Cheap Smartphones & the Broadband Ecosystem

The Economic Times today carries an article about Government panning sub $100 smartphones to boost broadband penetration. As per TRAI, India has about 15 million broadband subscribers and about 143 million access internet through wireless.Clearly with  negligible wire lines in access, last mile connectivity in India will be wireless and mobile devices are therefore critical to broadband access.

It is reported that a telecom official stated that, 

"A fully-functional smartphone is no longer an object of desire but an instrument of empowerment ," the official said. He added that since smartphone affordability remains the biggest hurdle to broadband penetration in India, the world's second largest mobile phone market, the government is exploring ways to encourage the biggest handset makers to produce sub- $100 advanced smartphones on a large scale that will come pre-loaded with the latest entertainment applications and also support mobile banking, telemedicine, education to even farming applications like e-krishi."

One viewpoint is that affordability of smart phones is a key driver of broadband penetration.

 "This, mainly since the average global price of such devices continued to hover around $130 (Rs 7,800), the main reason why barely 5% of the Indian population has till date upgraded to genuine smartphones despite the country's 70 %-plus telecom penetration levels.."

 In my view affordability of devices is a necessary but not sufficient condition for universalizing broadband access especially for rural India which has negligible broadband penetration. On the supply side, we also need good quality and affordable  connectivity (absent even in urban areas at present) and on the demand side we need locally relevant content in vernacular languages as well universal accessibility to cater to needs of disabled, illiterate and aged populations. As readers may recall, I has commented earlier on news about a probability of USOF India subsidizing mobile devices for rural poor. My views on this subject may also be seen in previous posts on Broadband Ecosystem

Need for Innovative Regulation-Indian Telecom Sector

On the occasion of the Confederation of Indian Industries National Telecom Summit 2013, The Hon'ble Minister of Communications & IT, the Chief of the Telecom Regulatory Authority of India and the Telecom Secretary have all highlighted important elements of the way forward to achieve the goals of universal digital inclusion and to boost the health of the flagging telecom sector in India. 

I am focusing more on the issues affecting the Market efficiency Gap in this blog post.

The need to concentrate of local R&D and design capabilities in manufacturing, the need to improve regulatory certainty including issues like M&A and spectrum and unified licensing were highlighted.  

The TRAI chief  stressed  "on  the critical need to use telecom infrastructure for public service in the fields of disaster management, financial inclusion and digital transactions, in the long term." (source: http://www.ciol.com/ciol/news/192836/government-committed-boost-telecom-sector)

Most importantly the telecom secretary stated that, "[i]nnovation in regulation is also important though legacy issues are there,..... there were complex legacy issues involved in order to fix unpredictability and ambiguity in the regulatory regime." (source: http://www.ciol.com/ciol/news/192860/innovation-regulation-farooqui)

In my view, taking stock of past mistakes, resolving legacy issues and creating a simple but  clearly refined regulatory framework for telecommunications can go a long way to rectify past problems and create a conducive environment for growth of Indian Telecommunications. Please see my earlier posts on Telecom Regulation.

Of course the legal framework of the  telecommunications sector is a part of the overall legal/regulatory framework of the economy which too needs looking at. One of these areas lies in the realm of competition policy. An overarching competition policy framework would prevent many a poor policy /programme from being accepted and would strengthen the ability of regulators and policy makers to make economically wiser decisions. I have written about this is an article titled "Airwaves, Incumbents and Good Governance - The Urgent Need for a Robust Competition Policy Framework" Also, please see my previous posts on Competition.

Continuously Declining Wire Lines in India

Telecom Regulatory Authority of India's latest Performance Indicators Report (January-March 2013) indicates that the wire line teledensity of the country has further declined from 2.52% to 2.47%. In Urban areas, wire line teledensity is 6.29% while in rural areas it is 0.79%. The market share of PSUs in wir line market is about 80%. Though not a part of this report, in rural areas the market share of the incumbent, PSU BSNL in wire lines is 99.9%.

The state of wire line penetration is closely related to negligible rural broadband penetration. While as I had written earlier, there are many regulatory issues contributing to this scenario, it is noteworthy that this situation is in spite of considerable USF support to BSNL for rural wire lines and broadband. My post titled "Regulation and USFs-Support for Rural Wire lines in India" had drawn attention to the fact that,about 98.6% of USOF funding has gone to support rural wire lines for voice and broadband connectivity. However BSNL which is the recipient of more than 86%  of USOF’s  total subsidy pay out  continues to steadily lose  rural wire line connections. These could have been maintained, improved and expanded by BSNL to provide broadband to rural areas. Much of this infrastructure was  put in place before BSNL was carved out of the Department of Telecommunications. It thus  represents a large amount of government investment besides presenting a huge competitive advantage for BSNL, considering  that it owns 99.9% of rural wire lines and rural India has negligible broadband penetration. This advantage has not been leveraged by BSNL. Nor has unbundling of this infrastructure been carried out in spite of regulatory recommendations. Further, against a Rs 1500 crore scheme initiated in January 2009 to support rural wire line basedbroadband with a scope to add about  18,00,000  connections (with subsidy being linked to the number of connections) BSNL had added less 400000 connections over a period of 3 years.

I had commented earlier that laxity in maintaining competitive neutrality of USF interventions tends to have long term negative implications on  the affected markets and defeats the very purpose of Universal Service.

One Size Does Not Fit All: US and Unique Needs

I have written earlier about reforms of USA's Universal Service Programme. A news item titled, "FCC suspends some cuts in rural high-cost support funding" tells us that FCC has announced that the suspension of its cuts in case of rural Alaska  planned as a part of its High Cost programme reforms. It has been stated by FCC that,

  “These measures will provide additional predictability and certainty for rate-of-return carriers as the Bureau works to adjust the benchmarking methodology as directed by the Commission through an open and transparent process.”

As explained in this article, "The Connect America Fund was designed to ensure that consumers in rural, insular and high cost areas have access to modern communications networks at rates comparable to those in urban areas. The program provides federal reimbursement to certain eligible carriers for some of the costs of serving rural communities."

As said by the Chairman of the American Indian and Alaska Native Affairs Subcommittee

 “The reforms they are suspending today is great news for rural Alaska, and is confirmation of what we have been trying to tell them this whole time: Alaska is different." He also emphasized that it has unique needs.

It has been recognized across the world that top down one size fit all approach will not work and Universal Service Funds and programmes must allow more stakeholder collaboration and bottom up projects to cater to different needs of geographies and communities.

Readers can also see  previous posts on U.S.A's Universal Service Programmes,  International Experience and related articles w.r.t  Indian USOF.

Delhi College (LSR) shows us the way-ICTs for PwDs

ICTs can play a critical role in empowering the disabled. My views on the potential of ICTs to empower Persons with Disabilities (PwDs) are presented in the exhibit  below:

The Potential of ICTs for PwDs (Archana.G.Gulat at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1970714)

 

I am proud to share a news item about my alma mater Lady Shri Ram College planning a resource centre for its disabled students as part of its equal-opportunity centre. It will be called  Swavalamban (self-reliance).

"It is a state-of-the-art facility equipped with latest assistive technology aimed at promoting self-reliance and independence among disabled students. The resource centre is endowed with a braille embosser, screen reading software, lex-cam scanner, book scanner, DAISY recorders as well as 10 computer systems with OCR software in both English and Hindi," said Kanika Khandelwal, the college's media coordinator.The resource centre will be fully functional from the upcoming academic year."LSR has the highest intake of disabled students and we do our utmost to ensure their academic, economic and cultural development," said Khandelwal.Last year, LSR had 12 visually impaired students and the college held computer literacy workshops, personality development seminars and other self-help programmes for their benefit. The equal-opportunity centre, Swavalamban, was initiated in 2007 and primarily supports blind students through training in JAWS and SAFA. Apart from computer skills, this centre also imparts entrepreneurial skills through interactive workshops on chocolate making, art and craft and candle-making.The college also provides scholarships to deserving students and conducts training programmes, workshops and field trips."

Please also read previous posts on this subject. 

Ubiquitous Broadband Demands Innovative Solutions

An EU study has found that "71% of all EU wireless data traffic in 2012 was delivered to smartphones and tablets using Wi-Fi, possibly rising to 78% by 2016" 

and that,

"The combined use of Wi-Fi and other small cell infrastructures (which complement traditional macro cell mobile base stations) can relieve congestion on the 3G/4G networks by providing “backhaul” functionality outside those networks, while minimising costs to both network operators and users. Wider use of these technologies could allow operators to save tens of billions of euros as they go about upgrading networks to meet customer demand. Consumers would save money by using Wi-Fi instead of paying for mobile data when they are actually near a Wi-Fi hotspot. Small cells can also extend network coverage into hard to reach places, including inside large buildings.

The study recommends to make spectrum from 5150 MHz to 5925 MHz available globally for Wi Fi; to continue making the 2.6 GHz and the 3.5 GHz bands fully available for mobile use and to consult on future licensing options for 3.5 GHz and other potential new licensed mobile frequency bands; and to reduce the administrative burden on the deployment of off-load services and networks in public locations."

There are important lessons here for India where scare and expensive 2G/3G spectrum drives up the price of wireless internet/broadband such that it is quite unaffordable for most people. On the other hand, given the low fixed line penetration, the growth in broadband is expected to come largely from wireless access.

News about a USOF Mobile Handset Scheme

It has been reported that USOF India may fund a scheme wherein mobile handsets are given to female members of poor rural households who have completed 100 days of work under India's rural employment guarantee scheme-MNREGA. Eligible beneficiaries would be identified by the state administration and handsets bundled with connectivity and m-government content such as health records and entitlements transfers would be provided by the USP chosen either through bidding or on nomination basis. Present USOF Rules would require choice of USP by bidding.

While the focus on women and m-government is welcome, I am not sure that mobile handsets are needed to be subsidized. It is the connectivity and content that USOF could focus on instead. If these are available, handsets (even second/third hand) would be purchased in any case. It is however a fact today that rural women may not own handsets. This was noticed during the implementation of USOF's Sanchar Shakti scheme. 

USOF may have to think of adequate safeguards to prevent transfer of the phone to non beneficiaries and false claims by USPs as implementing such schemes can be  administratively very challenging.