Broadband brings telecom back to monopoly tendency

Quoting Mr. N K Goyal n k goyal cmai delhi india president
President, CMAI Association of India,

The nineties saw big dose of privatization in telecom sector. Country after Country invited private telcos to invest and provided various incentives for their growth. Sector moved from monopoly to duopoly to multipoly and in case of Indian context about 13 telecom operators competing for subscribers.  Private telcos brought in tremendous development. In India within 10 years the subscribers have increased to 560 Millions.

Electronic and knowledge connectivity leads to economic connectivity leading to an inclusive growth across all sections of society. Now during 21st century the growth and development of a nation is increasingly becoming reliant on advances in Information and Communication Technologies (ICTs). Till 1998 we had only 0.3% global broadband subscribers and number grew to 10% within span of last four years. 1.1 bill of world’s estimated 6.6 bill people are on line out of which broadband subscribers are about 570 Millions as of December 2009. By 2013 global broadband subscribers are expected to surpass 1 Billion.

Though ICTs have spread rapidly in the last decade, penetration levels are insignificant in rural parts across the world and the same is true for India we well. The broadband penetration in India presently is hardly 8 Million which is less than 5 %. The targets set by the Government for broadband have not been achieved due to variety of reasons. In India, more than 70% population living in rural areas can benefit from Education, Telemedicine and Financial services enabled on the Broadband Network.

The Governments have realized the impact of telecom growth in GDP, economic development. Telecom also brought in empowerment to lowest citizen at the bottom of pyramid. Countries are realizing that e-governance is the key to economic development and they sees now need to increase the broadband penetration. Governments are realizing that broadband growth is also necessary for job creation.

This, however, needs massive investments. Take the case of India, where US $2.6 billion investment by 2010 and US $5.35 billion by 2020 will be needed to achieve the growth. The investment is needed primarily in field of urban networks, domestic and international backhaul, content delivery and rural build out process.

Internet access via mobile is gaining momentum. In many parts of world, the first screen seen by a citizen is cell phone. More than $ 140 Billion revenue is expected from mobile broadband by year 2014.

Interesting things are happening now. Each telco swears by broadband and does everything possible on this earth to get spectrum, yet the Country and its citizen’s cries for broadband and internet. The private initiatives results in broadband network are lagging way behind compared to wireless penetration. Surprisingly now every telco expects Government to provide stimulus, subsidy or grant. There are lobbies and pressures mounted on Government to be proactive and bring additional investments and subsidies to close the gaps in broadband. Government has also succumbed to this tactics and several Governments are announcing grants and investment plans for broadband.

Major search brands such as Google, Yahoo and MSN have now realized success and are fast developing solutions for mobile Internet.

Latest trends

USA announced $7.2 billion broadband stimulus package as a means toward transforming rural and low-income areas. This package comes with net neutrality, due to which all major existing operators constituting 85% of existing lines did not applied. Another factor not to apply was fear of stringent regulations and peep into business practices. So there have been numerous applications for grant by relatively lesser known smaller companies.

Australia created a separate Ministry of Broadband. The broadband Penetration per household is already over 90% using DSL or cable modems. The Government has announced $31 billion laying fiber and other networks to get ahead in an emerging high-tech global economy to cover 90% of Country by 1 Gbps by 2014 by FTTH network. They have formed NBNCo, which will get majority funding come from Government, supported by contributing from Building Australia Fund, Aussie infrastructure bonds etc.

Finland recognizing Broadband as a fundamental right to all citizens has planned 100 Mbps by 2013 for all citizens. Broadband of 1 Mbps is available to 90% of citizens.

Canada has Broadband penetration of 94 percent households, yet 22 percent of rural households are still without broadband. Canada Government announced in July 2009 Broadband Canada Connecting Rural Canadians as a part of Canada’s Economic Action Plan, which gives $225 million to Industry Canada for development and implementation of a strategy for improving broadband coverage. Federal Government supports up to 50 percent of cost for network equipment purchases and hardware/software upgrades, as well as long-term network capacity investment costs.

UK Government announced Digital Britain Plan to deliver 2Mbit/s broadband to all citizens by 2012.

South Korea has 43 Millions mobiles out of which 1/3rd are on 3G. About 50% of them provide more than 50 Mbps speed. The State has invested a lot in broadband penetration for all citizens.

Malaysia wants to boost Broadband penetration to 50% by 2010. They would like competition based on services, not infrastructure. The Government is a co-investing $ 284 Millions and Telecom Malaysia $3.2 Billions.

Infocomm Development Authority (IDA), Singapore has planned S $1 Billion investment for National Backbone Network by 2012 covering 95% of Singapore. IDA is investing S $ 750 Millions. The project operates on three levels. OpenNet is planning to roll out the dark fiber for the 100-Mbps network. This fibre would be sold to whole sale provider Nucleus Connect, a Star Hub Company. This will sell to retail service providers. OpenNet is supported by SingTel, Singapore Power, Singapore Press and Axia NetMedia, Canada.

China announced £300 Million project for every family to provide broadband and to link them to their children’s schools to access progress reports on attainment, behavior and other needs. It involves nationwide rollout of home access programme to get laptops for 270,000 families by 2012. China during January, 2010 has also urged the acceleration of triple network convergence.

French Government during January, 2010 detailed investment plans of E 5.4 Billion for building fiber outside cities by private investors.

Portuguese Government during January, 2009 announced E 800 Million Credit plus E 60 Million tax break for connecting 1.5 Million homes through FTTH.

European Commission plans to lay down Guidelines for Government funding to boost broadband rollouts to ensure higher level of broadband coverage.

Factors for low private investment

The complexity of a private sector business model comes from expectation of returns to shareholders and a bankable project putting profitability as a prime consideration without any linkage to social service or economic growth. Low paying capacity of rural subscribers, costs of laying fiber, right of way etc. and building cell towers throughout the Country appears makes Telcos see a un viable business. Government on the other hand is not constrained by these factors.

The laying of dark fibers around cities can also be viewed as any other civic utility infrastructure like sewerage, electricity etc. and need to avoid duplication of the same. Is that not returning of monopoly of Government?

Government’s constraints

Government always has budget constraints in doing so alone on large scale. Government has also its limitation to meet the timelines because of open transparent procurement procedures coupled with answerability to public at large. In Indian context it includes Rights to Information Act, Central Vigilance Commissioner, Auditor General, scrutiny by Parliament etc. Also higher the controls of Government, lesser chances for competition for private sector. So there is need for out of box thinking for Public Private Partnership.

Way forward

One fundamental issue is Governmental urge to earn revenue. While on the one hand Government wants broadband on the other hand it always plans to earn maximum revenue by auction of spectrum and other available resources. There is need for Government to give spectrum to rural areas and un served areas as a social cause.

One way forward is that local Governments and utilities departments who need broadband for education, medicines, E Governance builds the infrastructure from Government funds with private sector involvement wherever feasible and then lease it out to a Internet Service Provider or a telecom operator for applications, operation and maintenance.

A large operator has its own compulsions for profitability and exhaustive set up. In most of sectors throughout world there has been co existence of large and small players. The Indian telecom regulator TRAI has recommended for allowing niche operators who can establish network for smaller areas of their choice, as against present policy of granting permissions for the entire State. This concept needs to be encouraged.

Singapore model of four separate levels can be considered, the infrastructure, the network services, the value-added services and the applications. It will allow enough space for Government and private sector to play its role. Several players competing on a somewhat monopoly-based infrastructure will need proper regulation considering privacy and security issues.

3 thoughts on “Broadband brings telecom back to monopoly tendency

  1. It’s very effortless to find out any topic on web as compared to textbooks, as I found this piece of writing at this website. very nice article

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