huge sunk costs as we have already seen. This calls for
regulation in the industry as it involves certain technological requirements that cannotbe replicated economically (Buigues, 2006).
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Under the dynamic criterion, it should be considered that innovations in a developing
field like telecommunications can ease entry barriers to a great extent and this
dynamic nature of the industry should be kept in mind (Buigues, 2006). One might
also infer from this that new players might themselves bring in innovations with them
and thus might attract the initial outlay required from different sources like venture
capital or a joint venture. This new entrants innovation will boost competition and
benefit the overall industry. Hence, the persistence of entry barriers is only till a
period of time in life cycle of the telecom industry and Indian regulatory authorities
must identify this to decide on the timing and phasing of deregulation. This will be
discussed further based on the collected data in the analysis section.
It can be seen how regulations must be checked at regular intervals. Beardsley and
Farell (2005) agree with this in their report on industry regulation and say:
A regulator should continually assess not only the kind of rules each of them
requires but also, if competition is already established, whether fewer rules might
make sense.
The idea of regular assessment is stressed here as well. The logic of making
flexible regulations based on the non-existence level of market failures and the
presence of competition will be more beneficial for an industry like the Indian Mobile
which is in its developmental phase. Beardsley and Farell (2005) also talk about a
sunset clause whereby regulations are reviewed in pre-determined intervals and
extension or removal of the sunset clause will be decided on the performance
observed. This was successfully implemented in the U.S airline industry which
resulted in tighter competition and competitive prices, benefitting the consumers and
industry at large. Such a methodology could work for the Indian Mobile Industry after
providing for certain infrastructural changes.
3.9.3 Market Forces
The Indian Mobile telephone industry is at a stage in the peak of its growth stage.This is a crucial phase of development for the industry. Any technological innovations
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that are efficiently utilised and competition of properly channelized can boost the
productivity and reach of the industry. It has been seen how the probability of market
failure is an important determinant in the plan of action. There are various other
market forces that act on a market and direct competition. These market forces shall
now be studied in detail using the Porters Five Forces tool to gain a better
understanding of the zones where market power rests. This shall be strategic issues
to consider while the regulatory authorities and companies make decisions.
Porters Five Forces
The Porters five forces tool is now used to measure the different forces in the
market and how, when combined, they act on competitive rivalry. The extent of each
force is measured in zones ranging from Low, Medium and High.
Bargaining Power of Sellers - Medium
The mobile telephone industry in India started as a luxury product subscribed
by the early adopters in the late 90s and has gone on to become a standard
technical product bought by the common man. The constantly advancing nature of
technology has meant that new products and service packaging are being offered on
a continuous basis. New products like new handsets or new technology like 3G, etc
can bring a premium price for the sellers. But, the tight competition that exists in the
industry and an on-going price war mean that the bargaining power of sellers is
limited to the extent of them receiving subscription from the customers over other
providers. Thus, the technological progression equips companies with a lot of market
power. Bu the quick distribution of technology among competitors becomes another
consideration. The power of the companies is limited by the price discounts and other
forms of promotional offers presented by rival companies. Hence, their overall power
is medium.
Bargaining Power of Buyers Medium High
As seen above, the mobile phone customers have a heavy bunch of serviceproviders to choose from. The current price regulations, even technology and
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competition mean that customers have considerable switching power. A recent
regulation that has enabled customers to switch providers without changing phone
numbers at an ignorable fee shifts more power into the customers hands. All these
mean that there is relatively high power with the buyers.
Threat of New Entrants Medium High
This is one of the sharpest indicators of industry position. The Indian mobile
industry has seen many developments in the incumbent players zone of the market.
The private companies exploited a phase when privatisation was new to the industry
and they also carried their corporate reputation along with them (Bharti, Tata,
Reliance, Idea). The mobile telephone industry is a capital-intensive one, involving
high sunk costs and extensive economies of scale (Bergman et al, 1991). Another
factor to be considered is that any company with a breakthrough innovation can enter
the industry with the help of private equity and venture capital. There is also a strong
possibility of international players entering India on individual or joint ventures like
Vodafone did and Docomo being the latest example (Indian Express, 2008). This is
more likely with India being an emerging economy with a 100 million subscriber base
and average technological advancement. Considering all these factors, it will be fair
to say that the threat of new entrants in the market is Medium High.
Threat of Substitutes Low
The replacements for a mobile phone are very rare. Even the very few that
exist like the traditional telephone, computer and wrist watch phones are either
lacking certain key features of the mobile phone (telephone, computer) or rarely
available (wrist watch phones). Also, with more computer features being embeeded
in mobile phones like Blackberry, Palmtops and iphone, mobile phones are gaining
importance and utility. Even with technology development at a very high pace and
distribution, the threat to mobile phones from possible substitutes are low.
Competitive Rivalry High
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The inception of mobile services in India saw public sector providers like
BSNL and later MTNL dominating proceedings. Once the industry was opened up,
players like Airtel, Hutch and Essar came into the scene. The private players list has
now grown in numbers. This has been a combination of international entrants like
Vodafone and Docomo and joint ventures for specific products and offers like Airtel
Blackberry. The Mobile service subscribers in India have a bunch of Tier-1 service
providers to choose from and a lot of Tier 2 sellers. The tier 1 consisting of the
technology and market leaders like Airtel, Vodafone, Reliance and BSNL and the tier
2 lot being bigger with players like Idea, Spice, Aircel, etc. There are other players
who are relatively small but well established in their states like Aircel in Tamil Nadu,
BPL in Maharashtra and Spice in Karnataka. These private players have a
considerable share of the market in these circles and force the tier 1 players to adopt
a more tight strategy in these stages.
Another influencing factor, as in most businesses, is price. The wave of regulatory
changes and mixed strategies from companies has set-off highly stiff pricing margins
and non-financial incentives through promotional offers. Increasing competition with
existing and new players, improving technology like 3G and UMTS and more
disposable income from the bulging Indian middle class have all lead to high
competitive rivalry in the industry. The competitive structure is discussed in more
detail in Section 3.10.1and its affects are analysed in the Findings and Analysis part
of the research.
Threat of New Entrants(Medium - High)
Buyer Power Competitive Rivalry Seller Power (Med - High) (High) (Medium)
Threat of Substitutes(Low)
Figure 3.3 Porters Five Forces Indian Mobile Telephone Industry
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3.10 Likely Issues Affecting the Indian Mobile Industry
The International Telecommunication Union estimated that
mobile cellular subscriptions worldwide would reach approximately 4.1 billion by the
end of 2008 (International Telecommunication Union, 2009). Mobile phones have
gained increased importance in the sector of Information and communication
technologies for development in the 2000s and have effectively started to reach the
bottom of the economic pyramid (Heeks, 2008).
Looking at Figure 3.4, it can be seen how the graph is evening out towards the end
for developed countries showing the relative maturity of the markets. Comparatively,
the graph for the developing countries is rising continuously signifying the growing
nature of the mobile markets. This theory also applies to India, it being one of the
fastest developing countries.
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Figure 3.4 Source: NewYorker, 2008
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The market for cellular mobile technologies in Asia has seen explosive growth
in the nineties and the first few years of the millennium. In his paper, Chakravarthy
(2007) says that the main reasons for the growth of mobile telephony in Asia are the
opening up of markets to competition, introduction of digital cellular technologies and
the presence of an independent telecom regulator. Looking at it from the India
perspective, the markets had been opened up for competition after it was being
dominated by the government-owned BSNL and MTNL. The technology has been
constantly upgraded ever since the market opening and new kinds of expertise in the
field has been pumped into the sector by the innovative and high-paced private
players. But still, it has not advanced as it is in the developed countries.
Comparatively, countries like China, which has a similar density of population like
India, has much better technology, which sometimes is replicated by the developed
countries. It has also achieved a much better penetration and has a much larger
subscriber base. This shows the potential India can explore if it develops the mobile
telephone sector in a proper and structured way. The above two factors lead us to the
next element the regulatory framework.
The step to launch a separate department and then an independent regulatory
body TRAI, was a crucial step in developing the sector. This made sure that therewere now specific policies being made for the sector and the general events in the
industry was being monitored by an authoritative body. Moreover, the decisions on
competition and acquiescence of technology into the country are also controlled by
the regulatory and political bodies. This shows how the third variable overrides the
first two as the prime issue. In this section, these issues will be taken up individually
and elaborated on.
3.10.1 Competitive Structure
Theoretical Framework
Substantial empirical evidence reveals that privatization or deregulation in the
telecommunications sector can lead to performance improvements. Megginson, et al.
(1994) compare pre- and post-privatization financial and operating performance of 61
companies (in 32 industries, including telecommunications) from 18 countries. They
find increased sales, profits, investments, and employment following privatization.
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The early empirical work in this area compares average performance indicators
across firms or countries before and after deregulatory reforms. Most of that
evidence is from Latin America, a fact that is not surprising, given the region's
relatively early start in reforms. In general, these studies find positive effects of
reforms (e.g., Kikeri, et al. 1992; Wellenius and Stern, 1992).
Though privatization has yielded significant benefits, allowing entry and
competition in the sector tends to yield far greater benefits (Wallsten, 2002). A
monopoly provider, whether state-owned or private, experiences fewer incentives to
improve service and lower prices than do firms that operate in a more competitive
environment. As Ambrose, et al. (1990) argue, "simply moving a monopoly from the
public to the private sphere will not result in competitive behavior." This wisdom is
reflected in results obtained from a broad class of studies, which finds that
competition leads to the biggest improvements in the sector (Fink, et al. 2002; Li and
Xu 2001; McNary 2001; Petrazzini 1996; Ros 1999; Wallsten 2001).
The detrimental effects of monopoly provision are also exacerbated in network
industries (such as telecom), where the presence of network effects, switching costs
and supply side economies of scale, may lead to 'lock ins' where a producer with
market power charges a premium that customers may be willing to pay given that
their cost of moving to a new product or technology may be prohibitively high. (2)
'Locked in' customers may give rise to imperfect competition even if there is free
entry to the market, as new firms may not be able to ever build up the installed base
of consumers or realize the cost advantages that they require to compete. Again, no
anti-competitive behavior is necessary in order to create market inequality in network
markets (Economides, 2003). The natural monopoly that occurs due to the large
installed base of a dominant firm results in it wielding market power with no explicit
strategy of entry deterrence.
The Indian Mobile Industry Perspective
India, the worlds second-largest mobile-phone services market after China
(ITU, 2009), added more than 10 million subscribers for the third straight month in
November and is set to attract more operators as it prepares to auction licenses for
starting high- speed wireless services next year.
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Talking of competitors, India has a market that has a lot of divisional and
national players. But the overall scenario is dominated by a few big operators.
Airtel
Airtel comes from Bharti Cellular Limited - a part of the biggest private
integrated telecom conglomerate, Bharti Enterprises. Bharti Enterprises has
been at the forefront of technology and has revolutionized telecommunications
with its world class products and services. Bharati-AirTel is a GSM mobile
phone service provider in worldwide and the surrounding areas. It offers
various pre-paid and post-paid plans, as well as value added services.
Bharat Sanchar Nigam Limited - BSNL is the largest Public Sector
Undertaking of India and its responsibilities include improvement of the
already impeccable quality of telecom services, expansion of telecom network,
introduction of new telecom services in all villages and instilling confidence
among its customers.
BPL Mobile - Having started its services in 1995, BPL Mobile operates in
Mumbai, Maharashtra, Goa, Kerala, Tamil Nadu and Pondicherry- with a
network spanning across 209 cities currently. Today, BPL Mobile, India's
premier mobile phone service provider serves over 2 million happy andsatisfied wire-free citizens across all our markets. It provides cutting-edge
solutions, services and products in the broader areas of Enterprise
Communications, Digital Consumer Electronics and Information Technology,
with a dedicated focus towards hardware and software solutions for highly
competitive global markets.
Hutch
One of the bigger players in India. Bought in 2008 by Vodafone of the U.K.Some of the figures shall refer to them as Hutch.
IdeaCellular - Servicing Mumbai initially and a lot of other regions later. A
telecommunications venture from the Aditya Birla Group, one of the biggest
corporate houses in India.
MTNL - MTNL was set up on 1st April, 1986 by the Government of India to
upgrade the quality of telecom services, expand the telecom network,
introduce new services and to raise revenue for telecom development needs
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of Indias key metros Delhi, the political capital and Mumbai, the business
capital of India.
Reliance Infocom - The Reliance Group founded by Dhirubhai H. Ambani
(1932-2002) is India's largest business house.
Reliance Infocomm will offer a complete range of telecom services, covering
mobile and fixed line telephony including broadband, national and international
long distance services.
Spice Telecom - Spice Telecom the brand name of Spice communications
Limited is presently operating Cellular Phone Services in the states of Punjab
and Karnataka. Considered as one of the best providers of mobile telephony
in India. Spice brings quality cellular services at attractive prices. These
include Auto Roaming facility, special services like voice-mail, and Spice Plus,
and the option of charging cell phone account with pre-paid Spice currency,
the easiest way to pay.
Tata Indicom - Tata Teleservices ltd offers its products and services to
customers across India under the name of "Tata Indicom". TATA Teleservices
limited is India's leading Private Basic Service Operator. This is from the TATA
group one of the biggest and well-known corporate groups in India.
Videsh Sanchar Nigam Limited - VSNL was incorporated on April 1, 1986
under the Indian Companies Act , 1956 to take over the activities of the
erstwhile Overseas Communication Services (OCS). The company operates a
network of earth stations, switches, submarine cable systems, and value
added service nodes to provide a range of basic and value added services.
A Detailed list of mobile operators in India is provided in Appendix 2.
It can be seen how the operators in the sector are scattered. But in spite of so
many operators being present, the business in the markets are dominated by the
major players like Airtel, Reliance, BSNL, Hutch (Vodafone), etc. From figure 3.5, it
can be seen that the market in the metropolitan cities and the states in general have
been captured by the chief operators like Airtel, BSNL, Reliance, Hutch (Vodafone),
Aircel, Spice, Tata Indicom , etc. This depicts a picture of competition being lead by a
few players, but due to the cut-throat nature of the mobile sector, stage of
development and its scope for further growth, it is very healthy.
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Estimates put the total worth of Indias telecommunications sector at nearly
US$100 billion in 2007 (Budde, 2008). This was on the back of soaring valuations of
the countrys telecommunications companies, both listed and unlisted. Listed
companies like Bharti Airtel and Reliance Communications could claim valuations in
the range of US$26-27 billion and US$19-20 billion, respectively. And big operators
like Bharat Sanchar Nigam Ltd and Idea Cellular would be likely to range in value
from US$8 billion to US$30 billion if they were listed. Over a 10 year period, the
telecom industry saw numerous high profile exits by multinational companies such as
AT&T, Telecom Italia, British Telecom, Telstra, Cingular and France Telecom. Others
to exit included some local companies as well such as Aircel, BPL, Escorts, RPG,
Usha Martin, JT Mobile and Hindujas.
Figure 3.5 Market share region-wise (Asia Telecom Report, 2006)
Vodafone, which had also exited the Indian market earlier on, had made a comeback
in recent times with its successful bid for Hutch. Over the years, the exits and entry of
new players have been part of market consolidation, ultimately resulting in strong
value creation. A joint venture between AT&T and Mahindra Telecommunications
saw the US-based company become the first foreign telecom operator to get a
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licence under the Indian governments revised FDI policy increasing the foreign
ownership cap from 49% to 74%.
There are a few experts who predict the entry of more foreign players as the
market progresses and consolidation. These issues will be looked upon later. Before
analysing the existing competition, it would be very useful to have a look at the
market share occupied by the few dominant operators in the country. On June 30,
2008 the market share in the Indian mobile market looked like this:-
Figure 3.6 (CAOI)1
The heavy competition marked by the abundant number of players means
that there is a problem for customers in the respective regions in accessing the
frequency network of their service providers. There have been numerous complaints
in the recent past being network being blocked during peak hours due to colossal
overloading of customers. A reason to bring in regulation can clearly be seen. But,
like what Klein (1999) says, it should be in the nature of network industries to keep
1
CAOI - The Cellular Operators Association of India (COAI) was constituted in 1995 as a registered, non-profit,non-governmental society dedicated to the advancement of communication, particularly modern communication
through Cellular Mobile Telephone Services.
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the sectors as deregulated as possible and promote free competition. While this
paradox needs to be addressed, the other factor this feeds is the issue of technology.
The overflowing number of operators and ever-increasing number of customers
should be supported by efficient network infrastructure and other related technology.
This issue is now analysed in the following section.
3.10.2 Technology
The importance of infrastructure in a network industry has been
seen in the initial part of this literature review. Technology and infrastructure
development has been a persistent hurdle in the economic progress of India.
There are over 1.5 billion cellular phone subscribers in the world,
according to International Telecommunication Union (ITU, 2005). The developmen in
mobile phone subscribers today is faster than the growth in fixed telephone
subscribers and Internet users. In some developed countries in the EU like Sweden
and Iceland (and Hong Kong on the Pacific Rim) cellular diffusion is around 100
percent. Sweden today has a mobile penetration of a 101 percent, i.e. there are more
cellular phone subscriptions than people in the country. Most advanced industrial
countries have historically displayed a significant diffusion rate for cellular
technologies. According the Organization for Economic Cooperation and
Development (OECD, 2003), in 2001, mobile penetration in Netherlands, Iceland,
Italy, Finland and the UK were 81.3, 82.6, 80.4, 87.1 and 77.1 percent respectively,
with the overall penetration rate for EU being 74.3 percent. Among the other
developed countries, the US stood at 45.1 percent, Japan at 58.8, Australia at 57.1
and Germany at 68.3 percent in cell phone penetration (OECD, 2003). However an
important aspect of cellular technology diffusion among advanced industrial countries
is that mobile penetration has levelled off in the early part of the millennium with the
growth centres for cellular technology shifting to countries such as Russia, China,
India, Korea, Malaysia, Indonesia and the Philippines and Taiwan. The first basic
requirement for the Industry to grow is the need for a competent handset market. The
global players for mobile handsets are present in India as well.
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Figure 3.7 Global Mobile Handset Market
In the global scene, it is seen how Nokia dominates proceedings and India is no
different. The operators have been coming up with efficient mobile devices for the
Indian market.
Radio frequency spectrum is a limited natural resource. The word Spectrum
basically refers to a collection of various types of electromagnetic radiations of
different wavelengths. In India, the radio frequencies are arbitrarily confined between
9kHz and 3000 GHz and are being used for 40 different types of services like fixed
communication, mobile communication, broadcasting, radio navigation, radiolocation,
fixed and mobile satellite service, aeronautical satellite service, radio navigational
satellite service etc.
Some of the important and typical characteristics of the radio frequency spectrum assaid by Kaul (2006).
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In this section, it could be seen how the spectrum and other related
technology needs to be given attention and should be studied before formulating on
them. From the section on Competitive Structure and Technology, it can be seen
how anything that has to be controlled has to go through the regulatory bodies. This
key variable is now analysed in the following section.
3.10.3 Regulation and Government Bodies
There has been significant research on the adoption of new technologies from
both national and practical point of view. In telecommunications, the subject oncompetition generates furthur values to minimize cost to it has been argued that
competition creates additional values to reduce costs to innovate and eradicate un
clear pieces (Laffont and Tirol, 2000).
The cellular mobile industry has always been much less regulated than its
fixed line counterpart and indeed most public utility provision. In Asia this more liberal
policy environment led to mobile provision at a premium in the nineties by either
incumbent operators or by monopoly/duopoly private firms who were charging high
rents to consumers with relatively inelastic demand for voice communication services
in countries with low mainline penetration. However the relative lack of regulation that
prevailed in this industry also meant for more competitive entry as the level of
supernormal profits increased. In the study (Chakravarthy, 2007) of the number of
countries in Asia that had a certain industrial structure (e.g.--monopoly, duopoly,
three firms or more than three firms) from 1993-2004, we see that up to 1996, the
number of monopolies exceeded the number of oligopolies but from that point on the
number of countries with two or more firms increased significantly until in 2004, 10 of
the 31 countries surveyed had a monopoly whereas 21 had multiple providers. What
is clearly seen the change in the average peak-rate tariff for a three minute local cell
phone call for the different regions in Asia. The graph shows that 2000-2002 was the
only phase in the decade when the peak-rate tariff decreased for all three broad
regions of Asia. Thus an increase in competition is seen to be directly linked to a
falling of prices in this market. It may be mentioned that almost all countries had
"liberalized" or "corporatized" their telecom incumbents by the middle of the nineties
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(except the countries of the Middle East which even in 2002 had a number of
monopolies). This however did not make for higher consumer welfare or rapid market
growth, which came in the 1999-2002, as a concomitant to higher competition and
falling tariffs. It must also be mentioned that for developing countries even though an
increase in mobile penetration may be observed with more entry, a significant portion
of this increase may be because of unsaturated demand for telecom services, rather
than a response to "better" quality of service per unit of consumer expenditure.
Klein (1999) putting your self in the front that when we are uncertain, the
policymakers should not limit the admission of the competitive firms in such
networks. If they want to limit the admission he says that the limit should be
according automatic test after a set time, and observe for costs and profit.
An industry-agreed set of spectrum trades could represent a better and
quicker solution than one imposed through regulation. The future spectrum
distribution should be resolved quickly and it should allow for re-use of the spectrum
whilst maintaining a competitive market.
3.11 Summary & Conclusion
From the review, it has been seen how the quest for the development of
the Indian mobile telephone industry breaks down to the three factors of Competitive
structure, Technology and Regulation. In the individual analysis, it was also seen
how both competitive structure and the network infrastructure providing the
technology need to be managed properly for the over enhancement of the sector.
This leads us to the main variable recognised Regulation of the Industry, which not
only controls both the factors identified above but also plays a very important role in
its independent functions. In a nutshell, the literature review brought out the following
issues:-
Development of Mobile Communication is quintessential for the overall
development of India as an economy.
The network infrastructure acts as a bridge between the creation and delivery
of the services and should be given priority in policies.
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Competitive structure determines the traffic in the industry and this
concentration influences the industry through innovation, spillover and other
effects.
Technology is the backbone of the industry and is upgrading by the minute.The spectrum has to be managed strategically to squeeze the optimum use
out of it.
Regulation plays the most important role; it has to maintain a balance in the
competitive composition in the industry and also divide, utilize and impart the
spectrum distribution cleverly.
What needs to be done? - Further liberalisation of the spectrum and the adoption of
discernible technology manifested by novelty are needed to be implemented further
by the authorities to enable the network infrastructure facilitate overall development.
These areas have will form the nucleus of his research design and subsequent
analysis.
4. RESEARCH METHODOLOGY
4.1 Introduction
The research and the methodology implemented are key essentials in
deciding the success of the research carried out (Fisher, 2007). They portray the
procedure as how the research is going to take place and how it is linked to the aims
and objectives mentioned in the research.
4.2 Research Proposition
From the literature review, it was seen how the mobile industry can be broken
down into three segments for the purpose of infrastructure analysis. It has been
identified that, in the Indian Mobile Industry, given the current state of affairs, for the
network infrastructure to be developed and competition to be channelized efficiently,the regulatory authorities hold the key. From the background of this research, the
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wider research area of network infrastructure enabling mobile telephone industry
progress has been restricted down based on the three important variables
recognized Competitive Structure, Technology & Infrastructure and Regulatory
Framework. Among these variables, the importance of the regulatory function has
been recognised. The project proposition is supports the key variable which has its
benefit on the research attained n general will be based on this chief variable to help
the research achieve its overall purpose. The research is done to give spotlight on
the regulatory body of the indian telecommunication industry.
Regulation of network infrastructure shall enable development in the Indian
mobile telephone industry.
Figure 4.1 Breakdown of Hypothesis
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4.3 Research Design
The research aims to demonstrate the different parts of the research gathered
models and data,the technique of working and estimating results, all this is done to
overall add just before the main research objectives (Trochim, 2000). This part shows
an general view of the information sources and the set methods, also what kind of
methodology to be This section gives an overview of the data sources and collection
methods, methodology to be taken on and ways of analysis.
4.3.1 Research Approach
The research has elements relating to the cellphone infrastructure and when
merged , they add or reduce in general the sector efficiency. By braking the research
into various components, it is makes it more simple to set up cause and the outcome
connection between the variables recognized and the rigid structure.
Then, resulting model is found from different cases and the will be tracked across
cases and strategy proposition will be set up. These kind of models are mostly used
to describe possible events or explanation that are necessary from the rigid part of
the sector to sort out the efficiency roll-out communication for the firm. Forcasting
future happening and describing out action plans for the firm can be a subject to
argue about in a growing market like the indian cellphone industry, the research
states that it can cope up with the one-sided advise overcoming the flaws, which is a
part of practicality (Fisher, 2007). This means that information relevant to the known
variables in the indian framework would be gathered and kept as a viewpoint, the
network communication organization will be the key source to recommend future
plans.
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4.4 Data Sources and Collection
Rationally, this gives the way to the next step in the plan, that is searching for
suitable sources of information and gathering them in a systematic manner tominimize loss of value and have usefull understanding. The method of gathering
information used here is desk-bades orientation. It comes under secondary sources
of information (Fisher, 2007). The information gathered according to this method is
done from a large range of sources which also has the surveys about the situation of
the inidan telecom industry.
The report by OfCom drawing a phasing out plan for the UK mobile industry would be
considered as a basis to frame similar maps for the Indian mobile industry. Issues
specific to the Indian context would then be accounted for on the basis of recent
industry reports.
4.5 Methodology
The research takes the realist route and will require a detailed analysis of
factors contributing into the industry and finding the outward effects they bear.
Papers and concepts in the telecommunications would be referred to look at
the applied methods of dealing with network infrastructure prescribed by various
authors. This would then be compared with the articles from journals on the
telecommunications sector to bring out what the recent developments in the sector
mean for the research. Then, news and critiques on the incumbent firms in the Indian
mobile telephone market and their future plans would be analysed to see how the
competitive elements in the industry match with the industry trends noted in the
previous task. Then, the regulatory issues facing them would be examined via
reports from and about the concerned authority, TRAI. Putting all of the above into
perspective, a rough draft of what needs to be implemented in the process of
liberalising infrastructure would be made. The opinions of industry experts would be
consulted to sharpen the items and make a listing of what needs to be done. To this
advanced report on analysis, the research would add its view of how the liberalisation
needs to carried out and what the factors are to be addressed in the process. The
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qualitative report would then be summarised and recommendations will be presented
as the result of this research.
4.6 Objectives, Hypothesis and Analysis
Based on the research objectives, three significant variables were introduced
in the previous section Competitive Structure, Technology and Regulation. In order
to identify how best to liberalise the network infrastructure in the Indian mobile
industry, these variables will be scrutinised with context and the policy actions born
out of them will be listed. The likely outcome of the regulatory moves on each of
these variables will be analysed. The research will a qualitative analysis and use the
results to evaluate the requirement for each of these variables. After considering the
likelihood of events, the results on each of the variables are pulled together to frame
the overall implications.
The research foresees significant consumer and citizen benefits from the
liberalisation of better spectrum bands. The deployment of better infrastructure could
mean deeper and wider availability of communication services. A case for improving
connectivity to rural areas would also be considered as means of closing the digital
divide within the country. Future trends in the industry would be predicted based on
the global technology scene and ideas for how to keep pace with them would be
discussed. In its race to economic dominance, the mobile telephone industry
development holds a key role. Whether the network infrastructure could be
developed to enable India communicate itself with the world at large is the hypothesis
to be tested.
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5. FINDINGS & ANALYSIS
5.1 Introduction
Data pertaining to the identified objectives were collected from various
sources to ensure full coverage and overcome any possible bias. In this chapter, the
research shall present this collected data, process it and establish the out born of the
analysis.
Since the collected data and their interpretations are inter-related, they are
connected stage-wise and their implications are laid out as they are being presented.This chapter will take the following structure. First an overview of the general
scenario on the Indian Telecom industry in which the research is carried out is laid
out. The next section shall combine the two primary variables Competition and
Technology and present the data found on them. These shall be examined and their
implications for regulation will be sketched. The subsequent section will focus on
regulation in the industry. This will connect the previous section with what form of
liberalisation is required. It will discuss the factors to consider, how to implement itand other facts that form a part of the results of this research. The last focus section
shall bring out some of the future developments in the mobile industry to be
considered. The chapter will end with an overall conclusion.
5.2 General Scenario
Indias telecom industry is in a phase of transition. Process of change is often
volatile and responsive to intervention and global circumstances impacting it such asa Britian based telecommunication Vodafone investing in the indian market and
taking over the existing company called Htuch. In such an inherently dynamic
situation it is convenient to assume that cross-country experiences incubate the most
recent seeds of change. This is because countries at various stages of development
encapsulate developmental experiences that occur with the passage of time. The
striking dissimilarity of mobile networks with infrastructure provision historically is the
strong legacy of private provision. When it was introduced in countries of the
developing world it initially was a small service commanding a huge price premium
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and more of a status symbol for a small wealthy fraction of residents. Over time, due
to demand and supply side economies of scale, the profits accruing to the cellular
providers grew. This supernormal industry profit attracted other firms that started
providing cellular services like Airtel, aircel, and many more during this time and now
india has more than 10 major cellular indusries. In most countries in Asia, entry into
this industry was not particularly restrictive and by the late nineties it was not
uncommon to have multiple providers of technology and fairly intense competition
among these providers. The associated lowering of price that came with competition
suddenly put this technology within the reach of the masses, and changed the
character of mobile services from a consumer convenience product to an
infrastructure service that often substituted for a mainline phone in countries where
basic fixed line telephony was weak. This rapid growth in the late nineties and the
early part of the millennium has found several Asian countries like India, Malaysia,
Hong Kong, Japan and Taiwan witnessing tremendous competition in mobile
provision. This has led to considerable erosion in profits for operators. Net profits of
four mobile telecommunications service providers (VSNL, MTNL, Bharti
TeleVentures and Tata Teleservices) in India declined as much as 47 per cent in
2002-03 (Chakravarthy, 2007). The Cell
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