Mr President, honoured guests, ladies and gentlemen.

Thank you very much for the opportunity to speak to you this evening.

When I spoke here in March I had not anticipated that I would be returning so soon. I will make no predictions about any further visits. However, I hear suggestions of October and next February. I cannot be sure whether some of my colleagues might not like to come.
 

Wireless telecommunications

I will not bore you by going back over the issues I covered on Wednesday at the Indian Institute of Technology Delhi or yesterday at the IIR Wireless Summit. The text of one and the slides of the other are already on the INTUG web site, along with innumerable position papers, submissions and other speeches. I am to speak again tomorrow at the CII and IBA event and that too will go on the web.

One of my colleagues has accused me of going into the entertainment business. I prefer to think of it as education and enlightenment. That is not to say there might might not be entertainment along the way.

Let me turn to the stark fact that India is being outperformed in mobile telecommunications not only by its direct economic rivals but also by other countries. We all know that China added six million phones in March to reach 157 million in the same month that India reached a total of six million. Of course that was cheating, since it contains the lunar new year when people were buying themselves and each other a mobile phone.

Nonetheless, it is hard to believe that such a discrepancy can be permitted to continue long. It must surely focus the mind of the politicians here in New Delhi.

We can see a number of countries with low incomes and which have achieved much higher and faster growing teledensity than India. These include other former British colonies, such as Zimbabwe, and a former Belgian colony such as Congo.

Clearly there are lessons to be learned from all manner of sources and these require further study. We need to get the details of these and to apply the realities to the markets in India. We cannot continue to make do with myths and third hand accounts.

The official view is that India has the seventh largest network in the world.

I am not sure that I know how this is measured, perhaps in kilometres of copper and fibre, perhaps it is employees. It does not seem a very tangible measure nor is it one that helps me to understand the realities on, or indeed under, the ground.

In terms of total teledensity, India was ranked 151st in 2000. That is up 15 places from 1990, mostly in the preceding couple of years. It shows the enormous capacity for future growth, especially in mobile telecommunications. However, the latest figures from the Cellular Operators Association of India (COAI) suggest that growth has fallen back in April, after the surge in the last weeks of the old financial year. If so, then the forecast of 2006 when mobile will overtake fixed may slip back as much as a decade. It still looks as if the majority of the population in India will live their lived without ever owning a telephone.

Our concern as users is to see competitive markets supplying services at reasonable prices to as many users as want the service. Properly achieved, this will help India to close the gap. It will also boost the economy.

The most important question is why there has not been the great surge of mobile subscribers and especially of pre-paid customers that we see in Africa, Latin America and South-East Asia?

One answer seems to lie in the adoption of Receiving Party Pays (RPP) and in the difficulties that poses for pre-paid. RPP is well know to limit mobile adoption, you can see that by looking at the USA.

There are very few times you will answer the phone if you must pay to listen to your mother-in-law, your bank manager or someone selling you air-conditioning..

On the positive side RPP avoids several market abuses with which we struggle in Europe and Australasia.

Why is there RPP in India? Clearly to protect the incumbent operators. It avoids addressing a sensible interconnection regime. It comes from political will to protection the incumbents. Though it may simply reflect a dependency on the money that they provide to government in dividends.

The simple answer is to switch to Calling Party Pays (CPP) with the necessary regulatory checks and balances.

Every country needs regulatory certainty. Regulation that controls the incumbent operators not protects them.

Shymal Ghosh spoke yesterday about the 3G Auctions in Germany and the UK. It is too easy to look back and see the collective insanity. You have to try to understand what happened and do something about it.

The five winners in the UK auctions for 3G paid the equivalent of £50 for each person in the UK for each year of the ten year licences. It is hard to know how they contemplated getting this money back. Selling them into slavery is neither legal nor is it plausible. It would flood the market with some very unfit specimens, there are too many couch potatoes and a proportion are alleged to have New Variant CJD from eating hamburgers made from mad cows.

Of course the operators never intended to get the money from the customers. The basis of the sums paid at auctions came from the share prices which were grossly over-valued.

Had the operators lost in the auctions, their share prices would have fallen to unacceptable levels. However, they have now reached those very same levels. Vodafone floats around the £1 mark.

We have heard a lot in the last two days about the potential profitability of GPRS in the Indian market.

Let me first make clear the views of major users in Europe. GPRS has no known applications, it is unnecessarily expensive and has a set of very small international footprints. One central European operator during the GSM World Congress proudly announced GPRS roaming in Liechtenstein, Croatia and Slovenia. This is the sort of service to which we are expected to respond with excitement.

We do not see any improvements to these problems until the end of the year. By then it may be too late.

Those financial analysts who have not been laid off will eventually figure out that the mobile operators know nothing about either data applications or competition law.

The operators have little concept of what GPRS is, how to sell or how to price it.

My Australian colleague, who is an avid GPRS user, cannot get more than 9.6kbps, a speed already available over GSM for dial-up. Sometimes it is dips to 1kbps or is simply unavailable.

Frost and Sullivan told us that one application was to watch movie trailers. Next week the new Star Wars movie is released. The trailer is about twenty megabytes. We calculated that to download the trailer would cost about AU$ 400. This price looks to be out by a factor of three or four orders of magnitude. A reasonable price might be AU$ 1.00, with a voucher for the same amount to get your money if you see the movie. It would take between 10 and 45 minutes to download it.

It seems that the force is not with the GSM operators, but then we long ago suspected that they have gone over to the dark side.

It is very perplexing and not a little frustrating to see the operators in India planning to invest to upgrade their networks to deliver a service for which there is no market. Especially when there are over 1,020 million people here who do not yet have mobile phones. I am not saying that absolutely all of them can afford a phone tomorrow, but many can. Surely they are a vastly more attractive market, since the potential is almost unlimited. Think of how many of them have relatives in other parts of the world who would phone them, generating inbound traffic.

We heard hints from operators that the government would support the adoption of GPRS.

I can only say that the Department of Telecommunications should stick to being technologically neutral. It should avoid backing a horse that we know will lose.

One reason for local operators to deploy GPRS and then 3G is to secure their roaming revenues. Clearly the operators in the major Indian cities are making a lot of money from visiting foreigners. The GSM operators want to be able to make these easy money. Yesterday, all of them knew that the strongest GSM signals in Delhi were at Indira Gandhi International Airport, waiting to catch unsuspecting visitors.

The truth is that the revenues from roaming  may well not be there to collect. The prices are being driven down by the actions of INTUG with the regulators and competition authorities around the world. The ludicrous profits from that traffic will decline and disappear.

The COAI complains that its members cannot interconnect between circles. I am not sure that I understand why. The WTO commitments of India should oblige all GSM operators to interconnect with any foreign and therefore any domestic operator at any technically feasible point at cost-oriented prices. Thus, they should be able to interconnect as they wish in India. If not, then on the face of it India is in breach of its WTO commitments.

Of course, they should also be able to interconnect with BSNL on a cost-oriented basis at any technically feasible point.

3G remains a dream or a delusion. The Japanese are approaching saturation of the human market for mobile telephony. Consequently, they are planning to sign-up 20 million pets and 30 million domestic appliances. Location-based services are to include "where are my kids?" and "where are my pets?".

Sometimes one wonders if the behaviour of the operators is explained by excessive use of their own products.

The best answers in mobile telecommunications seem to be to wait and see how things go. Keep them simple and hold off as long as you can. At the same time to study closely the examples and how they might translate to other countries. This is never an easy task.

For example, we all know of the success of I-Mode. Yet, it seems so inscrutably Japanese when you examine it close up. We struggle to unpick the success factors.
 

Fixed telecommunications

One of the surprising stories of broadband Internet access comes from South Korea. While we were watching as Canada edged past the USA in terms of broadband teledensity, suddenly South Korea had leapt past both. Nobody had anticipated this, though the explanations are fairly straightforward. Its approach was careful even premeditated, the roll-out was into densely populated area with low prices. The intention was two-fold to develop a model that works in other parts of Asia and to provide a platform on which to test out new services. It is a model to be studied carefully, not least because it is beginning to be deployed in China.

Where the population density allows it, the South Korean model can be copied in India. The price of just under US$ 30 is very affordable and comparable with ARPUs of GSM operators in India.

As an outsider, the success of Indian cable television operators is as clear as their absence from broadband is perplexing. They should be encouraged to offer broadband Internet and to include in that voice services, using the newly liberalised IP telephony. It would create a set of innovative new players in the market. However, it requires a working interconnection model.

The work at IIT Delhi on 802.11b should be encouraged and the application of Wi-Fi to the Indian market must be explored rapidly. Together WLAN, WLL and UWB technologies provide exciting opportunities.

New technologies should be deployed by new operators. The risk is that these opportunities will be ruined by the incumbent operators.
 

The independence of regulation

I am going to discuss with my colleagues an annual award for the best action by a regulator, for example, the suppression of an anti-competitive abuse

I was in the Indian Cottage Industries shop earlier today and found the perfect prize. It was a very solid statuette of a lion god disembowling a demon!

I am not a great enthusiast for convergence in regulation. I see the problems as being too obvious. Broadcasting is a politically contentious subject. Anyone who stands between a politician and his publicity is in a dangerous spot.

In March Sony announced a new service. They took the movie Men in Black by Sony Pictures and developed a game, both single and multi-user versions. It runs on the new Sony-Ericsson handset through Java. Thus they leverage their assets in motion pictures into the mobile telecommunications business. Convergence of one sort or another is coming. However, it does not follow that you have to regulate them in the same way.

Regulation of converged services is best addressed in competition law, rather than in some gargantuan regulator. The All-India, All-Communications Regulator would be too cumbersome, too Kafkaesque and too aware of the political sensitivities.

What is needed today is effective regulation to disembowel the demons..
 

Conclusions

I don't want to keep you from eating any longer, so let me conclude.

I think that the potential for growth in Indian telecommunications is enormous. Once the forces of competition are unleashed, the effect on the Indian economy will be considerable. It will far surpass the growth we see today.

On fixed telecommunications we have already seen dropping international call rates. We need to see more players in the local loop, in broadband access to homes and businesses. We need to see new players competing against BSNL and MTNL and being enabled to enter markets where they have shown no interest.

The fight for the revenues from the top one per cent of the Indian population is depressing. On one side the GSM operators believe they can make money on GPRS. On the other the incumbents want to steal the same money away from them using CDMA-WLL(M). Surely, in a market of this size there is room for both.

INTUG is looking forward to the growth of TUG India in numbers and stature so that it can bring some influence to the political discussions.

My thanks to Anil Prakash for organising our meeting this evening and many other meetings during the last few days.

My thanks to American Express for sponsoring this evening.

Finally, my thanks for your attention.
 

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Last updated 10 May 2002.