by Varadharajan Sridhar
2012 Oxford University Press
342 pages; 10 chapters
By now, most technology and business observers know that India has the world’s second largest mobile user base, and that telecom contributes to over 2 per cent of India’s GDP. However, the scenario could be even better in terms of broadband and rich-media penetration, Internet telephony or telecom manufacturing – and this is due to shortcomings in telecom policy-making, as argued in this insightful book by Varadharajan Sridhar.
Sridhar has a unique background in industry and academia; he is currently a research fellow at Sasken Communication Technologies in Bangalore. He has a PhD from the University of Iowa and has taught at Ohio University, American University, University of Auckland, SP Jain Institute, IIM Lucknow and Management Development Institute. He has served on telecom and innovation committees for the government of India, and is a prolific columnist.
The 10 chapters in the book are thoroughly referenced and cover a wide range of material: telecom policy, mobile communications, Internet services, broadcasting, satellite, telecom manufacturing, and industry alliances. The book is packed with useful tables and charts which provide historical timelines of the growth of the telecom sector in India, industry mergers and acquisitions, license allocations, spectrum auctions, mobile traffic, Internet policy, 3G evolution, media convergence, telecom innovations, capital investments, and comparisons between the telecom sectors of India and China.
The book begins by covering the basics of network externalities in the telecom world, and the importance of industry standards for better consumer value. Key factors for industry players are economies of scale (network effects), density (especially in urban areas) and scope (eg. service bundling). The “S-curve” effect is used to describe market entry, growth and saturation of technology innovations. This is based on Everett Rogers’ model of the diffusion of innovation (by lead innovators, early adopters, early majority, late majority and laggards). However, many such models ignore the effect of other external factors such as government policies, technological advancements and service innovation.
Over the past decade, basic wireline services have started showing decline (hovering around 40 million subscriptions), as compared to the rapid growth of mobile services in India (which crossed 700 million subscribers in 2010). The number of mobile subscribers will cross 1 billion in 2014. “The Indian mobile industry has always been very innovative in pricing, as is evident today with pay-for-what-you-use, pulse-a-second and credit-on-incoming plans,” according to Sridhar.
The VAS market in India contributes to about 10-14 per cent of the total revenue of mobile operators, but the government could do more with the launch of utility services via mobile.
Unfortunately, the availability, allocation and management of mobile spectrum has had a “chequered and controversial path” in India. It has been tough for new players to get a level playing field in a domain dominated by large incumbents; principles like Net Neutrality could become a challenge in India in the coming years. There have been restrictions on the interconnections between public voice and data networks, which hamper the growth of the VSAT industry.
The delay in launch of 3G services has hurt the industry and the economy, as well as potential innovators and startups in mobile rich-media. “Time lost is a drain on growth, a blow to economic development, and a hurdle for the diffusion of basic voice service in the country,” argues Sridhar. High license fees also erode the profit margins of mobile operators in India, as compared to China, where operators have much higher returns on capital employed.
A detailed chapter covers the dynamics of spectrum regulation, where policy shortsightedness has focused only on subscriber bases as compared to transceiver efficiency. A holistic focus is needed, to look at perspectives of other sectors and technology options (eg. mobile TV, WiMax).
On the Internet front, broadband penetration is disappointing, in terms of numbers and diffusion patterns. Though the Common Services Centres scheme had aimed at the launch of 100,000 centres across India, there are still problems with connectivity, services and human skills. The National Broadband Plan of 2010 hopes to overcome these shortfalls, via measures such as the National Optical Fibre Agency (NOFA) and State Optical Fibre Agencies (SOFA).
On the broadcast front, there has been much confusion and controversy as well in provisions such as the Conditional Access System for channel management. As for DTH, there could be 35 million subscribers in India by 2013, more than in the US.
With respect to telecom equipment manufacturing, CDOT got off to a good start in areas like rural switches and exchanges, but fell behind in the mobile arena. Companies like Tejas in Bangalore have made successful forays in optical fibre solutions. Still, countries like China are way ahead on this front; in recent years, Huawei’s revenues alone have been more than double that of the production and export of all telecom equipment from Indian firms.
“The telecom manufacturing industry in India has still not reached a scale of operation in correspondence with the growth of the telecom services experienced in the country,” laments Sridhar. Still, there are promising signs with companies such as Midas, Micromax and Karbonn. The telecom outsourcing and related IT businesses include R&D offshoring are other huge opportunities for Indian players. Even big global telecom giants are pursuing a practice of ‘collaborative innovation’ in India, and Indian telecom players and startups are themselves venturing overseas.
The concluding chapter argues that the scale and speed of growth of India’s telecom sector call for a range of alliance models, eg. outright acquisitions or stake acquisitions for market access, technology hedging and technology control. The need of the hour is more stability and vision in India’s telecom policies, Sridhar summarises.
In sum, this is a very useful one-volume compendium of resources and analysis of the telecom sector in India, and should be relevant for all those interested in the larger long-term dimensions of the telecom sector in emerging economies.
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