Good call on Internet Telephony

The Telecom Regulatory Authority of India’s proposal to allow unrestricted Internet telephony augurs well for both the consumers and the telecom industry. Currently the Internet can be used only to make calls between two computer users within the country. The new proposal from the regulator will allow consumers to make calls through the Internet using normal mobile and fixed line phones. This recommendation has come at a time when domestic long distance calling rates seems to have hit a plateau. And as a corollary the minutes of STD usage per month is not picking up in proportion to the average increase in local call minutes. The basic problem in the domestic long distance telephony segment is that there is not enough competition to drive the market dynamics. Though there are more than 10 companies with licences to offer long distance telephone services, most of them are focused on services meant for the lucrative enterprise segment. There are not more than 4 operators offering STD services to the common population at a pan Indian level. Allowing unrestricted Internet telephony could take the number of operators to more than 50 as the technology allows the local Internet Service Provider to become an STD operator by routing calls, both local and long distance, through the world wide web. Compared to traditional long distance telephone services, the cost of offering Internet telephony is marginal as it does not require an ISP to own large networks of optic fibre cable or a cellular network spread across the country. It also works out cheaper because ISPs do not have to pay any carriage charges for Internet based calls, normally associated with the traditional long distance telephone service. Net telephony coupled with the regulator’s new proposal to allow consumers to choose their long distance operator through calling cards will make this segment more competitive. The net result of all this is that consumers will be able to get a choice of operators while making a long distance call at a fraction of the tariffs that exists today. The industry too benefits as it will bring a new stream of revenue for both the ISPs and the existing telecom operators. The Internet Service Providers Association of India reckons that Net telephony will give a fillip to the broadband uptake in the country as the ability to make telephone calls over the Internet would make it a more compelling reason for the consumer to take a connection. Leading telecom markets like Europe and the USA have already adopted this technology. Globally about 18 per cent of voice calls are now being routed through the Internet. Fearing that this trend may be replicated in India too, incumbent players have raised objections to the TRAI’s recommendations. They have demanded that the level playing field should be maintained by asking the ISPs to pay an entry fee of Rs 1650 crore before they can start offering voice calls. The same telecom operators were allowed to launch Net telephony by the Government two years back but no one has offered the benefits of this technology to the consumers. Now when the ISPs are being allowed to offer this service, the existing operators are playing the level playing field card worried over losing their market share. But any such levy on the ISPs would kill Net telephony even before it has started. In fact internet telephony, if introduced, will also benefit the incumbent telecom players in the form of additional revenue by leasing out capacity to the ISPs. Plus the telcos can themselves start offering Net telephony services and compete with ISPs in the market place rather than at the regulatory level. In any case the interests of the consumers outweigh the interest of any particular segment of the industry. It has taken more than 4 years for the TRAI to come out with this consumer friendly recommendation. The Government should stay clear of any pressure from the lobby groups and allow unrestricted Net telephony at the earliest.

All set for 3G

Paving the way for high speed mobile connectivity in the country, the Communications and IT Minister, Mr A. Raja, on Friday said that the auction for third generation mobile services will be completed in four months.
3G services are expected to facilitate higher speeds and data throughputs, which enable the delivery of a wide range of multimedia services, including video telephony, e-commerce and television on mobile devices like handsets, smart phones and palm tops. For instance, a 3-minute song can be downloaded in 15 seconds using 3G compared with the 8 minutes needed in existing mobile technologies. Consumers will, however, have to pay extra for the service and also buy a 3G-compatible handset.
To start with, only 4-5 operators per circle will be selected from the auction process due to limited availability of spectrum. Delhi and Mumbai will each have only two 3G operators of which one slot has already been given to the State-owned MTNL. Given that there are at least 9-10 private players in the fray, the lower number of slots could make the bidding more aggressive, especially in the two metro cities. That could in turn make 3G services expensive for consumers.
But operators said they would make 3G affordable in a price-sensitive market like India. “If 3G has to succeed in India, then operators will have to take the affordability plank. We have seen this in voice services where the uptake was low as long as the tariffs were high. In other countries, 3G may be a premium service but here it could be a different story,” said Mr T.V. Ramachandran, Director-General, Cellular Operators Association of India. One of the first things before anyone can experience third generation services is to have a compatible device. Currently, a simple 3G-enabled mobile handset costs about Rs 8,000 and a high-end smart phone costs about Rs 20,000. But device manufacturers such as Nokia, Sony Ericsson, and chip makers such as Qualcomm are taking a slew of initiatives to make these devices affordable in India.
Qualcomm, for instance, is working on smart phones that cost Rs 10,000 and a PC-like Internet access device priced at around Rs 8,000. The company is also planning to launch a USB port priced at around Rs 3,500, which will allow consumers to access high speed wireless broadband on their laptops or PCs.
“We are aggressively taking initiatives to make 3G devices affordable. We have the devices and using our single chip solution we have been able to arrive at a price point that is suited to the Indian market,” Mr Kanwalinder Singh, President, Qualcomm Indian and South Asia, told Business Line.
Qualcomm is also in talks with Indian mobile operators to launch carrier branded 3G mobile handsets. “Operators such as Vodafone and Hutchison have their own handset brands for 3G services in Europe. In India, too, we think that Indian GSM operators will launch 3G services bundled with their own branded handsets. We are in talks with them to work out the deal with an OEM manufacturer,” Mr Singh said.
Nokia, which has more than 25 3G enabled handsets in the market is also working on the affordability issue.
Mr D. Shivakumar, Vice-President and Managing Director, Nokia India, said, “The announcement of the 3G policy heralds the next phase of growth for India’s growing mobile industry. Nokia has a holistic approach towards driving the adoption of 3G in India, both at the infrastructure and at the handset level.
“As the market leader, we firmly believe that 3G technologies and future enhancements will offer the most expeditious and cost-effective means of providing mobile Internet access to the mass market.”High stakes
Since the success of 3G in India is paramount to the interest of all these global vendors, they will be announcing India-specific initiatives. No other market can give volumes like India can. Globally, 3G services is still at an early stage and if it succeeds in India, then the vendors can go to other developing countries with cheaper devices.
Third generation mobile policy couldn’t have come at a better time for cellular service providers. At a time when their average revenue per user is slipping to below Rs 250 and when most operators are faced with severe crunch in spectrum, 3G services is being looked at nothing less than the messiah for operators.
Over the past two years, GSM-based operators have been reporting declining ARPUs, one of the indicators of their financial health. They have tried to bring in a number of new value added services to counter the declining tariffs for voice calls. However, with existing cellular technologies only so much was possible. With 3G technology operators are hoping to introduce high speed data services that will bring new services such as video on demand, mobile TV, video telephony and other entertainment related services. At speeds that are almost 10 times the existing technologies, 3G will provide a better user experience. Other than revenues, 3G will allow operators to enhance their capacities even for voice traffic. Operators are facing severe 2G spectrum crunch in top 20-30 cities due to which their future growth will be hampered. The Government has already indicated that it has limited spectrum left for 2G services. In this scenario if the operators want to sustain the current momentum of adding 6 million subscribers every month, the 5 Mhz spectrum being allocated for 3G services will be more than useful. While 3G is good for data services, it is also 3 times more efficient than existing technologies in terms of packing in subscribers. COAI has projected 75 million 3G subscribers by 2012.
However, some of the new players have expressed concern that 5 Mhz may not be sufficient for a standalone 3G operator to do both voice and data. The policy is skewed in favour of existing players. On one hand Government is not giving any more 2G spectrum to new players and on the other hand only 5 Mhz is being given for 3G. New players will also have to cough out nearly Rs 4,000 crore to just qualify for the auction.
While 2-3 CDMA players will also be given 3G spectrum, the total number of operators may go up to 10 subsequently if the Defence releases more spectrum. The Government will clarify the total number of slots up for grabs based on the spectrum availability, before the auction begins. The policy may act as deterrent to many foreign players. A foreign player will have to commit a minimum investment of $1 billion for 3G in India. That will make sure that only a few serious players will come in. DoT has also made it mandatory for the new players to have prior experience in rolling out 3G services. This means that some of the Indian companies such as Hindujas, Jindal and DLF, which had earlier sought a telecom licence, will have to partner with a global player with 3G experience if they want to participate in the auction.
The biggest gainers are State-owned BSNL and MTNL, which have already been given 3G spectrum ahead of the rest. The two companies are planning to launch services within the next 3-6 months.