Indigenous technology, need of the hour

BANGALORE: In the early days the Indian telecom industry was under the State aegis until liberalization. ITI had monopoly on the phone sets. In building telecom gear, we have had a tradition of expanding telecom from the 80's. C-DOT, during Sam Pitroda, built an indigenous telephone central office switch that became the defacto switch for deployment countrywide, and the PCO-boom in the early 90's that lead to telecom really spreading to all parts of the country.

Its over two decades now and Indian telecom Industry has come a long way, says Vishal Sharma, principal consultant of California-based Metanoia Inc., a technology consulting company, focused on the telecom market around the world.

In a conversation with Dheeksha Rabindra from CyberMedia News, Sharma explains the trends, challenges and future of Indian Telecom Industry.

Excerpts:

Where does the Indian telecom industry stand today as compared to the western market?

In terms of deployment of technology and the build out of telecom networks in India, and the adoption of new technologies, India is second only to Korea, Japan, and China. What took Western markets 20-25 years to develop and deploy, India is doing it in 5-10 year. But then, that is the nature of telecom today. It is possible to leapfrog technologies and systems, and to deploy the latest technologies. The Indian operators are certainly doing that.

In terms of developing new technology ourselves, we are way behind the West. We have no notable equipment large indigenous equipment vendors. Contrast this with China, which has several very large equipment vendors who have substantial equipment sales within China, and, now, increasingly, outside of China too.

Also, our technology houses (the likes of Infosys, HCL, TCS, Wipro) have not really started strong telecom practices to influence the Indian telecom industry in any significant way.

If we continue this path, it will be difficult for India to sustain the telecom edge, and it will perpetually be dependent on outside for new technologies, that may not even be designed with the Indian landscape in mind. The robustness with which technology is deployed in India is also lower, and gear needs to be designed to account for this.

All those nations that are traditionally strong in telecom have had indigenous vendors that have supplied some significant fraction of their needs -- Korea (Samsung, LG), Japan (NEC, Fujitsu, Hitachi), China (Huawei, ZTE), Western Europe (Siemens, Ericsson, Alcatel), and, of course, North America (Nortel, Cisco, Lucent, Motorola.)

What is the major challenge faced by Indian telecom industry?

There are two major challenges. One is lack of adequately skilled, trained manpower to help them manage/man their ever growing networks that are using the latest technologies.

So far, the Indian carriers or service providers have relied heavily on their foreign vendors to bring this experience in (and some, like Bharti, have outsourced the entire operations of their networks to external companies -- Ericsson for the network and IBM for the software and billing).

However, as network complexity grows, and the mix of technologies deployed grows, it will be more difficult to sustain this patchwork approach - even though we have found this to be endemic in the Indian operator mindset, from Reliance to MTNL.

Second is simply the lack of good, economic, local alternatives for telecom gear. This will become more significant in the next few years. The gear that Indian operators purchase today has been designed for a different market and demography. While it does catapult them into the realm of advanced services, it forces them to use technology that is not adapted to the Indian scenario, and will impose a greater burden on Indian operators with the passage of time.

So far, the massive volumes of customers are allowing them to sustain service, even by offering it at a very low cost and with small profit margins. With the saturation of the market, there will be a need for more efficient, cheaper, India-centric technology.

What are the current trends in Indian telecom? With the current buzz word of WiMAX and metro Ethernet, where does India stand?

Massive build-out of telecom infrastructure nationwide, to the tune of $15 billion in 2007-08 alone is a gigantic investment needed for several reasons. First, to sustain the rapid growth in customer volumes, second, to expand the network’s capabilities to offer newer services in the medium- to long-term to sustain widespread adoption of mobile and fixed telephony, and of broadband and Internet penetration in the country.

Telecom operators are running hard to provide newer products and services. In the past, VAS included features like 3-way calling, conference calling, call holding/waiting, fax, voice mail, SMS, and ringtones. The availability of e-commerce portals is also mere over three years ago.

Going forward the emphasis will be on broadband entertainment like email, multi-media content and IPTV, which has the potential to be very successful in India.

In the enterprise market also, operators will provide bundled services – where a company will purchase a ‘broadband service’ (as opposed to a mere ‘connection’), and get its voice (phone), teleconferencing (video), and data (email, ftp, etc.) service all from its broadband provider.

WiMAX is being viewed as a good option for last mile connectivity as it needs no copper or fiber infrastructure. In the metro regions, Metro Ethernet is being promoted as a technology of choice to wire up cities, and reach new small and medium-enterprises. There are, however, issues of which technology is the best one to adopt.

So this is a time of great excitement and activity and great flux in the Indian telecom sector.

So what is in store for India in the future?

Looking to the future (next 3-5 years), there are a few things we would wager on. We expect that there will be more foreign investment in the Indian telecom sector (with the raising of the cap to 74 per cent FDI), and bigger players gobbling up some of the smaller regional players to expand their footprint.

There should be emergence of consensus in the industry about how to regulate services such as VoIP (Internet telephony) and IPTV. For instance, Internet Service Providers (ISPs) are not yet free to offer IPTV services on their networks, where as incumbent telcos like MTNL, BSNL are. There is need for better regulation on spectrum issues and a clearer picture on regulation of service of Internet commerce.

In countries such as the US and UK, Internet commerce and services are not taxed, and regulation has been put in place to extend this tax amnesty for another five years. However, in India the situation has been the reverse, with the DoT and Commerce Ministry looking to charge service tax on IP telephony companies for example. These issues will likely to be resolved in the next couple years for the Internet revolution to truly take off in the country.

From a consumer perspective, we anticipate a larger fraction of the broadband users to use Internet for entertainment, research, education, and shopping.

Even though the volume of on-line commerce in India is miniscule today, globally this is a $145 billion market. A similar phenomenon will evolve in India with increasing number of people connecting to the Internet via their broadband connections or mobile phones.

What are the issues faced for WiMAX deployment? Why has not WiMAX really taken off in India though many companies back it?

WiMAX deployment in India today faces a couple of key issues: First among them is a lack of open spectrum for WiMAX and spectrum issue. The uncertainty in spectrum availability makes it difficult for players other than the largest/richest ones to invest in purchasing equipment (since it is not clear which bands they will have to operate in).

Second is the relatively expensive cost of WiMAX equipment. The cost will drop substantially in due course.

Third, there is still uncertainty in the minds of several operators whether they should go the 3G route or the WiMAX route (which requires investment in completely new infrastructure).

Plus, for urban areas, technologies such as Metro Ethernet are also viable options, and several players are evaluating their options and going slow with deployments (despite the external hoopla), as they try to figure out the business cases for each of the technologies, and the relative merits of rolling out services based on each of them.

What are the new avenues of value added services that can create higher ARPUs for service providers?

The VAS market in the cellular world is growing in India, touching almost $1 billion by the end of this year, a 60 per cent growth over the previous year.

The growth in VAS will also occur in a phased manner over the next 2-4 years. The easiest growth will come from entertainment services. The other area of expansion will involve information services such as timings of flights/trains, venues/times of events, bank accounts details (balances, etc.). M-commerce services– such as purchase of tickets of various types, banking via phone sees traction. Although these are in their infancy today, they will grow substantially in the next couple of years.

Telcos will gain by offering VAS in several forms – one is information kiosks in various parts of the country, especially in semi-urban or rural areas and the other form of VAS will be by expanding services to existing urban customers in the form of IPTV, and Video-on-demand, for residential customers. For enterprise customers the services might include VoIP and video conferencing.

ISPs apart from VoIP, teleconferencing, and video conferencing, can gain ARPU through form of different connectivity options for enterprises. That is, different models of connecting the enterprise offices over VPNs (virtual private networks). They will also charge for services such as managed storage and data centers, where the operator is responsible for the storage and safety of enterprise data.

Can you also talk about your company's plans in coming years?

We are currently executing some key strategic plans. We want to grow in Europe, expand the global customer base (especially in the Middle East and Latin America), and to expand the technological areas we excel in (e.g. getting into 3rd generation cable technologies (DOCSIS 3.0), which will be key in the North American market in 2008-09).

We also wish to continue our presence in the Indian telecom industry, by our interactions with service providers, vendors, and technology houses.

Our goal is to make our workshops a regular feature (at least two times a year, preferably three) as a way of interfacing with the Indian telecom players and engineers.

In addition, we are soon launching our “Global Webinar Series,” which will allow engineers from any part of the globe to attend on-line, live, webinars by Metanoia, Inc. experts on all manner of communications subjects.