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Talk about opportunity. India's population is approaching one billion and its telecom market is one of the fastest growing in the world. Many factors contribute to this sizzling market. India has a rapidly growing and increasingly affluent middle class; a large pool of computer literate, university graduate personnel proficient in English; a low-cost workforce; and a reasonably stable legal and economic environment. At the same time, according to the Office of Computers and Business Equipment of the US Department of Commerce, India's information technology market is currently experiencing a compounded annual growth rate of 28%, which will make it the fourth largest in Asia (after Japan, Australia and China) by 2003. According to the same source, Indians will buy more than a million personal computers next year—25% of them for the home—and the number of Internet users, estimated at less than 250,000 today, is expected to exceed 5 million by 2003. So why is India's teledensity (the number of telephones per 100 people) of 2% still one of the lowest in the world, and why do many rural villagers have to walk 20 miles or more just to make a phone call? The root of the problem lies in India's history. Times past Over the last several decades, India's basic voice services were provided by three government-owned entities: Videsh Sanchar Ltd. handled all international calls, Mahanagar Ltd. covered the cities of New Dehli and Bombay, and the Department of Telecommunications (DoT) provided all the rest. The cost of networks was expensive, demand was limited, and a fitful, and rather Byzantine, bureaucracy ensured limited telecom growth. Hoping to rectify the problem, the Indian government decided in 1994 to license one new wireline and two new cellular competitors in each of 20 local geographic areas throughout the country. The intention was good, but chronic corruption, disagreement over connection charges and licensing fees, and severe financing complications for the start-ups caused so many problems that little competition was ever realized. New policies in place Something obviously had to be done. So in April, 1999, the government initiated its New Telecom Policy (NTP '99) to rectify existing problems and stimulate new growth. Under the new policy, licensing fees were reduced, revenue-sharing schemes implemented and the Telecom Regulatory Authority of India (TRAI) was given power to arbitrate disputes between the government and licensees. NTP '99 also made a commitment to open up the domestic long-distance market on January 1, 2000, privatize the DoT by 2001, initiate reliable rural service by 2002 and allow competition for international services by 2004. New teledensity targets of 7% by 2005 and 10% by 2010 were also established. At the same time, the Indian government made a major commitment to expand Internet access as rapidly as possible. Since the Internet service provider (ISP) market was opened in late 1998, there have been more than 100 new ISP licenses granted. The licenses extend for 15 years and no fees will be charged for the first 5 years. Challenges ahead Although these new initiatives are laudable, many foreign telecom companies remain reluctant to invest in India for a number of reasons. The biggest challenge of all is the absolute market dominance of the DoT in virtually every segment of the industry. The size of DoT market share makes it hard for smaller companies to compete.  Regulation is also an issue. The TRAI was theoretically created to bring some level-headed organization to the marketplace, but its authority remains in doubt and many of its policies have been overthrown by DoT challenges and court rulings. In some eyes, this lack of authority is a reflection of larger political issues. Many companies are hesitant to invest in a market where government turnovers are frequent and important ministers change regularly. Launch pad for OSS Despite these challenges, the potential for gain in India's exploding market is likely worth the risk for established foreign carriers and a wide variety of support players, too. Take operational support systems (OSS), for example. Like elsewhere in the world, India's many new service suppliers will be looking for cutting-edge OSS to outclass their competitors with more effective service provisioning and higher customer retention rates. Better yet, India's location as a gateway to the East will make it a significant stepping stone for OSS companies that want to access the dozens of other high-growth Asian markets. And even better still, according to a study funded by the World Bank, India is already ranked number one by US vendors for offshore software development. That means locally based OSS suppliers will be able to harness India's internationally recognized pool of high-quality, low-cost, software designers at their point of origin-a significant advantage in the design-intensive OSS industry. All in all, the bottom line equation of low penetration equals big opportunity is likely to hold true in India. Major markets are already exploding, and dozens of new niche markets will soon need services and suppliers. Of course, no one can predict how India's future will unfold, but the biggest winners in the telecom sweepstakes may well be the companies with the vision-and the guts-to get in early. From Current OSS, Spring 2000, Vol. 1, No. 3. Published by Eftia OSS Solutions. |