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The telecom sector is one of the fastest growing sectors of the Indian economy. Today, India’s more than 100 million telephone network is one of the largest in the world. In terms of number of phones, we are the fifth largest network after China, USA, Japan and Germany. During the first year of the new Government, i.e. May, 2004 onwards, an all time record growth has been achieved by adding about 2.36 crore phones. The number of phones provided in the country up to 1995 was only about 2.2 crore since the introduction of phones in India. In the recent past, every month more than 20 lakh phones get added i.e. about 70,000 persons are provided phones each day. The tele-density has increased from 7.15 per cent on April 30, 2004 to 9.15 per cent in April, 2005. Now the number of mobile phones has overtaken the number of fixed phones. The share of private sector has also increased to more than 45 per cent in the total phones.
The annual turnover of telecom industry is more than Rs.51600 crore. The telecom operators contribute about Rs.6000 to Rs.6500 crore per annum to central exchequer through Licence Fee, USO levy, spectrum charges, Dividends, etc. Of this, BSNL alone contributes about Rs.2500 crore per annum. Besides, the sector also contributes through service charge, Corporate Tax and other fiscal levies. The telecom services are clearly the growth driver for other sectors of the economy. The usage of these services significantly contributes to the productivity and income levels. The available studies suggest that the incomes of business entities and households increase in the range of 5-10 per cent by the use of telecom services.
The achievement in the telecom sector is a result of several policy initiatives taken by the Government. The new Government has taken many pro-active measures to facilitate the expansion and growth of the telecom network. To begin with, the performance bank guarantee for the National Long Distance Service licencees was reduced from Rs.100 crore toRs.50 crore. To encourage end-to-end bandwidth provision, the licence fee for Infrastructure Providers-II has also been reduced from 15 per cent to 6 per cent of the Adjusted Gross Revenue (AGR) in June, 2004. Similarly, Internet Service Providers (ISPs) were also permitted to use underground copper cable for establishing their own last mile linkages.
In the first Budget of this Government (2004-05), Customs Duty exemption was provided on Switching Centres for unified access service providers and on optic fibre cables and raw materials required for OFCs. In the subsequent Budget (2005-06), Customs Duty on import of components and raw materials required to manufacture telecom equipment has been reduced to zero. The Customs Duty on the remaining 107 out of 217 Information Technology Agreement-I items (ITA-I) has also been proposed to be zero. Similarly, for the inputs and capital goods required to manufacture these items, the Duty has been reduced to zero. The Corporate Tax rate has been brought down from 35 per cent to 30 per cent benefiting the telecom operators and manufacturers as well.
The “mobile telephone connection” was taken out from “One out of Six Criteria” for the purpose of filing Income Tax return to encourage faster expansion of mobile telephony. To encourage technological upgradation, withholding tax on technical services has been reduced from 20 per cent to 10 per cent.
In the area of broadband connectivity, a well laid out broadband policy was announced in October, 2004. To encourage expansion of broadband connectivity at a faster pace, both outdoor and indoor usage of low power WI-FI and WI-MAX systems in 2.4 GHz -2.4835 GHz band has been delicensed. The use of low power indoor systems in 5.15 – 5.35 GHz and 5.725 – 5.875 GHz bands has also been delicensed in January, 2005. Further, to expedite the process of spectrum allotment, an automated spectrum management system has been commenced. The Government has also approved the enhancement of FDI ceiling from 49 per cent to 74 per cent for major telecom services in February, 2005. On the tariff front, due to increase in competition and fast expansion of telecom network, the telecom tariffs for both NLD and ILD have decreased considerably – making the telecom services more affordable to the consumers at large. The introduction of revised access deficit charge regime from February, 2005 has also resulted in further decrease in tariffs for long distance calls.
A programme has been initiated to establish State Wide Area Network (SWAN) up to the block level with a minimum Bandwidth of 2 MBPS to provide reliable backbone connectivity for e-governance. National Internet Exchange of India (NIXI) aims to ensure that the Internet traffic which originates within India and also has destination in India, remains within the country, resulting in improved traffic latency, reduced cost and better security. Further, in order to bring about a substantially increased proliferation of .IN Internet domain name, a new .IN policy framework was announced and a plan in this regard is under implementation. It aims to put in place a more liberal, efficient and market friendly domain name registration system. These steps would result in improved traffic, reduced cost and better security. The National Common Minimum Programme of the UPA Government recognizes the potential of e-governance not only to improve governance but also to facilitate people’s access to government services. The National e-Governance action plan seeks to lay the foundation and provide impetus for a far more pervasive spread of e-governance to reach the common man, particularly in far-flung areas. In this regard, various elements are being put together that are needed for leveraging the enormous power of Information & Communication Technology (ICT) for the economic development of our country.
Future Vision
It has been visualized that by 2007, the country will have 250 million telephones and the tele-density will be about 22 per cent. Of these phones, around 180-200 million phones are estimated to be mobile phones and the public sector operators would contribute about 50 per cent. The operators would cover about 5000 cities and towns within next few months. Thus, wireless phones would play an important role in achieving the plan objective of telephone on demand. By the end of 2007, the entire country shall be carpeted by telecom network and all the villages shall be connected by phone. The Internet connections shall increase from 5.45 million in December, 2004 to 18 million by 2007 and further to 40 million at the end of 2010. By 2007, broadband connections are targeted to be 9 million which are expected to be 20 million by 2010. Further, introduction of 3G technology would enhance voice capacity, higher data speeds, etc., which in turn would facilitate e-initiatives of the Government such as e-governance, e-health, e-education, etc. With the increasing competition, it is expected that the tariff rates will fall further benefiting the consumers at large.
Rural Telephony
More than 87 per cent of the villages have already been covered by providing 5.30 lakh village public telephones (VPTs). Most of the VPTs have been provided by BSNL. These apart, BSNL has also provided all the 133 lakh rural DELs in the country. It is expected that the pace would considerably accelerate with the implementation of non-lapsable Universal Service Obligation Fund (USOF) and the private operators would also enter rural areas for providing individual rural phones. So far, Rs.1814.50 crore have been made available to the operators for rural telephony of which Rs.1314.50 crore are for the year 2004-05. For 2005-06, a provision of Rs.1200 crore has been made available for USO support. The USO is being vigorously implemented. Apart from the USO support, BSNL was reimbursed licence fee and spectrum charges amounting to Rs.1995 crore during 2004-05 for expanding rural telephony.
Although a specific programme is under implementation and there has been a substantial coverage through public access, the rural areas are still virgin markets for telecom services since the rural tele-density is only 1.7 per cent. Given the advantages of mobile telephony, special efforts are presently under way to encourage mobile operators to reach out and cover these rural and underserved areas. It is being envisaged that the passive infrastructure such as land, building and towers may be funded through USOF and can be shared by all the operators for mobile telephony in rural areas. However, under the present dispensation, mobile telephony is not covered for funding through USOF. Therefore, necessary amendment is required to be made to enable such funding.
Broadband Connectivity It is widely recognized that the use of broadband services greatly contributes in the growth of GDP through applications including e-education, e-health, tele-marketing, e-governance, entertainment, etc. However, the current level of Internet and broadband access in India is abysmally low. In the Broadband Policy announced in October, 2004, the broadband connectivity has been defined as “an always on” data connection that is able to support interactive services including Internet access with a minimum download speed of 256 kbps to an individual subscriber. The policy visualizes creation of infrastructure through various access technologies for providing broadband services. In pursuance to the Broadband Policy announced in October, 2004, it is expected that the number of broadband subscribers would be 3 million by 2005, 9 million by 2007 and 20 million by 2010. And to encourage faster expansion of broadband connectivity through wireless, the low power indoor and outdoor usage of WI-FI and WI-MAX Systems has been de-licenced in certain bands. The SACFA/WPC clearance has been simplified. The setting up of National Internet Exchange of India (NIXI) would enable bringing down the international bandwidth cost substantially, thus making the broadband connectivity more affordable. During the current year (2005-06), BSNL and MTNL have planned to provide 12.32 lakh and 5.5 lakh broadband connections respectively.
Spectrum Management
Government policies on spectrum allocation are a major factor, which will shape the future of the telecom industry. To enable faster expansion of wireless telephony, adequate spectrum is a pre-requisite. Although the allotment of spectrum is being managed in an objective and transparent manner, the service providers and other wireless users along with the manufacturers need to play more constructive and disciplined role in the spirit of mutual understanding and co-operation. In this regard, government has adopted a technology-neutral policy in the telecom sector. A World Bank Project is being implemented for spectrum management and for augmenting the wireless monitoring systems with an outlay of Rs.200 crore.
Research and Development
In the area of Research and Development, new developments are taking place. C-DOT, which is a premier organization, has focused its programmes into three major areas, that is: Rural Broadband and Wireless solutions, Projects of strategic importance and future technologies including IP and Packet Networks and Commercial software intensive projects.
Indigenous Manufacturing by Global Players
As a result of initiatives of the Government to encourage the manufacturing in the telecom sector investment of about $ 800 million (Rs.3500 crore) is expected to be made by various telecom equipment manufacturers. These are very positive signals for making India a telecom manufacturing hub in Asia-Pacific region and self-reliant in the field of telecom equipment.
All these measures are intended to expand telecom services in the country at a faster paced, reduce digital divide, build a reliable manufacturing base to meet the equipment demand and employ latest available technologies which, in the final analysis, would benefit the consumers. (PIB Features)
**Adviser (Economics), Department of Telecommunications
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