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July 7, 1998


N Vittal

Heads I win, tails you lose!

N Vittal flips the telecom coin and discovers he can win either way.

Email this story to a friend. Believe it or not! For every 1 per cent rise in telephone density there is a 3 per cent rise in the gross domestic product of a nation.

This incredible business opportunity should lay to rest any arguments against overestimating the importance of the sector.

Telecommunications is going to be the principle catalyst in the world of business tomorrow. This is evident from the two faces of the industry: The first is the $600 billion services and equipment business globally and the second is the linkage between telecommunications and GDP that I have already explained.

In the $600 billion trade of global telecommunications business, services account for 80 per cent and trade of equipment 20 per cent.

Further, the size of the industry is all set to skyrocket to $1.2 trillion by 2000 because of the World Telecom Agreement, which was signed at Geneva in February 1997. It came into effect in February 1998 and provides for continuously bringing down tariffs on telecom equipment.

Yet, unlike other industries, India has more hope in improving its share of this global pie. That is because of the nature of telecommunications, which has spawned remarkable flexibility and imagination among smaller nations like Finland and Sweden despite the dominance of leading companies form US, Germany, France and Britain.

The Indian government's Department of Telecommunications, which is all set to be corporatised into four companies can also hope to join the fray. The case of British Telecom is already there to emulate. British Telecom, a similar government monopoly, developed its own dynamism after it was privatised.

However, BT has not been a story of unqualified success. Recently, its effort to align with MCI failed when Worldcom beat it to the finish.

This highlights another aspect of the telecommunications business today: large companies merge but this does not deter newcomers form displaying amazing gumption.

Despite this, in the next few years we will have only half a dozen companies dominating the entire globe.

If India has to remain in the reckoning it must think of how it can also develop indigenous companies strong enough to compete globally through proper policies.

The National Telecom Policy, 1994, visualises India becoming a manufacturing base for telecom equipment. But the irony is that right now, the companies already in the sector are doing so badly that they are thinking of winding up.

How does the country stall this and revive the manufacturing dream? Here are a few solutions:

We must fine-tune the tariff policy in such a way that it is cheaper to manufacture in India than import from abroad. The Federation of Indian Chambers of Commerce and Industry appointed a taskforce in June 1997. It gave specific recommendations on this issue. These must be implemented if manufacturing is to be saved.

The second major requirement is that DoT, which is the main purchaser of telecom equipment today, must give up its attitude of rationing orders. It should change policy and give all the orders to the lowest bidder.

In order to see that other manufacturers are not deprived of the market, at least in those circles where no private party has been finalised so far, DoT must adopt duopoly.

The driving force behind telecommunication is technology and the most exciting work on that front is the Internet itself.

The government's Internet policy is in trouble. It is sad because it has changed forever the way business is done. In fact, that brings us to the second aspect of the telecommunication, its deep connection with the GDP.

Increasingly, modern trade is becoming impossible without the speed that telecommunication delivers. Smart business practices like the just-in-time techniques demand it.

Email, more than anything else, has changed the way business is conducted. Global companies can communicate freely without having to worry about time zones because of it.

People are also laying bets on e-commerce. Some make a distinction between e-commerce and e-business. E-business refers to using electronic equipment in carrying out business in a more efficient way. E-commerce deals with using the electronic medium itself as a basic means for transactions.

This calls for appropriate cyber laws and laying down of safety precautions for e-cash and so on.

Exciting things are happening. The question is whether India will be able to take advantage of the Internet explosion? This would be possible only if we are able to allow multiple players to come in and provide the backbone so that a 'national information infrastructure' is in place as quickly as possible.

The need for amending India's laws to provide for more use of information technology has also been realised by the government. The report of the committee on cyber laws under the chairmanship of the secretary of electronics is already before the government.

If an early decision is taken it will help India extract full advantage out of the impending global boom in the telecommunications industry.

India has a tremendous advantage as far as trade in telecommunications is concerned. Because of its size, everybody is looking at India as a potential area of rapid growth. But we will be able to succeed only if the right policies are adopted and greater competition and pluralism in telecom services are encouraged.

Greater competition will automatically bring down the tariff. This, in turn, will increase the market size. We also have the edge in software. India can make a contribution in developing new technologies.

We have become members of the GTA as well as the ITA. The conditions, therefore, are right for India to develop appropriate strategies to see that new technologies are generated.

In short, world trade depends on telecommunications. And trade in telecommunications depends on technology. India cannot afford to miss the opportunities in both these areas.

Previous columns: Critical mass | T.R.a.I | Santa Clause 11(2) | The Broadcasting Bill | The death of distance | S.O.S, getting the message out of the bottle | Force 7 from FICCI | Of railroads and info highways | Techno Politics | Cheating death: Ways to resurrect ITI | The HAM-handed miracle | Electronic governance | Which came first? | The four-engine design | Learning to learn | Heads 'n hands | Post-mortem | Where's the cash | Mr T S Eliot's digital wisdom | Banking on IT | R, R & R | Pots & Pans | The Changing Change | Reality check | Spectrum analysis | Global Slum | Rebooting democracy | Catalysts of change | Educational emergency | A card for all seasons | Moore, Metcalf & Gelder

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