Did you know?
India wants to install around
25 million direct exchange lines by 2001 and this will require
an investment of
US$ 22 billion.
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Department
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Telecom equipment and services
Points to be noted:
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VSAT
services, though privatised, have not taken off in India. Demand
for electronic mail, video-conferencing is not strong enough to
justify investment. Besides, licence fees to be paid to the Department
of Telecommunications (DoT) are too high given the size of
demand.
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The
telecom sector has witnessed the presence of many leading foreign
companies including US companies: AT&T, Motorola, Nynex, US
West, Hughes, Harris, Qualcomm, Sprint, Telstra, NTT, Singapore
Telecom, Philippine Telecom, Bezeq, Siemens, Ericsson, Nokia,
Fujitsu, Alcatel, and Bell Canada among others.
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The
DoT retains its monopoly
as of now as the main service provider short- and long-distance
basic services. Private operators have to obtain licenses from
DoT and work with it on a revenue sharing basis. It has been agreed
in principle that private companies will be allowed to establish
their own gateways in addition to using the gateways of DoT, VSNL or authorised public\government
organisations. But this concept will be put into practice only
after security-related issues are looked intoi by a committee
that has already been set up.
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Potential
investors should be aware that telecom privatisation has been
hit with snags. Cellular phone operators have been taken by unpleasant
surprises. Both the bidders and the government had then estimated
an average air-time use of 250 minutes per subscriber per month.
But the actual use, as at May 1998, was only 140 minutes. Each
subscriber now spends an average of Rs.1,100 a month on an average,
but the industry needs a per subscriber expenditure of Rs. 1,800
every month to make commercial sense. This situation is building
pressure to extend the licenses to 15-year-periods as opposed
to the current 10 years. The extension will bring in extra revenue
which can help the private operators make some money for themselves
and pass a part of it to the customer as well (given the intense
competition among the private operators).
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One
possibility is that India may follow the Chinese model of cellular
phone services, which is to charge a high monthly rental but low
air-time charge. This may reduce the number of subscribers but
those who subscribe will have a higher spending power. At present,
India charges a monthly rental of only US$4 (compared to US$30
in China) while the average air-time charge in India is 20 US
cents (compared to only 5 cents in China).
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The
case for increasing monthly rental is clear: The present monthly
rental of US$4 (approx. Rs. 160) for cell-phones is less than
the rental for pagers (which is Rs.250): this is clearly an anomalous
situation which cannot last long. The profile of the cell-phone
owner in India is therefore poised to change towards the better-off
classes who can pay higher monthly rental and talk longer on cheaper
air-time rates. This will drive out the lower middle classes from
the cell-phone circuit, but middle-to-upper middle classes in
India are huge enough to make commercial sense for the private
operators.
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