12 th Symposium on Development and Social Transformation

1. 12th Symposium on Development and Social Transformation Panel 2: The Changing Face of Telecommunications and Power Sector PoliciesTuesday November 15 (10:45- 12:15)

2. 12th Symposium on Development and Social Transformation Panel 2: The Changing Face of Telecommunications and Power Sector Policies Bridging the Digital Divide in India – Lessons from EgyptSanjeev Kumar Sharma

3. TELECOM REVOLUTION IN INDIA – THE MYTH REASONS FOR POOR ICT PENETRATION IN RURAL INDIA Presentation Outline DIGITAL DIVIDE – THE INTERNATIONAL PERSPECTIVE Policy Initiatives - Lessons from Egypt Suggestions on Implementation in India Sanjeev K Sharma

4. TELECOM REVOLUTION IN INDIA – THE MYTH • 72% of Indian Population Lives in Villages • 741 million live in over 600 thousand Villages • Absence of basic infrastructure like Electricity, Road & Telecom has resulted in poor socio-economic growth • Literacy rate 49.4% as compared to 70% in urban areas • Every 3 out of 4 villages do not have primary health centers • Result – 72% of population contributes to only 24% of GDP • The lack of policy initiatives is reflected in widening digital divide between rural and urban India Sanjeev K Sharma

5. TELECOM REVOLUTION IN INDIA – THE MYTH • Source – Telecom Regulatory Authority of India’s website Sanjeev K Sharma

6. TELECOM REVOLUTION IN INDIA – THE MYTH • The trend of infrastructure building in rural areas is on decline and this is alarming • Immediate need for policy intervention • Digital divide is worldwide phenomenon and we can learn from other similarly emerging economies • International perspective indicates thrust on building information society by access to information through internet Sanjeev K Sharma

7. REASONS FOR POOR ICT PENETRATION IN RURAL INDIA • Sparsely populated • Poor purchasing power • Supporting infrastructure like electricity and transport in poor conditions • Unavailability of technical manpower • Low business volumes All this results in high infrastructure set-up costs, low returns and high operational costs - Typical cart and horse situation Sanjeev K Sharma

8. DIGITAL DIVIDE – THE INTERNATIONAL PERSPECTIVE • The ICT development indices report released by United Nations Conference on Trade and Development (UNCTAD) shows that during 1995-2002 countries like Egypt, Mexico, China & South Korea have shown remarkable progress in increasing the penetration of ICT amongst masses. Sanjeev K Sharma

9. DIGITAL DIVIDE – THE INTERNATIONAL PERSPECTIVE • rapid growth in telecommunications have been either demand driven like in China or state-pushed like in South Korea and Egypt. • The growth of ICT in urban India has been mainly demand driven. BUT • To increase the penetration of ICT in rural India will require greater policy leadership and initiative from state. • Hence policy initiatives in Egypt are of special interest to india Sanjeev K Sharma

10. Policy Initiatives - Lessons from Egypt • Egypt rose sharply ICT diffusion index ranking from 154th to 112th position • Since 1999 MCIT in Egypt has launched several policy initiatives to build it’s information society • For success all policies focus on three aspects Policy Success 1. Awareness 3. Affordability 2. Accessibility Sanjeev K Sharma

11. Policy Initiatives - Lessons from Egypt • Egypt’s overall dream of building information society and bridging the digital divide is based on three pillars of policy initiatives • Build extensive R & D capacities • Provide conducive regulatory framework • ICT capacity building in community through various e-Access policy initiatives like • Free Internet access • IT Clubs • PC for community • ICT trust fund • Mobile ICT units • Smart school network etc. Sanjeev K Sharma

12. Policy Initiatives - Lessons from Egypt PC for Community • Started in Nov 2002 by MCIT • To achieve PC penetration of 1 for every 3 families • Aim – sale 6 million PCs in next 7 years • Easy credit facility to be paid in 40 installments • Collaboration with 22 hardware providers • Verification, sales facilitation, internet provision and installment collection by Telecom Egypt • Tie up with National Bank of Egypt & BankeMishr and Insurance agency • MCIT monitors program and performance of private partners • Xceed call center to built awareness • Advantages - Tremendous boost to sale of PC , employment generation, employment generation, capacity building, export Sanjeev K Sharma

13. Suggestions on Implementation in India DOT - Coordinate the activities of various partners - Provide finance through USO fund - Will enlist local PC manufacturers and monitor performance - Coordinate with various ministries for tax exemptions - Will negotiate rates for supply of PCs and software BSNL - Verification of credentials of loan-seekers - Collection of monthly installments though telephone bills - Free internet access for PC buyers for one year (Claim compensation from USO fund) - Implement scheme through its teleshoppes (Sales outlets) “Own Your PC” Responsibilities of various partners Banks - Provide finance with 36 installments - Provide PC for connectivity with BSNL server for credential verification and installment collection - Financing the projects of enlisted PC manufacturers PC manufacturers and software providers - Develop local language applications - Develop component level manufacturing capabilities - Will get tax exemptions on sale of PCs - Provide at least 36 month warranty - Develop sales and service centers Sanjeev K Sharma

14. Policy Initiatives - Lessons from Egypt IT Club Policy • Started by MCIT to provide access to technology in under-privileged areas on shared access basis • Aim at setting up 2800 Clubs by June 2007, 1000 already operational with average 1000 users per club • Tackles affordability and accessibility • Nominal fee of about 0.2 USD per hour • Government provide hardware and private partner provides infrastructure • Training the trainer program provides employment • Software library, surfing, training available to users • International partnerships with Microsoft, UNDP, Korea • Software application in Arabic • Advantages – Employment, entrepreneur development, Use by small businessmen, increased computer literacy, Sanjeev K Sharma

15. Suggestions on Implementation in India • 1 Server, 3 PCs, printer, LAN & UPS in every Club • Estimated cost of 90 million USD can be met through USO fund • Funds required – Appx 4,000 USD per center • Implement in 20,000 villages in first phase (those above 5,000 population Sanjeev K Sharma

16. 12th Symposium on Development and Social Transformation Panel 2: The Changing Face of Telecommunications and Power Sector Policies ICT Policy: A Comparative Study of USA and IndiaDebkumar Chakrabarti

17. Outline of Presentation • ICT : The Potential • ICT Policy: The Normative Way • ICT Policy: Developed Countries (USA, Japan, EU) • ICT Policy: Developing Countries (China, S.Korea, India) • Concerns & Lessons • Recommendations

18. ICT: The Potentials • The key enablers of globalization. • Transformed the business, markets and organizations, revolutionized learning and knowledge-sharing. • Empowered citizens to equitable and prosperous future, democratized societies and resulted in significant economic growth in many countries. • Impact of their value-addition had been so rewarding. The technologies themselves became more affordable and accessible. • Contribution of ICT —ICT growth and ICT diffusion.

19. ICT: The Normative Policy • The ICT policy of a country should focus equally on the following three major endeavors: • Targeting the ICT-producing sector as a “strategic” industry to heighten its formation and growth; and • Fostering the diffusion of ICT throughout the economy. • Social use of ICT. • Targeting only one and thrust on export orientation mainly to garner rapid benefits may create a major economic mismatch. • Absorptive power of its own ICT productions to check susceptibility to international recession and regional inequalities.

20. ICT Policy: Developed Countries USA • Freedom and support for the ICT industry. • Stimulation of high-tech entrepreneurial culture, creating a homogeneous and flexible labour market while acting as a launch customer for new technologies. • The industry is characterized by a high-tech attitude and a close cooperation with universities. • Globally the biggest purchaser of ICT goods and services (45% of world’s total spending). • Some of the largest firms in the field of ICT originated in the USA (Microsoft, Hewlett-Packard, Intel, IBM, to name only a few). • Sheer size of the home market. Support from the government sector, DoD, NASA, and through "Homeland Security Initiative".

21. ICT Policy: Developed Countries JAPAN • A techno-cultural fit. • Broadband access is a major topic on the government's ICT policy agenda, private sector taking the lead. • Japan has an excellent telecommunications infrastructure. High potential in educational standards and technological capability. • IT accounted for 11.6% of GDP in 2000. • Reliance on mainframes has meant that Japanese businesses favored custom software made by domestic software firms. • Japan is spending more than $30 billion a year on telecommunication infrastructure improvement. • New IT legislation in 2001 ('IT Basic Law') and the 'e-Japan strategy' program.

22. ICT Policy: Developed Countries EU • European ICT policy: mildly regulating and stimulating aimed at a strong social cohesion. It contains the following elements: Regulation e-Europe R&D • European ICT policy is aimed at developing an 'Information Society for all'. • The EU is strong in Telecommunications, Sustainable development and Social protection • Regulation initiatives: adoption of harmonized standards such as GSM, the liberalization of the telecommunications sector and the creation of the Single Market. • The central policy initiative is the e-Europe 2005 Action Plan. • By the end of 2005, Europe aims to have modern, on-line public services (e-Government, e-Learning, e-Health) and a dynamic e-Business environment, based on a widespread availability of broadband access at competitive prices and a secured information infrastructure.

23. Concerns: Developed Countries • Off-shoring of jobs, manufacturing bases are gaining considerable momentum. • Intellectual property right, privacy, digital divide, misuse of ICT (terrorism, money laundering, etc.), affordable universal access. • The EU is relatively weak in Innovation and R&D, Information society and Enterprise ecosystem.

24. ICT Policy: Developing Countries China • The success of the ICT industry in China is a result of: • Deliberate government policies to use Joint Ventures as vehicle for FDIs and Technology Transfer; • A very competitive manufacturing industry aimed at export, which can now also serve the gigantic domestic market. • The availability of a huge pool of low-cost labour; • Hardware production is booming. Chinese companies are rapidly increasing their market share; from 2% in 1999 to 30% by 2002. • The Chinese Government announced in 2002 its support for the domestically developed 3G standard TD-SCDMA. • The Chinese software industry is small and underdeveloped. • China's Government places strong emphasis on promoting domestic production capabilities and using local products in preference to imported foreign technology.

25. ICT Policy: Developing Countries India • India: building a huge software industry aimed at export. • Focused policy set by India's Government, aiming at liberalization and stimulating the software industry by creating favorable conditions for investments. • The Indian software industry grew from a mere USD 150 million in 1991-1992 to a staggering USD 9.5 billion in 2002-03. • India's success in software is rooted in a combination of factors: • The availability of a large low-cost and highly educated, English speaking labor force; • Low entry requirements in terms of investments; • Favorable treatment of the sector by the government, for example through tax exemptions and; • Strong connectivity with the U.S. computer industry. • There remain however challenges, including the perception of an unfavorable regulatory climate, an overloaded judicial system, poor infrastructure and costly access, and limited use of ICT in the domestic market.

26. Concerns: Developing Countries • The linear projection of future growth would create a new set of macro-economic problems. ICT-related exports alone can exceed all current accounts payment by 2010, completely dominating all other parts of the economy. This may put upward pressure on the currency, with inimical consequences on other sectors of the economy, especially manufacturing. • The inordinate focus on ICT sector is gradually and constantly amplifying inequalities, particularly in the rural Asia, where majority of population resides. The benefits of ICT have been confined to urban elites, till now. • The export oriented thrust on ICT is propelling to focus on cost advantage in these countries, rather than deeper technological capabilities, making the continuation of growth doubtful.

27. Lessons to be learned from the Developing countries • The countries referred show a strong preparedness to make choices and shape the future. • The Indian Government focused on software development for export and far-reaching measures: the government permitted foreign equity of up to 100% and duty free import on all inputs, created technology parks and offered professional labor services to clients. • Korea, like Japan, has shown an early commitment for broadband and has created the financial incentives for them. • These choices have paid off: the countries now avail of ICT sectors that are highly dynamic and have the best prospects for the future.

28. Lessons to be learned from the Developed countries • liberalize further into market-based operation and competition and limit the role of the Government to regulation, arbitration and negotiation only. • induce large-scale social use of ICT, eg. in education, primary health, e-governance, etc. • promote private sector research and development, and innovations. • promote massive cross-sectoral ICT diffusion, both to gain competitive efficiency on %cost saving as well as to generate absorptive power of ICT within the country. • pursue policies both domestically as well as regionally to ensure greater application of ICT within Asian economies. Given that different countries of the region have expertise in different parts of this new technology, greater application of ICT provides an opportunity for greater economic cooperation within Asia.

29. 12th Symposium on Development and Social Transformation Panel 2: The Changing Face of Telecommunications and Power Sector Policies Roads to Convergence – Regulatory ResponseDeepali Sharma

30. Presentation Outline • What is convergence? • Possibilities created by Convergence. • Outcomes of convergence . • Normative policies to reap the potential of convergence. • Regulatory response to convergence . DEEPALI SHARMA

31. What is Convergence? • Convergence refers to the process by which communications networks and services, which were previously considered separate, are being transformed such that: • Any one network platform can carry all types of services . • One integrated consumer appliance can receive all types of services, and • New services are being created. Examples of new products and services being delivered include: • Web casting of any audiovisual data, • Home-banking and home-shopping over the Internet, • Voice over the Internet; etc DEEPALI SHARMA

32. Service Provider Customer Premises Equipment Telecom Service CableService Mobile handset TV Power/Utility Service Broadcast Service Fixed phone handset Computer One Service Provider Common Delivery Medium Common CPE One Stop purchase Modes of delivery of Service Market Related Developments Fiber/twisted pair- telecom operator Fiber/Coaxial cable Power/Utility operator Bundling of Service Flat rate price package Integrated operations due to mergers/ condolidation/ linking RF Spectrum without satellite Power/Utility Service Satellite DEEPALI SHARMA

33. Outcomes of Convergence • Services provided by any- whether telecom operator/Broadcaster/ ISP are encroaching over those provided by others • Authority and work span of individual regulators-Telecom /Broadcasting /IT are overlapping, resulting in duplication of resources and efforts • Results in • confusion among operators, • renders government policies ineffective, • Hinders development of technology and market DEEPALI SHARMA

34. Issues for reforms in Regulations • Reforms do not simply involve extension of present policies over new services • Complete overview of legal and policy framework • Commercial success of technology and market determine direction of convergence and area of policy reform • Policy reforms decide on the future of technology and markets • Ideal solution is to have a single policy and regulator governing the three sectors DEEPALI SHARMA

35. New Policy Framework • Single regulatory policy framework based on law of competition • Less of enforced regulation but more of self regulation • Ensure optimum utilization of Spectrum • Horizontal structure in Broadcasting separated across carriage and content • Common regulator across three sectors for carriage • Content regulation determined by social and cultural objectives of the country DEEPALI SHARMA

36. Response across the world • Singapore , UK, Malaysia, India have introduced an integrated and independent Regulator. • The new regulators are for • regulating and promoting ICT industry • regulations are based on competition laws • they promote self regulation by industries • the procedure devised for framing regulations is more transparent having increased public participation. DEEPALI SHARMA

37. Reforms in UK, Malaysia and Singapore • United Kingdom created OFCOM by merging five regulatory bodies • OFTEL • Radio Communications Agency • Independent Television Commission • Radio Authority • Broadcasting Standards Commission, which were merged to form an Integrated body OFCOM • Singapore formed Infocomm Development Authority by merging • Telecommunications Authority of Singapore • National Computer Board to form • Malaysia formed single regulator –The Communications and Multimedia Commission DEEPALI SHARMA

38. Case of India • India is moving towards a converged regulator heading for Unified licensing policy - issues regarding content regulations yet to be resolved • The countries that have reformed earlier are reaping the benefits of developments in technology and market for their economic growth better. DEEPALI SHARMA

39. 12th Symposium on Development and Social Transformation Panel 2: The Changing Face of Telecommunications and Power Sector Policies Increase in Broadband Penetration in India: Policies for Unbundling the Local LoopNeeraj Kumar

40. Introduction • What is Local loop ? • What is Broadband ? • What is Digital Subscriber Loop (DSL ) ? • Relationship between DSL & Broadband Maxwell, School, SU, USA

41. Unbundling ? Incumbent operator is forced to make its local loop available to other companies (competitors) to provide broadband through DSL in competition to incumbent itself. Maxwell, School, SU, USA

42. Problem faced Low Broadband Penetration Maxwell, School, SU, USA

43. Possible Solution - Unbundling • Brings competition in provisioning of Broadband • Breaks monopoly of incumbent Telecom operator Maxwell, School, SU, USA

44. Why not to Unbunde ? • Forces incumbents to provide competitors with essential business inputs • New entrants 'parasite' the incumbent's network - stifles infrastructure based competition and technical innovation • More regulation required- detrimental to the market. Maxwell, School, SU, USA

45. Why to Un-bundle ? • Local loop infrastructure can not be duplicated – thus leaving incumbent’s monopoly • Incumbent created local loop infrastructure under state monopoly protection and using taxpayer money. • Incumbents seen to be less efficient and lethargic Maxwell, School, SU, USA

46. International scenario - Telephone lines & No. of Broadband Connections Maxwell, School, SU, USA

47. Status of Unbundling - International • U.K. – Unbundling started in 2000. 31,000 local loop connections have been 'unbundled' short of a target of 50,000. (31 January 2005) • ULL DSL as % of total DSL - UK - 0.39%, • U.S. – LLU working since 1996. Unbundled loops more than half of CLECs’ lines (December 2001). • European Union (EU) – 0.02% European incumbent’s lines were unbundled 27 months after unbundling starting in December 2000 Maxwell, School, SU, USA

48. Unbundling – a failure or a success in other countries • “There seems to be no correlation between unbundling and DSL penetration and no effect of unbundling on competition resulting in DSL penetration. EU regulator’s competition hypothesis is not true - Cullen International analysis” • “ Local loop unbundling (LLU) is not working “(ECTA 2002)” - Phil Elvis, ECTA Managing Director Is it an early phase & result may not be conclusive Source: European competitive Telecom. Association (ECTA), DSL Scorecard, end of March, 2003 Maxwell, School, SU, USA

49. Unbundling – International experience • Operational coordination problems between the incumbent and new entrants regarding processes such as ordering, provisioning, billing, fault handling and service level agreement, pricing, co-location, space availability, spectrum management on local loops. • Arranging power supply for additional equipment, Air-conditioning, fire control, security at premises etc. • Lot of litigation Maxwell, School, SU, USA

50. Indian Scenario • 95% local loop (45 million) is with incumbents viz. BSNL & MTNL • Broadband penetration in India 0.1 million in mid 2005. Maxwell, School, SU, USA