Guest Column: Making India a Telecom Trendsetter

In the past five years, telecom service providers in India have added three
times more subscribers than in the first 53 years of post-independence
existence. Owing to its rapid development, the telecom industry has truly
emerged as the poster child of Indian economic reforms.

A major contributor towards the growth of the telecom industry in India is
the Association of Unified Telecom Service Providers of India (AUSPI). It
represents the interests of the CDMA wireless and fixed-line operators in India.
Owing to the new leadership of our core members, with Ratan Tata having assumed
the chairmanship of Tata Teleservices and Anil Ambani the chairmanship of
Reliance Infocomm in recent months, the industry has registered tremendous
growth.

Mukund G Rajan, president, Association of Unified Telecom Service Providers of India (AUSPI)

Our compound annual growth rate has been in excess of 200% since the launch
of our services. The figure is impressive when compared to the rest of the
cellular industry, which has been growing at around 70%. Our subscriber base has
crossed 30 mn, and our members have been regularly adding over a million
subscribers each month. Our reach now extends to the largest number of towns and
villages amongst the private operators. With some of the most customer-friendly
and affordable tariffs in the Indian market, we are aggressively leading the
thrust into rural India.

In the last round of bids announced by the Universal Service Obligation (USO)
fund administrator, our members were the only private operators to win the right
to offer rural services in as many as 103 secondary switching areas (SSAs)
covering 40% of rural India.

Our members provide some of the most innovative and creative solutions in the
Indian telecom sector. To cite an example, the fixed wireless phones propagated
by our members have transformed basic communication in India. By providing many
more value-adding features, including Internet connectivity and SMS, our members
have gone much beyond the services provided by traditional telcos. In fact, one
of our members received the prestigious World Communications Award 2005 under
the category “Best Telecom Service in Emerging Markets” as an
acknowledgement of this constant innovation.
We are also leading the sector in providing the killer application in
rural India, which is data connectivity for access to government services and
critical information.

With the largest customer-facing presence, including exclusive outlets and
huge numbers of feet-on-street and world-class back-end capabilities, our
members are now poised to dominate the Indian telecom landscape. This includes
state-of-the-art network operations centres and the largest call centres in
India.

Reshaping the Telecom Industry

By virtue of their performance in India, the AUSPI members are also helping
to shape the future of CDMA technology evolution. We believe India can and ought
to take a leadership role in defining the future evolution of CDMA. We already
have membership of the various CDMA standards bodies, including the CDMA
Development Group (CDG).

Equally important, we have led in India the reduction in handset prices to
deliver in the Indian market the world's most affordable CDMA devices. Our
ability to do this in the area of data-enabled handsets and devices is playing a
key role in supporting the government's vision of providing data-rich
information services to the rural parts of India.

We are sure we will receive the government's support, as has the IT
industry, in our endeavour to lead further technology evolution in the CDMA
industry, including in the areas of 3G technologies such as EV-DO, and other
wireless broadband technologies.

Challenges Before AUSPI

The Indian telecom industry has come a long way since its inception. It is
widely recognized that the industry in India has attracted some of the savviest,
smartest business persons. I often say that if one can succeed in telecom in
India, one can succeed in any business. The Indian telecom sector has seen some
of the toughest Indian and multinational competition, and relatively complex
regulation. Moreover, as a rapidly changing technology, it can turn
yesterday's powerful companies into today's losers rendering billions of
dollars of investment worthless.

The reduction in handset prices is playing a key role in supporting the government's vision of providing data-rich information services to the rural parts of India

Like the IT industry, the Indian telecom industry is attracting many of the
brightest young minds in India. The average age of employees in the Indian
telecom sector is in the early 30s. It lies in the hands of this community of
young and bright minds to shape India's future, to create in a country where
around 50% of the population is below the age of 25 years a future in which
every Indian adult is networked and connected, so that India emerges as the
premier knowledge society in the world.

Yet, on our path to achieve these objectives lie several challenges.

The availability of raw material or spectrum: Without this, wireless
communication is impossible. We need more spectrum, and this should be released
as soon as possible, as part of a well-defined spectrum policy. Critically,
spectrum should be equally allocated to all service providers, and service
providers must be free to adopt whichever technology they please, with all the
attendant risks, of course. In this connection, it is imperative that the
significantly large and complicated allocations to the defense services are
coordinated and generous allocations are released to the service providers, who
today are struggling with some of the lowest allocations of spectrum in the
world.

The management of policy and regulation: It will always be the case that
technology development will outpace developments in policy and regulation.
Rather than penalizing those in the forefront of innovation, the licensor and
regulator need to be supportive of innovation and encourage the delivery of new
services and technologies to subscribers. We need a fair, stable and predictable
policy regime, and sensible regulation. The benefits of this have already been
demonstrated in the IT sector in India. One would hope, given that the cabinet
minister in charge of IT also presides over the telecom industry, that the same
philosophy that has allowed IT to bloom in India will increasingly permeate the
telecom space.

The creation of a level playing field: We must ensure that the same
yardsticks and rules apply to all players, and they are put to common tests.
This means we must have a system where the private players receive the same
incentives and support that the powerful and profitable incumbents controlled by
the government receive. And where such fundamental rights as the right to
interconnection are not delayed or altogether denied for inadequate reasons.

 Taxes and levies: India has one
of the highest tax-paying telecom sectors in the world. Combined with the lowest
tariffs in the world, it leaves one with wafer-thin margins for service
providers. A calculation shows that our taxes and levies at between 19-28% of
revenues plus GST are far higher than other emerging markets, including Sri
Lanka, Pakistan, and China. To provide incentives to increase penetration in low
teledensity areas, it is imperative that these levies be reduced. This is
particularly necessary in rural areas which have lesser purchasing power and low
density of population, and therefore higher network costs. Such a measure will
certainly provide the Indian economy with a sustainable competitive advantage
vis-à-vis other emerging markets.

All of these challenges can and will be overcome, with typical Indian
ingenuity. But the sooner we do so, the quicker India can emerge as a
trendsetter in the world of telecom. With 4-5 mn subscribers being added each
month, the Indian market is rapidly becoming the most creative telecom market in
the world. The future, as I can foresee, is hugely exciting.