India reverses the digital divide

Apart from posting at least a 50 per cent growth, Indian telecom in 2007 will 'go global' with a vengeance—acquiring state-of-the-art digital techonologies and using them within the country to boost its already impressive world-leading statistical growth. And it is the poorer consumers who might be showing the way.

By S D Saxena

Indian telecom presents a unique growth and survival phenomenon to the technology, information and digital world. India was initially slow in developing telecom and information technology as there was a belief among the planners that the growth of technology, especially telecom, was not essential to economic growth, and that other sectors like agriculture needed more emphasis. The result was that India was initially rated as one of the countries with lowest number of telephones per 100 people.

The country has now come a long way, becoming one of the fastest-growing telecom nations in the world. Its telecom growth has also created a unique model for the world—that telecom can indeed grow in the most cost-effective manner, and can become an instrument of growth for the poorest of poor. The phenomenon presents a situation where comparatively lower-income people begin using the digital technology of telephones more effectively than the higher-income people. It is a reversing of the digital divide.

The growth rate of telephones in India is an indicator that people have found in telecommunication, especially mobile telephony, an instrument of economic nirvana. People have also found innovative ways to use the technology to improve their economic lot. A number of studies have indicated that economically lower-rung workers and small entrepreneurs have discovered new ways to use information to improve their business potential and the return on investments. Whether it is the fishermen of Kerala or common workers or, for that matter, self-employed women's cooperatives, the common element is using market information as a source for betterment. Innovative methods include using mobility data transmission, especially the SMS, for communicating cost-effectively.

The unique phenomenon of the world's lowest telecom tariffs, including the lowest acquisition cost, is an incentive for everyone to switch over to telecom connectivity. Inputs made for telephone usage are more than compensated in terms of earnings and ease. India's monthly growth is 5.9 million telephones—the highest in the world—which is expected to continue for some more time, since the total number of telephones (160 million) is a smidgen of India's population.

Indian telecom has also demonstrated that there is a fortune at the lower end of the economic pyramid, as has been enunciated by Prof C K Prahlad in his famous proposition. Telecom, being a volume business, has demonstrated that large volumes at exceptionally lower tariffs can still create margins and a viable business model.

The future indicates sustained growth for the next five years: while the present growth rate is bound to decline, the numbers will keep on increasing. The immediate target of 250 million telephones by the end of 2007 is a crucial landmark; all telecom operators in India are chasing a bigger slice of the customer base, adopting innovative methods to increase their share. It is a number within reach.
India—being a country where audiovisual entertainment, particularly Bollywood and Hollywood films, are a major source of entertainment—is also poised for a major boost in the broadband realm, both in the fixed and mobile domains. In the fixed wire domain, the state-run companies— Mahanagar Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL)—are pursuing an aggressive policy of very low broadband tariffs in order to get consumers to utilise the 'triple-play' services that use existing telephones and copper lines that already connect about 40 million customers. This number is growing: at present, India has about five million broadband connections, with the bandwidth available ranging from 256 kbps to 2 mbps. New tariff models are being used to provide telephone, internet and television through DSL at a much cheaper rate, along with the bundling of terminal cost.

Indian telecom has provided the backbone for the thriving KPO and BPO businesses, and has been the main source of software exports and online connectivity with the major research centres worldwide. With research and development outsourcing as a developing trend, Indian telecom will be faced with new challenges to provide world-class connectivity to corporates. Under the circumstances, the growth of world-class business communication and cost-effective solutions for international connectivity will be found. Public sector undertakings like BSNL and MTNL are also involved in building projects such as Submarine Digital Fibre Cable Links in the Southeast Asian region.

Telecom operators such as BSNL, Reliance and Bharti have also been acquiring interests in international carriers, which is bound to bring in new business activities in connectivity and data transmission, along with trade in software and BPO-related businesses that are in global demand. Bollywood movies, much desired by the global Indian community, can possibly find new markets through these international links. The simultaneous global launch of a Bollywood film may now become possible through technological developments, and vice-versa for Hollywood films.

Wireless broadband using Wi-max and other emerging technologies is being tried as a 'pilot' and seems promising. The growth in 3G is expected any time now: Indian regulators have evolved a system for the allotment of spectra through the bidding route, which is being evaluated by the Licensing Authority. It is felt that the 3G technology might be used sooner than later, and could be available to customers by mid-2007. The major operators have factored this in their growth plans. BSNL, an incumbent operator, has already reached the finalisation stage as far as tenders for the procurement of a combo of 2G/3G technology for their network are concerned.

Looking at the short-term horizon of one year, Indian telecom is expected to continue with an impressive 50 per cent growth. The telecom sector is also expected to post reasonable profits and purchases, giving buoyancy to the global telecom manufacturing infrastructure—especially the big five global manufacturers—and to IT hardware manufactures and software vendors.

(The author is Director, Finance, BSNL The views expressed are of the author alone, not of the company)