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The Indian Telecom Ecosystem

Telecommunication has been recognised the world over as an important tool for socio-economic development. It has a defining role in the growth and modernisation of various sectors of the economy. India is regarded as 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 country’s economic growth. Besides contributing about 5.3 per cent to India’s GDP, Telecommuni-cations along with Information Technology has greatly accelerated the growth of economic and social sectors. Against this backdrop, the National Telecom Policy 2012 (NTP 2012) was conceived with the vision to transform the country into an empowered and inclusive knowledge-based society, using telecommuni- cations as a platform.

According to a World Bank study, a 10 per cent increase in mobile penetration is known to boost per capita GDP by 0.8 per cent points in developing nations. According to a study by the Indian Council for Research on International Economic Relations (ICRIER), states with a higher teledensity have grown faster than those with lower teledensity. States with 10 per cent higher teledensity have grown 1.2 per cent faster. For instance, Bihar could have witnessed 4 per cent faster growth if it had enjoyed the same teledensity as Punjab. An efficient telecommunication services network facilitates smooth information flow, which could result in lower transaction costs.

Government of India has approved building of National Optical Fiber Network (NOFN) to provide connectivity to 250,000 Gram Panchayats in the country. The project envisages providing high-speed and high-quality broadband access to all village panchayats through optic fibre by year 2014 and progressively to all villages and habitations. National Telecom Policy 2012 has set a target of 175 million connections by 2017 and 600 million connections by 2020 at minimum 2 mbps speed and higher speed up to 100 mbps on demand. This will help the Government to ensure equitable and inclusive growth.

In less than a decade, the mobile phone has become an essential item of day-to-day use in the life of an average Indian. The easy access to mobile services is on account of low tariffs and affordable handsets. A positive regulatory regime, competition among mobile service providers and significant investment in telecom infrastructure have contributed towards improvement in teledensity across the country. In fact, a mobile handset or a wireline telephone instrument is no longer a mere communication device; it has the potential of being an instrument of empowerment. This would be made possible through ubiquitous network connectivity of mobile technology, broadband Internet, fibre penetration in all villages, low-cost affordable devices and software solutions, which enable electronic access to various services including m-payment. A unique AADHAR-based electronic authentication framework would be an integral part of providing service to the people. Cloud computing will significantly speed up ability to design and roll out services and enable social networking and participative governance and m-Commerce at scale, which was not possible through traditional technology solutions. As per GSMA, the global business impact of connected devices could be $4.5 trillion by 2020. One of the strategies of NTP 2012 is to promote synergies between roll out of broadband and various government programmes, namely e-governance, e-panchayat, MNREGA, National Knowledge Network, AADHAR, Aakash tablet, etc.

India’s mobile service providers (MSP’s) have yet to tap the full potential of rural India, as large parts of rural India are in dire need of telecom services. Bridging the rural-urban digital divide is critical for India’s inclusive growth in financial, healthcare and education sectors, among others. The challenge, however, is to deliver a mobile service to rural users that is viable and profitable at the current low levels of ARPU. Notwithstanding the economic progress over the last decade, the digital divide in the country continues to be significant. Expansion of telecommunications in the rural areas has been slow as compared to urban areas, with the former accounting for only 39.6 per cent of the total connections. In addition, there is wide variation in teledensity from one state to the other. States such as Punjab, Kerala, Karnataka, Tamil Nadu, Gujarat and Maharashtra have higher teledensity in the range of 87-109 per cent vis-à-vis states such as Bihar, Uttar Pradesh, Madhya Pradesh and Assam, which have teledensity in the range of 44-55 per cent.

Authored by Mr. Satyendra Gupta, Chief Financial Officer,
Aksh Optifibre Limited.

 

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