Drivers of Telecom in India

Ashok Jhunjhunwala, TeNeT Group, IIT Madras,

ashok@tenet.res.in

Pan-IIT Conference - March 03

India’s Imperatives

India has 1000 million people– 180 million households– 40 million fixed line telephones,

12 million mobile and four millionInternet connections

Upbeat Mood as Indian Telecom Poised for Growth

– 100 million lines by 2005– 200 million lines by 2010

Customers Start to benefit– long distance cost tumbles from

Rs 30 to Rs 5 per minute

Primary Bottleneck

Affordability– Telephone infrastructure cost (Capex) about Rs30K per line a

few years back Finance Charge : 15% Depreciation : 12% Operation and Maintenance : 13% License fees, WPC charges, service tax: 10% 50 % of Rs 30,000 required as yearly revenue to break even

– revenue of Rs 1200 per month

What percentage of Indian Households can afford this?

Urban Household Affordability Vs Monthly Telecom Spend*

36

22

11

6

31 2%

5%

10%

19%

61%

38%

0

5

10

15

20

25

30

35

40

220 330 440 630 940 1560

Monthly Telecom Spend (in Rs)

HH

s I

n

Mil

lio

ns

0%

10%

20%

30%

40%

50%

60%

70%

HH

s I

n %

Affordable HHs (In mn)

Affordable HHs ( In %)

* For year 2002-03 at 25% unreported income & 3% income spend on telecom

1.40.5

3.0

6

15

31

0%1%2%

5%

24%

11%

0

5

10

15

20

25

30

35

130 190 260 360 550 910

Monthly Telecom Spend (in Rs)

HH

s In

M

illi

on

s

0%

5%

10%

15%

20%

25%

HH

s In

%

Affordable HHs (In mn)

Affordable HHs ( In %)

Rural Household Affordability VsMonthly Telecom Spend*

* For year 2002-03 at 25% unreported income & 1.75 % income spend on telecom

India Requires

Telecom Infrastructure at a Capital Expenditure (CAPEX) of under Rs 10,000 per line

– Not a problem of the West, as affordability there is much higher– a task of scientists of Developing Countries

In doing so and serving the large potential market of India and other Developing Countries

– we can be amongst the world leaders in telecom technology

CAPEX cost has fallen to about Rs 16000 per line– can get to Rs 10,000 per line in a few years

Telecom Network Technology

Contribution to CAPEX from Network Elements for emerging market

– Backbone Network (contributes to 10% of CAPEX)– Fibre, WDM Networks, SDH Networks

– Backbone Switches and Routers (contr. 5-10% of CAPEX)

– Access Network (contributes to 60 to 65% of CAPEX)– Mobile, Fixed Wireless and Fibre Access

– Service Platforms (contributes to 10 to 15% of CAPEX)– OMC, Customer Care & Billing, NMS, IN Services and ISP platforms

India has a fibre 10 km from almost any village in 85% area

Backbone Network

BSNL has fibre going to most taluka (county) headquarters

Reliance, Bharati and Tata laying fibre feverishly

Technology– WDM Network

mostly obtained from Lucent, Alcatel, Nortel, Sycamore etc.

– SDH Network Hwawei, UTStarcom, ZTE,

Tejas Network dominate Chinese and Indian

cost-effective technologies

Access Network

Contributes to 60 to 65 % of per line CAPEX

– Mobile Cellular : GSM/GPRS and IS-95/3G-1X costs have significantly come down : rapid expansion likely technologies dominated by Ericcson, Nokia, Siemens, Lucent,

Qualcom etc.– Korean companies enter via IS-95/3G-1X

– Fixed Wireless : providing fixed telephone and Internet to homes and offices

– Fibre Access Network : dominate urban centers

Fixed Wireless: dominated by corDECT WiLL

To PSTN

To Internet

35 kbps Internet(premium rate of 70 kbps) plus simultaneous telephone

at Rs 8K per line

Fibre Access Network

.

Emerging as best option to connect dense urban areas– For Residential Areas

Fibre to the street corner with POTS, DSL or Ethernet on Copper for 500 m combined with 802.11 wireless tomorrow may replace coaxial based cable

TV tomorrow

– For Commercial Areas Fibre to the Building with Ethernet in Building

– Technologies dominated by Indian and Chinese companies Huawei, ZTE, UTStarcom, Midas

Rural Opportunity

India has 600,000+ villages– 650 million people, Rs 600,000 Crores Rural annual GDP

Can we double the Rural GDP in the next ten years….

Connecting Rural India

– BSNL’s Contribution: on the average one fibre connected rural

exchange for every 150 sq km a wireless system with 10 km range at existing fibre

connected exchange would cover 80 - 85% of villages in India

– India need a communications company which would focus and operate only in Rural Areas

looks at rural areas as large potential business and provides wireless Internet connectivity in villages

thinks and acts rural

N-Logue : A Rural Service Provider– aggregate demand into a kiosk using

corDECT Wireless in Local Loop ISP in a box : Minnow Reliable power back-up

– Rs 50,000 (including taxes) per Kiosk providing telephone, Internet, multimedia PC with web-camera, printer and 4 hour power back-up for PC

plus Indian language software

– set up by a village entrepreneur on the line of STD PCOs needs Rs 3000 per month to break even

Innovative Technologies& Business Models

n-Logue Deployment Strategy

Scope:•1 –3 Talukas•25 Km radius, 2000 sq

km•4 – 5 lakh population•2 - 5 towns•300 -400 villages

Connections:•Individuals•Government

— schools and PHCs

• Kiosks

LSP

Rs. 50,000 / Kiosk

ACCESS CENTRE

KIOSK OPERATOR

Application & Content

Providers

Telephone Backbone

Internet Backbone

Banks

BanksMicro Finance Organisations

500 + Connections (at least 1 in each village)

What is the monthly income?

STD PCO Rs 500+ Children learn typing

– all kinds of on-line and off-line education Rs 500+

Kiosk is a photography shop Rs 300– also a video parlour on weekend evenings Rs 300

email and browsing– voice mail and video mail Rs 500+

e-governance access– connect to taluka Government office for services Rs 200

and much more

Word-processor in Indian Languages

Multi-lingual Office PackageIITM -

Chennai Kavigal

Mailclient in Tamil

Mundi . . . .

A 60 year old from a village near Melur

– Palaniamma had lost vision in both eyes since 2 years

– through the Aravind process Doctors confirmed that vision can be restored in at least one eye

IITM trying to develop Remote Diagnostic tools

– Blood Pressure, Sugar & Iron, ECG Monitor, stethescope

– at total cost of Rs 10,000

Crop Consultancy

Top: Ladies Finger Diseased with yellow mosaic

Below : Post treatment

Saving of Rs 140,000 for the farmers

Cost of information Rs 20

Can Kiosks become Micro-banks?

TeNeT and n-Logue working with ICICI– Remote Bill Payment– Rural ATM– Micro-finance– Remittance– better credit assessment

Credit and Product Marketing is one of the biggest requirement of Rural India

Do we have a model for sparser areas?

Fibre not available in 15% of areas Only about 50 to 100 villages in 20 Km radius

– less population per village– less available money

Technology Intervention

Business Intervention– finance and buying/selling may make even larger sense

• 8-10 voice channels + 64/128 kbps Internet satellite backhaul

• Each hub supports 16 to 20 remote sites with 2 Mbps downlaod

• Rs 10,000 corDECT + Rs 10,000 backhaul cost per connection

PSTN

Internet

2.4 m antenna3.8 m antenna

15 -20 Kms with 100 connections

For inaccessible Rural Areas

2 M

bps

-->

128

Kbp

s --

>

<-- 64 Kbps

ISRO-IITM

To Sum Up

Telecom will take off in a major way in India in coming years

– most regulatory hurdles crossed– focus on reduction on CAPEX

Can Telecom help in Doubling India’s Rural GDP– will change India– Internet is Power

can we have a micro-bank in every village in the next five years