The technology divide

Published : Feb 14, 2003 00:00 IST

(From right) Pramod Mahajan with Bharti Enterprises' chairman Sunil Bharti Mittal, Hutchison Essar's director Asim Ghosh and director-general of COAI T.V. Ramachandran at a press conference in New Delhi. - GURINDER OSAN/AP

(From right) Pramod Mahajan with Bharti Enterprises' chairman Sunil Bharti Mittal, Hutchison Essar's director Asim Ghosh and director-general of COAI T.V. Ramachandran at a press conference in New Delhi. - GURINDER OSAN/AP

Given the policy bias inherent in the TRAI's new tariff proposals, the mere introduction of wireless technologies is unlikely to improve teledensity, an avowed objective of state policy.

COMMERICAL interests usually lurk behind the hard-sell approach of companies when they offer technologies, pushing them as the latest and the very best in the business. Reliance, for instance, claims that its mobile telephony platform, the code division multiple access (CDMA), which it is launching across the country, is superior to the global system for mobile communications (GSM) platform, which is used by the well-entrenched competitors in the cellular telephone industry.

At the heart of the controversy, exacerbated by the recent tariff revision made by the Telecom Regulatory Authority of India (TRAI), is the issue of whether Reliance's use of the "limited mobility" platform is limited in any sense of the term. The controversy goes beyond the turf war between Reliance and cellular telephone operators. The cellular operators allege that CDMA is a full-fledged platform for unlimited mobility. The issue of the choice of technology, which would normally have been a matter for an operator to decide, has become controversial because of the actions of the government and TRAI, the regulator.

The government opened up the telecom sector to private companies on the promise that its action would lay the ground for greater penetration of telecom facilities and that it would lower costs and result in the induction of technologies that would enable these objectives. In 1997, the government introduced a new class of operators, those using the Wireless in Local Loop (WiLL) family of technologies, which use radio frequencies to overcome the "last mile" problem in the telecom network - between the telephone exchange and the subscriber's premises - by replacing traditionally used copper cables (Frontline, June 27, 1997). WiLL's advantages were essentially seen to arise out of reduction of cost facilitated by the replacement of copper cables, and the time and expense in the deployment of telephone connections. Although GSM and CDMA also replace copper, they were seen essentially as services that laid emphasis on enabling the subscribers to communicate while on the move. WiLL, on the other hand, was seen as focussing on enabling the telecom companies to extend the network faster and cheaper.

TRAI's categorisation differentiating operators offering "limited mobility" when the technology itself has no limits, has resulted in a piquant situation. While the regulator differentiates between mobile and limited mobility, Reliance has offered to exchange prospective customers' GSM handsets for the CDMA-enabled handsets. Since the 1980s, standards for mobile communications, aimed at optimising the use of "scarce" radio frequencies, have enabled the explosion in mobile communications all over the world. Mobile communications based on the GSM standard, which was established in 1982, commenced commercial operations in Europe in 1991. The standard uses the time division multiple access (TDMA) technique to achieve optimisation. By splicing digitised audio signals from handsets of mobile receivers into distinct "time slots", each a small fraction of a second, TDMA enables optimal usage of the radio spectrum available for mobile communications. This enables multiple mobile phone users to occupy the same radio spectrum. On the other hand, CDMA, which was developed by the United States defence establishment, relies on a technique that enables each user to occupy the entire frequency spectrum. In effect, multiple users' conversations are "layered", each separated by a code. Each user thus occupies the entire bandwidth available. The code enables the separation of conversations between pairs of users. Qualcomm, the American company that helped the U.S. defence establishment develop this technology, has marketed it.

Reliance recently ordered five million CDMA lines from Lucent Technologies for its WiLL services, estimated at Rs.500 crores, through a deal facilitated by Qualcomm. Lucent is reported to have agreed to provide the equipment over a two-year period across the 17 circles that Reliance has licences to operate. Reliance is also said to be negotiating with vendors such as Samsung, Alcatel and Motorola. The company has also placed orders for handsets with the Korean company, LG.

D.K. Sangal, former Secretary, Department of Telecommunications (DoT), told Frontline that both GSM and CDMA, while being "essentially WiLL", improve the utilisation of available frequency spectrum. He said that both systems were capable of providing competent cellular services, a range of value-added services and the could also inter-work with each other and with fixed networks through appropriate interfaces. He reckoned that the investment costs were comparable, although the CDMA handsets, being somewhat new, might be a slightly costlier. "The restriction of limited mobility on CDMA is purely artificial," he said, imposed merely for regulatory purposes. Reliance has claimed that its CDMA platform will offer better services.

OBJECTIVITY, however, demands a more dispassionate assessment of the technologies on offer. A few characteristics of the Indian telecommunications situation could provide a broad canvas for the assessment. For all the talk of the boom in telecom services, the teledensity in India is a mere 4.4 connections per hundred households. This figure, when viewed against the uneven spread in terms of the rural-urban divide, is even more depressing. Moreover, even within the urban setting, there are wide disparities in access, not only within the metropolitan cities but also between metros and the smaller towns. For instance, the teledensity in Mumbai is 11 per cent and Delhi 13 per cent. These two cities together account for 12 per cent of India's fixed lines and 15 per cent of the cellular subscriber base.

Telecom spending in India, at about 1.3 per cent of the gross domestic product, is among the lowest in Asia. Within the existing telecom networks, too, there is a great deal of unevenness. For instance, a large proportion of the users of the main landline networks, the government-owned Bharat Sanchar Nigam Ltd. (BSNL) and the Mahanagar Telephone Nigam Ltd (MTNL), just about use the "free calls" that they are allowed within the lowest tariff slab. In effect, the inequality in incomes, characteristic of Indian society, is mirrored in the operations of the industry. The recent tariff increase, amounting to at least 50 per cent for subscribers at the margin of the network, is likely to widen the divide further. Ironically, successive policy statements of the government, aimed at dismantling the monopoly of BSNL and MTNL, cited low teledensity as the reason for inviting private investment in telecom operations. However, it is evident that the private telecom players are only skimming the cream of the Indian market.

It is already evident that private investment is not accelerating access to telecom services. Neither TRAI nor the government has insisted on private operators meeting their Universal Service Obligations (USO), which is aimed at providing telecom access to rural and remote communities. TRAI had even ruled that village public telephones (VPT) should not only provide access, but must be STD-enabled so that these communities are linked to the rest of the country. Rural teledensity in India, at about 1 per cent, is unlikely to improve in the current policy framework. TRAI-mandates that private operators contribute 5 per cent of their gross revenues to the USO Fund.

The failure of the private operators to provide VPTs has meant that the burden has fallen on BSNL. The six private operators - Bharti in Madhya Pradesh, Tata Teleservices in Andhra Pradesh, Hughes Telecom in Maharashtra, Shyam Telelink, HFCL Infotel in Punjab and Reliance Telecom in Gujarat - had committed themselves to provide about 98,000 VPTs within three years of commencement of services; but they have provided only about 4,000 VPTs. BSNL has sought Rs.938 crores to fill the gap, but the USO Fund has a corpus of Rs.800 crores. BSNL has already covered 500,000 villages, and expects to cover another 35,000 before the end of the financial year.

Private operators have been lobbying the government to allow them to draw "reimbursements" from the USO Fund if and when they provide VPTs. When WiLL was first held out as a technology with potential, it was essentially seen as offering a possibility to widen access to under-served segments of the population. However, TRAI's critics say that, instead, it has been "hijacked" as yet another platform, citing its potential as a value-added service.

Sangal avers that the separation of technologies by official fiat - either by the government or by TRAI - goes against the interest of the consumer. He points out that in 1987, when he was Secretary, DoT, there was a proposal that MTNL introduce cellular services to widen its reach, but this was shot down as an "obscene" suggestion. He recalls that he believed then that cellular services had the potential to serve the rural market without necessarily being expensive. In fact, he believes that the delayed entry of BSNL and MTNL - a delay caused by the government - has enabled the private cellular operators to enjoy extraordinary profits. In the wake of the controversy over WiLL, there has been a demand for a "unified licence", enabling telecom operators to offer a bundle of services using technologies of their choice.

Sangal says that the regulator ought to take a "technology-neutral" stand and let the market decide which technology is better. The recent successful deployment of "gram phones" in Kalleda, a village in Warangal in Andhra Pradesh, by a non-governmental organisation, the Rural Technology Foundation, indicates that choice of technology has to be tempered in the context of ground realities. In this instance the technology chosen is a fairly simple one, that of using a shared "party line", which was extensively used in the U.S. until the 1950s. Basically, it enables several users to share a single line, resulting in low tariffs of about Rs.12.50 a month per subscriber. However, the service provider too benefits. Traffic on the line increases, generating greater revenues for the operator.

Teledensity has increased significantly in the village; more Dalit households are now part of the network. Typically, agricultural workers now take instructions from absentee landlords who call them on the phone. The party line principle, perfectly legal within Indian telecom regulations, can also be applied to urban situations, such as in slums. But there are reports that the telecom companies will resist such a move because it will be seen as poaching into their markets.

Sangal believes that politicians and professional managers often belong to the urban middle classes. "They believe that extension of service to rural areas is a concession, and that such service will always remain unviable. It is my belief that given full connectivity with reliable service, the usage of services in rural areas will increase manifold and they will become financially fully viable. True, initially they will require subsidies." The point is that at the existing tariff levels, potential rural subscribers do not perceive a telephone connection as a value-for-money proposition. This is not to imply that innovations such as the gram phone are "better" than CDMA or GSM phone, but that they address squarely the unevenness of the Indian situation in telecom.

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