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December 22, 1997


N Vittal

Pots & Pans

First there were POTS, the 'plain old telecommunication services'. Then came the PANS, the 'plainly awesome new services'. But the flash of the PANS is far from reaching all of India.

PANS cover glamorous services like cellular phones, paging, radio trunking and network related services like email. I wonder whether we can even consider the Internet itself as a value-added service.

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Also on the horizon are 'personal communication networks'. Services like the Iridium satellite phone are set to make massive changes in global telecommunications.

In fact, the term 'value-added service' means that in addition to the basic function of voice communication, the services include communication of data, pictures, as well as a facility of storage and transmission of information like voice-mail.

It is worth analysing the dynamics of creating a value-added service. If we look at the world telecommunication business, the total size of the business may be in the order of $700 billion. Eighty per cent of this, about $560 billion, is accounted for by telecom services and in that, the size of value-added services, perhaps, does not exceed 15 per cent or $74 billion.

But then, PANS represent a new wave. We are witnessing a convergence of technologies. Audio, video and text are emerging into, what we call, multimedia. Soon, we will see the computer perform multiple functions. Already, there is a talk about Internet telephony. There is a fear that Internet telephony is going to give the established telecom service providers a run for its money.

The three factors

In India the whole phenomenon of creating value-added services is driven by three factors.

The first comes from the push of digital, satellite, and communications technologies, which are driven by sophistication in software.

The second is the introduction of pluralism in telecom services, which enjoyed a century of government monopoly. This factor is further strengthened by geopolitical developments like the Global Telecom Agreement and the Information Technology Agreement.

The third factor is market dynamics. The consumer's awareness has been increasing rapidly. Compound this with creative marketing by competitors and the technological push, which is helping lower costs.

The first factor

Let us begin with the first factor of technology push. Technological development has two different dimensions.

One is that the costs of services are falling substantially. It has been estimated that long-distance call rates in the 1990s were a thousandth of that in the 1950s!

The second is the unbundling of monolithic telecom service providers. Earlier all sectors of telecommunications were handled by such giants. Today, one sector of telecommunications services which involves heavy capital up-front, like in building backbones and transmission and the switching systems is done by a separate organisation. Smaller players do businesses in niche markets and offer specialised services. These normally go by the name of 'value-added service'. Here, the up-front cost is less and there can be greater customer focus.

But let us not forget that this unbundling of services has become possible only because of technological breakthroughs.

The second factor

The second factor is the introduction of vigorous pluralism. The intense competition due to the liberalisation of the services in India is leading to creation of new players like the cable TV providers jumping into telephony and vice versa.

At another level we find, even in India, the possibility of the railways, the power grid and the electricity boards getting into the telecommunications business. As a result, the entire economics of the industry is changing.

And all these developments are taking place while costs in the industry are falling steadily. Ultimately it is the customer who will benefit.

The third factor

After a century of monopolies, it is high time that the customer gets his chance. This will happen because of the simultaneous development of technological breakthroughs and more competition in the field with more players coming in. This is the third factor in the creation of value-added services.

How can India win?

Hence, the fundamental issue is whether India will be able to take advantage of these developments.

The setting up of the Telecom Regulatory Authority was a good move, for one. Today we have an organisation with a brief to ensure a level playing field in the industry.

The government too has been looking ahead and come up with some really progressive initiatives like the Internet policy.

The problems multiply dramatically if you preen at the nuts and bolts level. Any observer of India's telecom scene will tell you what a massive hurdle is posed by the monopoly mindset of the government departments.

Already, there is talk of restructuring the Department of Telecommunications. The best solution is to go back to what the Telecom Commission recommended on December 31, 1993. The plan then was to form four regional corporations so that there can be vigorous development and better customer focus.

Next, India needs to do some better spectrum management. In the present system, government departments distribute 99 per cent of the frequency. These departments have been known to adopt a dog-in-the-manger policy. Often they don't use a particular band and will not allow others to use it either or just delay the allocation. A radical review of the situation is called for.

The review can acquire direction from the Supreme Court's judgement in the Hero Cup case. The court held that airwaves are public property and the Indian citizen, under Article 19 of the Constitution, has the right to access it. The government must regulate to ensure a fair management of the airwaves.

Now can the government block the spectrum and exercise veto against newcomers? I wonder.

I suggest that the entire issue of spectrum management should be transferred to the Telecom Regulatory Authority of India.

The other important issues in creating 'value-added services' are training manpower, mastering new technologies and creating an environment by which market dynamics will operate.

TRAI can play a role, but perhaps even more important will be the role played by activist consumer organisations and the effective application of legislation like the Monopolies and Restrictive Trade Practices Act and the Consumer Protection Act.

Finally, the future of the value-added services in India is going to depend on how intelligently are we able to mobilise the four engines of telecom reform: Technology, political will, regulatory activism and market dynamics.

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

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