Digital Reach

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HERE IS NOTHING

more moving than seeing a carpenter

talking business on his mobile, or a fisherman trying to sell

his catch, or a farmer keeping track of market information

using his cell phone. The benefits of cell phone technology have

really reached the masses in India.

It took five decades for India, a country of over a billion people,

to reach 20 million landline telephone connections. In 1995 –

when mobile telephony was first introduced in the country –

few could have imagined that within ten years, India would have

more mobile phones than landlines and be the fastest growing

telephony market in the world.

The encouraging regulatory regime, falling prices and increas-

ing geographical penetration of networks are all driving mobile

growth in India. In 1992, the government took a landmark deci-

sion to liberalize its telecom sector by opening mobile telephony

to private sector operators, and in 1999 introduced a new policy

called NTP 99. This created a new revenue sharing arrangement

with private telecom operators, absorbing some of their losses

and cutting licence fees to USD5.5 billion. NTP 99, and the

subsequent entry to the cellular market of Bharat Sanchar Nigam

Limited (BSNL) saw tariffs crash across the board. Call rates

also fell by about 60 per cent, and these factors resulted in an

increase in the subscriber base from 1.2 million to 1.88 million

in 2000.

Over the next three years, the Government took a series of

important steps that included opening telecoms to more opera-

tors and introduction of the calling party pays (CPP) regime,

which made all incoming calls to mobile networks free. As mobile

phone prices continued to crash to their present level of less than

two cents per minute for local calls, the subscriber base grew from

13 million in 2003 to close to 60 million at the end of July 2005.

Meanwhile, to keep up with the competition posed by mobile

phones, landline services, controlled primarily by two state-owned

companies (BSNL and Mahangar Telephone Nigam Limited),

slashed call rates, helping landline subscribers to grow as well. At

the end of July landline connections, which took five decades to

reach 20 million had jumped to over 47 million.

India has one of the lowest average revenue per unit (ARPU)

figures in Asia – and it is expected to slide even further over the

next five years. As telecom operators penetrate deeper into the

Indian market they are being forced to target new subscribers

from relatively low income brackets. According to the National

Association of Software and Service Companies (NASSCOM),

India’s main ICT industry lobbying group, the ARPU of mobile

operators fell from USD192 per year to about USD73 per year by

the end of fiscal 2005, and could fall by another 11 per cent by

the end of fiscal 2006, before starting to stabilize.

Experts say that with growth in urban centres petering out,

the real potential lies in expansion in rural areas. According to

a recent study by the Telecom Regulatory Authority of India:

“Private players are largely hesitant in expanding in rural areas

because rolling out infrastructure with huge investments does

not appear profitable to many.” According to the Cellular

Operator Association of India (COAI), the reluctance to invest

in rural areas is also evident from the teledensity (telephones

per 100 inhabitants) gap between urban and rural India. While

teledensity has improved from 1.5 in 1997 to 3.64 in 2001 and

is currently at 9.7 in the urban areas, rural areas continue to

suffer from penetration of just 1.79 connections per 100 inhab-

itants. According to some estimates, expansion to connect rural

areas would require investments of over USD23 billion – almost

double the amount that the telecom sector has invested in the

last decade, and a figure which the industry sector cannot yet

afford.

Perhaps this is why telecoms players are now being forced to

focus on non-voice revenues like data and content services. But

with non-voice revenues contributing just about five per cent of

the total revenues of the telecom sector, according to research

firm IDC, there’s still a long way to go before such services can

contribute toward improving ARPU significantly.

Nevertheless, India’s telecom industry is optimistic. Despite

these challenges the sector will survive and even thrive just on

the basis of its immense growth potential in term of new users.

The growth in mobile and its benefits for Indian society

Indian society is multifaceted to an extent perhaps unknown in

any other of the world’s great civilizations. The differences of

region, language, wealth, status, religion, urbanity, and gender is

the special feature of Indian society. Nearly 74 per cent of India’s

population dwells in villages, with agriculture providing support

for most of these rural residents. The ultimate result of mobile

growth will be to develop a Information Society in which every-

one can create, access, use and share information and knowledge

and can be connected anytime, anywhere.

Mobile phones are shaping the identity of individuals, families

and social groupings. Like many information and communica-

tion technologies, mobiles are meant to save us time. But this

new generation of always-on, anytime, anyplace technologies may

allow for levels of convenience and safety, but also of surveillance,

unknown and unimagined by earlier generations.

Mobile users are getting younger and younger. A technology-

savvy segment of society, young people are enthusiastic early

adopters of new mobile services. Their use of texting, mobile

Internet services and gaming typically exceeds that of their older

counterparts. The largest use of the mobile Internet is among

young students. In India, teenagers are the most avid texters. The

penetration of mobile phones among 18-year-olds is fast increas-

ing. Young people use mobiles to create and maintain social

The mobile revolution in Indian society

Bharat Sanchar Nigam Limited