INDIAS SECTORAL
POLICIES
TELECOM
ENERGY
TRANSPORT
INDIAS TELECOM POLICY
Telecommunication has emerged as a key driver
of economic and social development in an
increasingly knowledge intensive global scenario, in
which India needs to play a leadership role.
National Telecom Policy-2012 is designed to
ensure that India plays this role effectively and
transforms the socio-economic scenario through
accelerated equitable and inclusive economic
growth by laying special emphasis on providing
affordable and quality telecommunication
services in rural and remote areas.
INDIAS TELECOM POLICY
Thrust of this policy :
Availability of affordable and effective communications for
the citizens is at the core of the vision and goal of the National
Telecom Policy 2012.
Sustained adoption of technology for offering viable options in
overcoming developmental challenges in education, health,
employment generation, financial inclusion and much else.
By formulating a clear policy regime, NTP-2012 endeavours to create
an investor friendly environment for attracting additional
investments in the sector apart from generating manifold
employment opportunities in various segments of the sector.
INDIAS TELECOM POLICY
The last decade was characterised by significant
penetration of telecommunications in India. The
New Telecom Policy 1999 has been a catalyst for
growth of the telecom sector.
The number of telephone connections, at the end of
February 2012, was 943 million, as compared to 41
million at the end of December 2001. This growth
has been fuelled by the cellular segment (mobile
phones) which alone accounted for 911 million
connections at the end of February 2012.
The composition of the telecom sector too has
witnessed a structural change, with the private sector
accounting for 88 % of the total connections.
INDIAS TELECOM POLICY
Today, India is one of the fastest growing
telecom markets in the world.
The unprecedented increase in teledensity
and sharp decline in tariffs in the Indian
telecom sector have contributed significantly to
the countrys economic growth.
Besides contributing to about 3% to Indias
GDP, Telecommunications, along with
Information Technology, has greatly accelerated
the growth of the economic and social sectors.
INDIAN TELECOM
SECTOR
Some Fast Facts:
India remains the fastest growing
telecommunications market globally, though the
pace of growth has slowed.
Call rates are the cheapest in the world, and can be
less than 1.0 per minute under some plans.
The Indian market is intensely competitive with 11
carriers, most of them present throughout the
country.
The share of telecommunication services in Indias
GDP is expected to increase to 15% by 2015.
INDIAN TELECOM
SECTOR
Some Fast Facts: (Contd.):
Following the exponential growth over the last
decade, market penetration has increased to 75
telephone connections per 100 people.
Broadband internet usage remains low, with only
12.5 million users in a country of nearly 1.2 billion
people.
The 2010 government auction of 3G cellular and 4G
wireless broadband licenses saw aggressive bidding
and the entry of new companies.
Controversies and corruption allegations related to
the award of spectrum licenses have affected the
industry recently.
INDIAN TELECOM
SECTOR
BACKGROUND:
From one of the most celebrated among emerging market
success stories to a case study in corruption and nepotism,
the Indian communications industry has seen a dramatic swing in
fortunes in recent years.
After several decades of stagnancy under a government-owned
monopoly, the industry became a classic example of how the
right combination of new technology, innovation, and
supportive government policies can transform a sector.
Through the industrys success, Indias large consumer market
potential was boosted, attracting investments into several
other sectors of the economy.
INDIAN TELECOM
SECTOR
However, intense competition for market share eroded the industrys profitability.
Aggressive bidding for spectrum made it difficult to maintain prices at a
sustainable level and the wave of corruption scandals involving senior government
officials has dimmed the industrys lustre in recent years. With this, relatively
young companies continue to lose money. Nevertheless, the Indian
communications services market remains one of the fastest growing and the most
competitive anywhere in the world.
The transformation of the Indian telecom sector and the impact it had on the lives
of ordinary Indians have been almost miraculous. In the not too distant past, a
telephone connection was a luxury for most Indians. Since government-owned
companies had a monopoly, only the affluent and the politically-allied could get a
connection on demand. Others had to wait for months or even years and often
resorted to bribing telephone company employees to make a call. When they
finally had a connection, callers were typically burdened with high call rates and
erratic service.
INDIAN TELECOM
SECTOR
The contrast to the present day can hardly be wider. India is the
fastest growing market in the world now.
While the pace of growth has slowed down, it is still above the
growth rates in other large markets. With nearly 900 million users
across the country, India is now second only to China in total
number of telephone connections.
With several service providers even in rural markets, Indian
consumers are spoilt for choice. Equipment availability and
service reliability are comparable to any developed market, while
the call rates are the lowest in the world.
With rates as low as a penny per minute and free incoming calls,
even the lowest income groups in India can afford cellular
telephones now. On their mobile phones they now have access to
services like banking and real time information on prices of farm
produce.
INDIAN TELECOM
SECTOR
Evolution and expansion
The seeds of the communications revolution in India
were sown in the mid-nineties when the government
allowed private firms to offer mobile telephone services.
The first licenses were issued in 1995 for the 4
largest cities, followed by 18 other geographies by 1998.
Though foreign ownership was restricted to 49% in these
firms, many large foreign telecommunication companies
partnered with Indian companies to enter the market.
However, high call rates and regulatory restrictions
limited growth for several years. Frustrated by the slow
growth and large financial costs, most foreign companies
exited the market.
INDIAN TELECOM
SECTOR
Evolution and expansion
The regulations were further eased in 2003, which removed regulatory bias in favour of
select technologies and allowed firms to expand across the country under a single
license.
As the businesses achieved scale and with better technology, call rates came down
substantially. This kick-started a virtuous cycle where the increased number of users
improved economies of scale for service providers and lowered call charges, which
attracted even more users.
Subscriber growth literally exploded and the industry added more than 10 million
subscribers a month on average for several years starting in 2006.
Stock market valuations of telecom companies soared, helped by exceptionally
strong revenue and earnings growth. Though their average revenues per customer
were substantially lower than service providers in mature markets, the massive
customer base in India offered huge potential for future growth.
The sector also became one of the largest employment generators in the country,
and steadily expanded its share of the governments indirect tax revenues.
With more than 170 million subscribers in India, and 230 million across all markets,
market leader Bharti Airtel is now the fifth largest telecom company globally.
INDIAN TELECOM
SECTOR
Evolution and expansion
The high degree of innovation by the service providers also played a fair part in
sustaining the boom in India. Most large telecom companies outsourced almost all of
their network and other infrastructure, to instead concentrate on marketing and customer
support.
Instead of investing large amounts of capital in their own infrastructure, the
telecom carriers pay the equipment vendors, who build, own, and operate the network,
based on actual usage.
This trend opened up significant opportunities for global equipment manufacturers
like Nokia and Ericsson, besides technology service providers like IBM.
Indian service providers now also share infrastructure like transmission towers, which
helps them expand to new territories quickly and manage costs better.
Attracted by the opportunity, independent transmission tower operators have also
entered the market.
Also, the fast expanding market for mobile handsets attracted global
manufacturers to India. India is now the second largest manufacturing base for
Nokia, which remains the global leader in mobile telephone handsets. More recently,
select domestic handset manufacturers have gained market share by offering attractively
priced products to value-conscious buyers.
INDIAN TELECOM
SECTOR
Competition and Controversies :
The high growth rates encouraged the government to allow even more service providers to enter
the industry.
In 2008, the Indian government awarded licenses to several new companies, opening up an
opportunity for global companies to gain a foothold in the market. Telenor of Norway, Sistema
of Russia, and Etisalat of the UAE quickly acquired majority control of new license holders and
launched services.
To grab market share, the new entrants launched their services at attractive price points. When
the more established players responded with price cuts of their own, it blew up into a full-fledged
price war.
The growth in subscriber additions slowed, the profit margins of even the most
established companies in the industry declined and losses piled up for the new
companies. Stock prices of telecom companies, which were investor favorites for several years,
started to underperform.
Even more damaging were the corruption scandals that followed. In 2010, the government
invited applications from existing service providers for licensing additional telecom spectrum
for providing high-end 3G services. In a deviation from its earlier practice of fixed pricing for
airwave spectrum, the government decided to give out the new licenses on the basis of a
competitive auction. The prices quoted by the bidders were several times higher than the fixed
price granted previously by the government for older licenses, including just a year before in 2009.
INDIAN TELECOM
SECTOR
Competition and Controversies :
The high growth rates encouraged the government to allow even more service providers to enter the
industry.
In 2008, the Indian government awarded licenses to several new companies, opening up an
opportunity for global companies to gain a foothold in the market. Telenor of Norway, Sistema of
Russia, and Etisalat of the UAE quickly acquired majority control of new license holders and launched
services.
To grab market share, the new entrants launched their services at attractive price points. When the
more established players responded with price cuts of their own, it blew up into a full-fledged price war.
The growth in subscriber additions slowed, the profit margins of even the most established
companies in the industry declined and losses piled up for the new companies. Stock prices of
telecom companies, which were investor favorites for several years, started to underperform.
Even more damaging were the corruption scandals that followed. In 2010, the government invited
applications from existing service providers for licensing additional telecom spectrum for providing
high-end 3G services. In a deviation from its earlier practice of fixed pricing for airwave spectrum,
the government decided to give out the new licenses on the basis of a competitive auction. The
prices quoted by the bidders were several times higher than the fixed price granted previously by the
government for older licenses, including just a year before in 2009.
Allegations of collusion between telecom companies and government officials to fix spectrum prices started
floating around. These charges gained credibility after the governments independent auditor presented a
detailed report that showed a loss of several billion dollars in license fees due to the earlier
policy of fixed spectrum pricing.
INDIAN TELECOM
SECTOR
Seeking growth overseas
As the home-grown Indian telecom companies gained in size
and realized that the subscriber gains in the domestic market
wouldnt last forever, they started searching for opportunities
in overseas markets that were underdeveloped.
Bharti Airtel started offering services in Sri Lanka and
Bangladesh, but those markets were relatively small. For
companies seeking large untapped markets, Africa was the
most obvious destination as the telecom industry in that
continent was relatively less developed and offered growth
opportunities.
Tata Communications was the first to venture into Africa with a
relatively small business in offering fixed line services in South
Africa.
INDIAN TELECOM
SECTOR
Future growth opportunities
After several quarters of bloodletting, the industry has realized that the price wars cannot
be sustained indefinitely, as they would hurt both the established players and the
challengers.
As a result, call rates have gradually started moving up higher. Some of the established
carriers have seen an improvement in profitability, though the call volumes continue to
trend lower. Though none of the new entrants are as yet profitable, their losses are
unlikely to worsen any further.
At the same time, it may be difficult for the smaller players to survive in the long-run and
it is possible that some may be acquired by the larger carriers. This is unlikely in the short
term as the current regulations and licensing conditions restrict mergers and acquisitions
in the industry.
For instance, current rules do not permit :
- a carrier to have more than a 40% market share in any of the countrys 22 telecom
regions.
- Further, no telecom carrier can hold more than 10% equity stake in another company in
the same region.
However, if the government accepts the recent proposals by the Telecom Regulatory
Authority of India (TRAI), these rules will become less restrictive and encourage
consolidation in the telecom sector.
INDIAN TELECOM
SECTOR
For future growth, the industry is banking on high value 3G and
data services that fetch higher revenues per user and are more
profitable. Though 3G services were launched by the major carriers in
2011, customer conversions have been slower than anticipated
because of higher costs.
However, the rising popularity of smart-phones and intensive
marketing has led to increased demand for these services. It is
expected that emerging markets like India too will follow the more
mature markets where the majority of the customers have moved
to higher value services.
Spectrum licenses for 4G services that are even faster are likely
to be offered for bidding by the government shortly. While spectrum
prices are likely to rise even higher, as it is a scarce
commodity, the established carriers are expected to bid
aggressively.
INDIAN TELECOM
SECTOR
Another segment that offers significant growth potential is internet broadband services.
Despite Indias global reputation as a technology services powerhouse, broadband
internet services are not as popular. The services available to retail consumers have low
connections speeds and are of poor quality. Several companies are betting that increased
demand for online multimedia will lead to significant growth in this space, if higher quality
services are provided at affordable price points.
The bidding for 4G wireless broadband licenses in 2010 were no less aggressive than that for
3G cellular licenses, indicating the industrys confidence in this segments growth potential.
Besides the new jobs generated directly, the telecommunications industry has also created
a large number of small businesses which provide support services in sales and
equipment servicing. The growth of the industry has also contributed significantly to overall
economic growth in India, by facilitating activity and efficiency gains in other sectors.
Reliable and cost-effective communication services have opened up new markets for
farmers and small businesses in other parts of the country, while ensuring faster
dissemination of prices and other information. Like in other parts of the world, the
telecommunications revolution has touched the lives of millions of Indians and the industry is
likely to remain a significant growth driver in the future as well.
INDIAS TELECOM POLICY
The National Telecom Policy 2012 (NTP
2012) is conceived against this
backdrop. The vision is to transform
the country into an empowered and
inclusive knowledge-based society,
using telecommunications as a
platform.
INDIAS TELECOM POLICY
Notwithstanding the economic progress over the last decade, the
digital divide in the country continues to be significant.
On the one hand, expansion of telecommunications in the rural
areas has been slower than urban areas, with the former
accounting for only 34% of the total connections.
On the other, the ability of the poorer sections of the
society, both in rural and urban areas, to benefit from
technology needs to be enhanced.
NTP-2012 has the vision Broadband on Demand and
envisages leveraging telecom infrastructure to enable all
citizens and businesses, both in rural and urban areas, to
participate in the Internet and web economy thereby
ensuring equitable and inclusive development across the
nation.
INDIAS TELECOM POLICY
Telecommunications is no longer limited to voice. The evolution
from analog to digital technology has facilitated the conversion of
voice, data and video to the digital form. Increasingly, these are
now being rendered through single networks bringing about a
convergence in networks, services and also devices.
Thus, the policy aims to address and enable the coordinated
action to respond to the dynamic needs resulting from confluence
of telecom, broadcasting and IT sectors.
Given the continued predominant role of wireless technologies in
delivery of services in ICT sector, NTP-2012 incorporates
framework for increasing the availability of spectrum for
telecom services including triple play services (voice, video and
data) for which broadband is the key driver. This will be
facilitated by deployment of services through appropriate
instrumentalities, while safeguarding national interests.
INDIAS TELECOM POLICY
Once a mere communication device, the Telephone
has now the potential of being an instrument of
empowerment. There is need to reorient the
telecommunication policy. This vision is made
possible through ubiquitous network connectivity
of mobile technology, broadband Internet, fibre
penetration in all villages, high-technology low-cost
affordable devices and software solutions which
enable electronic access to service. A unique
AADHAR based electronic authentication
framework would be integral part of providing
service to the people.
INDIAS TELECOM POLICY
A concerted effort to boost manufacturing activity is now
exigent as robust economic growth in the country is leading
to an extraordinarily high demand for electronic products in
general and telecom products in particular. NTP-2012
provides a roadmap for India to become a leader in cutting
edge, state of the art technologies through R&D and creation
and incorporation of Indian IPRs in global standards.
NTP-2012 recognises that the rapid growth in the telecom
sector requires to be supported by an enhanced pace of
human capital formation and capacity building. It becomes
imperative to put in place an integrated skill development
strategy for the converged ICT sector as a whole so that
there is continuous up-gradation of skills in tune with the
technological developments.
INDIAS TELECOM POLICY
NTP-2012 recognises the importance of creation of the robust and resilient telecom networks for
adequately addressing the need for proactive support for mitigating disasters, natural and man made.
VISION
To provide secure, reliable, affordable and high quality converged telecommunication
services anytime, anywhere for an accelerated inclusive socio-economic development.
MISSION
OBJECTIVES
STRATEGIES
R&D
LICENSING
SPECTRUM MANAGEMENT
INFRASTRUCTURE
QUALITY OF SERVICE
SECURITY
SKILL DEVELOPMENT
PSU-STRATEGIC SERVICE AREA
CLOUD SERVICES
FUTURE TECHNOLOGIES
FINANCING
ROLE OFREGULATOR
OPERATIONALSATION OF THE POLICY
