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Issue 7: Developing Countries - India

Politics and Technology Converge: Case Studies on the Effects of Regulatory Reform on VSAT Adoption in Developing Countries

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C: COUNTRY CASE STUDIES - INDIA

Telecommunications Regulation in India

India is another example of a developing country that has made significant strides in telecommunications reform. Even though these reforms must be rated as partial, when compared with those of more developed countries, the changes have nevertheless resulted in measurable gains in access to and use of satellites in solution to communication problems.

India's VSAT regulatory reforms date back to 1994 when the service was first opened to private sector participation and Closed User Groups (CUG) were given licenses. The CUG was a category of business relationships in which the producers of goods were permitted to freely interact with their traders and agents by means of satellite data networks. Following this initial move were a series of other progressive changes that helped to achieve and sustain industry growth in India. Some of these changes are noted below.

Licensing: In line with the need to keep licensing fees as low as possible, the Department of Telecommunications in 2001 switched from a licensing fee regime to a revenue sharing regime for VSAT installations. Under the licensing fee regime, each service provider had paid Rs 50,000 per terminal per annum, considered to be the highest rates in the world at the time. When shifting to a revenue sharing approach the rate was reduced to 10% of gross revenue. This amounted to Rs 10,000 - 13,000 plus an additional 3-4% of the gross revenue that each provider paid to the Wireless Planning Council, the caretaker body for spectrum usage, the amount depending on configuration.[38] Furthermore, licenses were granted on a non-exclusive basis and they could run for a period of 20 years, extendable one time by 10 years.

Spectrum and Use of Foreign Satellites: For many years, India followed a highly restrictive policy in terms of spectrum regulation and use of foreign satellites. Prior to 2001, the VSAT industry was made to rely solely on an indigenous constellation of satellites, using INSAT's extended C-band for commercial transmission capacity. Being restricted to INSAT equipment led to serious capacity shortages, with its attendant negative impact on growth of data communications. Realizing the effect on VSAT providers, the new Telecommunications Policy of 1999 made provision for the usage of Ku-band, which took effect in 2001.

As an added measure, the government of India further allowed access to foreign satellites.[39] This latter reform seems to have benefited mostly Internet service providers and broadcasters, however. Whereas the government allowed these users to negotiate directly with foreign satellite companies for capacity, VSAT providers had to rely on the Department of Space to negotiate on their behalf. This prompted the VSAT industry to petition for a more Open Sky Policy that would allow them also to negotiate independently, a matter that is still under consideration.[40]

Increased Bandwidth: Improving transmission speed is another matter addressed on behalf of the VSAT sector. From initial speeds of 64 Kbps in 1994, data rates that hardly promoted the usage of terminals to their optimal level, the industry was allowed to increase network delivery speeds to 512 Kbps.[41] On the advice of industry members, the Association of VSAT Providers in India is currently pushing for still higher speeds on the grounds that most of the equipment and software in which they are investing has higher speed capacities. According to A. Junja, CEO of Bharti Broadband, a VSAT provider in India, increasing speeds would enable more efficient data transfer and translate into cost savings for users.[42]

VSAT Applications in India

Internet Use: One indicator of the positive impact of VSAT regulatory reforms on the lives of Indians is their increased use of computers for personal services. Significant increases in Internet use were recorded immediately after the government started its VSAT sector reforms. From Table 1, one can notice a progressive expansion in both the use of Internet and the availability of personal computers to Indians after 1994 when the government became more accommodating to the VSAT sector. It is true that several other factors were in play in the same time frame that helped to stimulate this growth, but liberalization of the rules facilitating infrastructure investments and making communications services available to the broader public had an observable effect on Internet use.

Year Estimated Internet Users Availability of PCs
1992 1,000 410,000
1993 2,000 560,000
1994 10,000 800,000
1995 250,000 1,200,00
1996 450,000 1,500,000
1997 700,000 2,000,000
1998 1,400,000 2,700,000
1999 2,800,000 3,300,000
2000 5,000,000 4,600,000
Table 1. Internet Users and Personal Computers in India (1992-2000)
Source: Yearbook of Statistics, 1991- 2000, ITU

Though there was a tremendous growth in the number of Internet users and availability of PCs over the years, the actual numbers of Internet users in India is just a negligible fraction of the total population. For example, according to the ITU 2002 World Telecommunications Development Report, Internet users per 10,000 inhabitants were only 68 while the number of PCs per 10,000 inhabitants was only 58. It is obvious that the number of Internet users are greater than the number of PCs available. This discrepancy may have now been made even worse by the impressive growth in Internet users in 2002 to 159 per 10,000 population. In the long term, VSAT adoption may be hampered by the slow growth in personal computers on which to receive the Internet.

Rural Connectivity: The reforms embarked upon in India from the mid-1990s facilitated the initiation of numerous VSAT based rural connectivity projects. Three most significant of the projects are as follows:

Warana Wired Village Project: The National Informatics Centre in association with the state government launched in 1998 a project to provide agricultural, medical, and education information to villagers by establishing networked "facilitation booths" in 70 villages. The project relied on high-speed VSAT to make Internet access available to its co-operative societies. All the villages had computer kiosks that were linked to a central network, and training centers were opened in six villages to impart computer education to rural youth and provide access to the Internet.[43] The project is ongoing and continues to provide farmers with access to essential information. The network lists prices of farm produce in the region's agricultural markets (to help farmers decide what to plant or where to sell their produce), and offers a daily weather forecast. Efforts are underway to duplicate the Warana experiment in other parts of the country.

Gyandoot Agricultural Project: Launched in January 2000, the Gyandoot Project involves the installation of a low-cost rural intranet covering 20 village information kiosks offering access to such services as pricing information on agricultural produce, copies of land records, online registration of applications and public grievance redress. These services are offered at nominal rates ranging from Rs5 to Rs25.[44]

Karnataka Telemedicine Project: Launched in 2002 under the auspices of the Indian Space Research Organization, this project connects Narayana Hrudayalaya, a super specialty hospital for heart care in Bangalore, with Chamarajanagar District Hospital and Vivekananda Memorial Hospital, an NGO run health unit at Saragur in HD Kote Taluk for telemedicine facilitation. The tele-medicine offering consists of customized medical software integrated with computer hardware, along with diagnostic instruments connected via VSATs at each of the three locations. This service enables the medical records of patients to be sent to Specialist Doctors, who in-turn study and provide diagnosis and treatment during videoconferences with those on the patient's end.[45] This demonstration project has greatly reduced the burden on rural patients who would have to travel over long distances to consult specialists.

Business: The favorable regulatory climate has greatly expanded the number and variety of VSAT applications emerging within commercial sectors. The result is that more and more businesses are relying on VSATs to respond to the needs of their customers. Prominent among such entities are manufacturing and infrastructure companies, bank-affiliated credit card companies and stock exchanges.[46]

According to Joyjit Chatterji, General Manager, Sales and Marketing at Comsat Max, a leading VSAT service provider in India, banks in India have been quick to install ATM machines using VSATs for connectivity.[47] This has allowed banks to come closer to their customers without having to open branches everywhere. An example is the State Bank of India that implemented a 600-site broadband satellite communications network, considered to be one of the largest deployments of ATMs using VSATs. Through VSATs, the National Stock Exchange of India has been able to set up access terminals in many parts of the country, including remote towns. Its network of 3,000 VSATs is thought to be among the largest in Asia.[48]

Governance: With the Y2000 passing of India's Information Technology Act, many departments of Indian state government are now relying on VSAT-based Internet connectivity to provide quick and quality services to citizens. The result is that more people in India are now using the Internet to transact their affairs with government offices, instead of having to be there personally. As of 2002, the number of Indians using Internet for accessing government services and products as a percentage of the total number of Internet users increased from 22% the previous year to 31%.[49]

Basic government services provided via Internet include (i) registration formalities for land, marriage, birth & death, (ii) information and downloading application forms, and (iii) lodging complaints. Thus, VSAT-based Internet connectivity makes for a more responsive government, ensures that necessary information is more widely available and readily accessible, time is saved by users, frustrations are lessened and greater opportunity is given for users to communicate their needs to those in charge.

VSAT Service Providers in India

In 2003, 11 companies were registered to provide VSAT services in the Indian market.[50] Table 2 indicates who these service providers are and their subscriber base as of June 2003. It is evident from Table 2 that Hughes Escorts Communications Ltd., HCL Comnet and Comsat Max constituted the three leading VSAT service providers in the market.

Rank Service Provider 03-30-03 06-30-03 % Market Share (06/03)
1 hughes 4992 5456 29.65
2 HCL Comnet 3022 3987 21.67
3 Comsat Max 3493 3668 19.94
4 Bharti BT 3047 3252 17.68
5 Essel Shyam 1997 1579 8.58
6 Telstra Vishesh 134 158 0.86
7 RPG Satellite Comm. 103 96 0.52
8 HFCL 67 67 0.36
9 Tata Services 58 58 0.32
10 ITI 53 53 0.29
11 GNFC 22 24 0.13
  Total 161,988 18,398  
Table 2. VSAT Service Provider Subscriber Base (2003)
Source: http://www.trai.gov.in

Ghana | China | India | Brazil | Israel | Lessons for Africa

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