BOOK REVIEW

A Compendium on the Indian Telecommunications Industry

Sunil Mani

he growth performance of telecommunications services has been an astounding success if success is dened in terms of both the cost of that service and its availability. The number of telephones in the country has increased from a paltry ve million as on 31 March 1991 to almost 951 million by the end of March 2012. The density of telephones (an important indicator of development) has increased during this period from less than one telephone per 100 people to almost 80 telephones per 100 people. Although two-thirds of these telephones are still in urban areas, the rural-urban divide in the availability of phones has been steadily falling. Availability is also translating itself into lower costs: India is believed to have one of the cheapest telephone services in the world and this has proved very benecial to its information technology (IT) services industry, which depends to a large extent on good communications infrastructure. Filling a Gap Telecom has turned to be one of the few deregulated industries that have become successful. There are four distinct aspects of this success increasingly termed a revolution of sorts that merit ones attention. First, almost the entire supply of telephones is in the form of cellular mobile phones: in fact the ratio of mobile phones to xed phones is about 30. Second, a major portion of the supply of mobile phone services (almost 90%) is provided for by private sector service providers. Third, despite deregulation, the government still plays an important role in terms of licensing service providers, allocating spectrum and regulating the conduct of existing service providers. Further, the government has also come out with a series of policies governing the future direction of the industry. Fourth, the telecom sector has now become an important source of non-tax revenue to the exchequer.
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The Telecom Revolution in India: Technology, Regulation and Policy by Varadharajan Sridhar (New Delhi: Oxford University Press), 2012; pp xviii +342, price not stated.

The book, of course, devotes a fair amount of attention to various segments of the services sector such as cellular mobile, xed telephony, internet, satellite services and even broadcasting services. Thus it is a more holistic treatment of the services industry than earlier works on the industry. But the discussions are more at a descriptive level with ponderous boxes (on an average four boxes per chapter). Some of the chapters even have seven boxes and often each of these extends to more than a page. Information and Analysis There is no one central question that is stated in the form of a testable hypothesis right at the beginning. Instead what we have is one descriptive chapter following the other. While the material contained in each of the chapters, often devoted to a segment of the industry, does inform the reader of the structure of that segment, it does not raise or answer any analytical questions. We may illustrate this with reference to the material contained in three of the key chapters in the book, namely Chapter 3 on the cellular mobile services industry, Chapter 4 on spectrum management, and Chapter 9 on telecom manufacturing, research and development (R&D), software development and outsourcing. All the three chapters contain a wealth of information, but it is presented in a cluttered fashion that taxes the reader a bit too much. Reading through a range of issues with so much boxed material is not that helpful for a systematic understanding of these three important areas of the sector. These criticisms apart, the chapters do contain interesting nuggets of analysis, which the author ought to have given more importance. Let me illustrate this with each of these three chapters. I consider Chapter 3 on cellular mobile services one of the key chapters in the book as it is the phenomenal growth of the mobile telephony that has resulted in the so-called telecom revolution in the country. The main analytical issue here is achieving competition on service provision. How did the government manage to create competition between service providers, resulting in both signicant reductions in average prices and improvements
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The spectacular performance of the industry has spawned a fair amount of literature, although most of it is in the realm of economic or business journalism. The recent 2G scam has increased the literature on the industry exponentially. Yet the phenomenal growth of the industry has been tempered by recent controversies and scams of unprecedented proportions to such an extent that it has even put the future growth of the industry in jeopardy. However, serious expositions on the growth of this technology-based industry are wanting. The book under review, authored by someone who has the distinction of being an academic at one stage of his career and then an industry-based analyst, is a welcome addition to this latter material on the industry. The author, by virtue of his varied assignments, has the rigour of a serious analyst and detailed knowledge of the intricacies of this technology and indeed jargon-driven industry (if the 20-page glossary in the book is anything to go by). The result is a painstakingly detailed charting of the growth of the industry structured in 10 chapters. The book is almost entirely devoted to the services segment of this industry. Discussions on the other important segment, namely the equipment sector, are conned to just one chapter and even here the discussion is rather skimpy relative to the extensive treatment of the services sector. Given the impetus that a growing services segment gives to the equipment sector and the emphasis that the State has placed on the growth of the equipment sector, greater elaboration of the ideas contained in Chapter 9 would have been very useful and would have balanced the discussion between the two segments.
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in the technology underlying these services? This question, analytically challenging, is never raised in the chapter. Instead what we have is an independent discussion of competition (on pp 83-84) and another independent discussion on prices; the two are never linked. Based on a tracking of movements in a summary measure of competition over the period 2000 through 2010 namely, the Herndahl-Hirschman (HH) index1 against the number of service providers, the author reaches the conclusion that increasing the number of service providers beyond four or ve does not lead to signicant reductions in the HH index or in other words increase in competition. The author forgets the fact that by keeping markets contestable with the threat of potential entry incumbent rms are forced to compete with each other and not collude, as happens in many oligopolistic industries especially in the Indian context. The author does not explain how the state has used spectrum allocation (despite mistakes in the pricing of spectrum) and licensing of two different telecom standards (GSM and CDMA) to stimulate competition. Comparison of the large Indian market with smaller countries such as Ukraine which the author invokes as having just one service provider is not helpful. The right comparison for India is of course the Chinese market where the market is even now concentrated in the hands of just two or three dominant service providers with higher prices than in India. Such a comparison is made by the author but only towards the end of the chapter. Initial discussions in the chapter do introduce the reader to a description of various rounds of licensing in the country. But these discussions are not linked to the discussion of competition. The author also seems to imply excessive competition when he states that low Average Revenue Per User (ARPU) along with competition makes it nancially difcult for operators. However nowhere in the book does the author adduce any quantitative numbers on service providerwide sales and prot data overtime on the nancial health of service providers that would have substantiated the statement.
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The fact is that there has not been any shake-out of service providers as in the civil aviation market that would bear testimony to this line of reasoning. Finally the author also does not discuss recent concerns about the difference between total number of subscribers and the number of active subscribers across service providers and circles. This conversation also has important implications for the computation of the HH index, as competition could be overstated or underestimated, depending on whether active subscribers are less or more than the total number of subscribers. A reading of this chapter gives the impression that a number of individual sections were written separately and then physically integrated to form the chapter. Consequently the discussion does not appear seamless. For instance, in what way does the author relate the discussion of mobile technologies, with which the chapter starts, to the later issues discussed in it? Some Wasted Opportunities The author rightly refers to spectrum management as a conundrum and devotes a full chapter to the discussion of this intricate issue. Any reader would want to have a detailed discussion of 2G spectrum in a book published in 2012. The otherwise spectacular performance of the telecom sector was marred by the recent 2G scam, which erupted during the 2008 allocation of spectrum and licences. The Comptroller and Auditor General noted in 2010 that the allocation process did not reect the correct value of radio spectrum as there was no auction and the entire process was awed, beneting selected service providers. The auditor suggested that the telecom ministry did not do the requisite due diligence, granting 85 out of the 122 licences to ineligible applicants. Government auditors estimated the presumptive loss to the exchequer due to this underselling of spectrum to be about $40 billion. The scam has somewhat dented faith in the various institutions supporting the development of telecommunications in the country and even raised questions about their independence. However, none of these important discussions are in the chapter, which diminishes its utility

as an important reference source on spectrum management in the Indian context. There is also no synthesis of the vast amounts of technical literature on spectrum management that has sprung up, especially over the last one year or so. The phenomenal growth of telecom services is now slowly but steadily leading to the emergence of telecom equipment manufacturing in India. The government also has seized this potential opportunity and would like the country to become a major hub for telecom equipment. Given the fact that the existing domestic rms do not have the requisite technological capability, the government has been relaxing rules governing the participation of foreign companies in the manufacture of telecom equipment in the country. The telecom industry is thus an interesting counter-intuitive example of the growth of services leading to the emergence and growth of an equipment industry; usually, it is the other way around. Growth in multinational corporation (MNC) involvement in manufacturing has also enhanced levels of R&D, especially through the mode of R&D outsourcing. These are the issues discussed in Chapter 9. But there is no systematic discussion of any of the issues and the chapter runs the risk of being mistaken as an afterthought by the author. The issues are very often introduced in an abrupt manner. For instance, there is a sudden discussion of manufacturing in India in the post-2004 period. The history of telecom equipment manufacturing in the country is not discussed in any great detail before this, nor are the different phases in its evolution over time identied. So it is not immediately clear to the reader why the post-2004 period is taken as a separate phase. The statement that telecom equipment manufacturing in India started only in 2004 (Table 9.2 on p 261) is clearly unacceptable as such manufacturing started as early as 1948 with the establishment of the state-owned ITI Limited in that year. The chapter also has a comparison with the Chinese experience of developing an equipment industry. However, the discussion is too skimpy for any serious comparison between the two giants. The policies followed and the outcomes achieved in the
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two giants are exactly the opposite. This was a good opportunity for the author to bring out this contrast. There is no concluding chapter to the book. The author considers the Indian telecom industry as an evolving story. For once, one cannot dispute the authors argument. The author rightly speculates on the emergence of partnerships of various sorts, which will alter the structure of the industry, the market power of leading rms and pose serious challenges to the regulatory agency. A useful compilation of past and present partnerships are to be found in Table 10.2, although it stops at 2009.

Finally, how does one place this book against the small but growing literature on this industry? It certainly has the ingredients of a good compilation and reference work on the Indian telecom industry. Researchers and policy makers wanting to have the various facets of the industry explained may not be disappointed as the book is generous on factual material. Here too, the author could have indicated his data sources (especially for the various gures), and this would have enhanced the scientic rigour of the book and would have served as a guiding post for future research. An independent chapter on the role of government,

especially the regulatory agency, would have been further welcome addition. I am, of course, happy that I read this book as it certainly furthered my understanding of this fascinating industry, which is currently in a state of ux.
Sunil Mani (mani@cds.ac.in) is with the Centre for Development Studies, Thiruvananthapuram.

Note
1 In computing the HH index, it is not clear whether the author has measured market share of each service provider in terms of number of subscribers or in sales in value terms. The source of data used for computation is not indicated either.

Books Received
Balachandran, G (2012); Globalising Labour? Indian Seafarers and World Shipping, c 1870-1945 (New Delhi: Oxford University Press); pp xii + 318, Rs 795. Bapat, Guru Rao (2012); Re-Scribing Tradition: Modernisation of South Indian Dance Drama (Shimla: Indian Institute of Advanced Study); pp x + 154, Rs 595. Barnes, Douglas F, Priti Kumar and Keith Openshaw (2012); Cleaner Hearths, Better Homes: New Stoves for India and the Developing World (New Delhi: Oxford University Press); pp xvi + 170, Rs 595. Bhalla, G S and Gurmail Singh (2012); Economic Liberalisation and Indian Agriculture: A Districtlevel Study (New Delhi: Sage Publications); pp xxx + 360, Rs 795. Bussell, Jennifer (2012); Corruption and Reform in India: Public Services in the Digital Age (Cambridge and New Delhi: Cambridge University Press); pp xii + 306, Rs 895. Chatterjee, Partha (2012); The Black Hole of Empire: History of a Global Practice of Power (Ranikhet: Permanent Black); pp xiv + 425, Rs 795. Das, Ram Upendra and Rajan Sudesh Ratna (2011); Perspectives on Rules of Origin: Analytical and Policy Insights from the Indian Experience (New York: Palgrave Macmillan); pp xiv + 229, price not indicated. Datta, Birendranath (2012); Cultural Contours of North-East India (New Delhi: Oxford University Press); pp xiv + 225, Rs 695. Dimri, Jaiwanti (2012); Images and Representation of the Rural Woman: A Study of the Selected Novels of Indian Women Writers (Shimla: Indian Institute of Advanced Study); pp viii + 339, Rs 695. Dube, S N (2012); Ideas and Movements in the Age of the Mauryas (With Special Reference to Pali and Ardhamagadhi Sources) (Shimla: Indian Institute of Advanced Study); pp 368, Rs 650. Einsiedel, Sebastian von, David M Malone and Suman Pradhan, ed. (2012); Nepal in Transition: From Peoples War to Fragile Peace (Cambridge and New Delhi: Cambridge University Press); pp xv + 398, Rs 495. Fukuyama, Francis (2012); Time to Start Thinking: America and the Spectre of Decline (London: Little Brown and Hachette India); pp vi + 291, Rs 699. Hayness, Douglas E (2012); Small Town Capitalism in Western India: Artisans, Merchants and the Making of the Informal Economy, 1870-1960 (Cambridge and New Delhi: Cambridge University Press); pp xiv + 344, Rs 895. Hecht, Gabrielle (2012); Being Nuclear: Africans and the Global Uranium Trade (Cambridge: The MIT Press); pp xx + 451, price not indicated. Jassal, Smita Tewari (2012); Unearthing Gender Folksongs of North India (Durham: Duke University Press); pp xv + 296, price not indicated. Kakar, Sudhir (2012); The Inner World: A Psychoanalytic Study of Childhood and Society in India (New Delhi: Oxford University Press); pp xx + 272, Rs 295. Kochhar, Sameer, ed. (2011); Growth & Finance: Essays in Honour of C Rangarajan (New Delhi: Academic Foundation); pp 351, Rs 1,095. Koithara, Verghese (2012); Managing Indias Nuclear Forces (New Delhi: Routledge); pp xx + 294, Rs 795. Mohanty, Deepak, ed. (2012); Regional Economy of India: Growth and Finance (New Delhi: Academic Foundation in association with RBI); pp 508, Rs 1,095. Mujumdar, N A (2011); Indias New Development Agenda: Building a Value-based Society (New Delhi: Academic Foundation); pp 223, Rs 895. Mukherjee, Aditya, ed. (2011); A Centenary History of the Indian National Congress (Volume V: 1964-1984) (New Delhi: Academic Foundation); pp 647, price not indicated. Nathan Dev and Virginius Xaxa, ed. (2012); Social Exclusion and Adverse Inclusion: Development and Deprivation of Adivasis in India (New Delhi: Oxford University Press); pp xxii + 335, Rs 750. Raychaudhuri, Ajitava and Prabir De (2012); International Trade in Services in India: Implications for Growth and Inequality in a Globalising World (New Delhi: Oxford University Press); pp xx + 265, Rs 695. Rizvi, Janet (2012); Ladakh: Crossroads of High Asia (New Delhi: Oxford University Press); pp xxv + 310, Rs 795. Roy, Pabitralumar (2011); Mapping the Bodhicaryavatara: Essays on Mahayana Ethics (Shimla: Indian Institute of Advanced Study); pp xxxix + 352, Rs 625. Sahasranaman, P B, ed. (2012); Speaking for the Bench: Selected Judgments of Justice V R Krishna Iyer (New Delhi: Oxford University Press); pp xii + 552, Rs 895. Saleth, R Maria (2012); From Individual to Commujune 9, 2012

nity: Issues in Development Studies Essays in Memory of Malcolm Adiseshiah (New Delhi: Sage Publications); pp xvi + 259, Rs 695. Sharma, T R (2011); The Concept of Equity in Sukraniti and Arthasastra: A Comparative Study (Shimla: Indian Institute of Advanced Study); pp xii + 212, Rs 495. Shankardass, Rani Dhavan (2012); In Conict and Custody: Therapeutic Counselling for Women (New Delhi: Sage Publications); pp xxix + 282, Rs 425. Singh, Lata (2012); Popular Translations of Nationalism: Bihar, 1920-1922 (Delhi: Primus Books); pp xiii + 277, Rs 995. Srivastava, D K and U Sankar, ed. (2012); Development and Public Finance: Essays in Honour of Raja J Chelliah, Sage Publications in association with Madras School of Economics, pp xvi + 341, Rs 995. Srivastava, Neelam and Baidik Bhattacharya, ed. (2012); The Postcolonial Gramsci (New York and Oxon: Routledge); pp viii + 253, price not indicated. Thapar, Romila (2012); Asoka and the Decline of the Mauryas (New Delhi: Oxford University Press); pp xlii + 435, Rs 345. The BRICS Report (2012); A Study of Brazil, Russia, India, China and South Africa (New Delhi: Oxford University Press); pp xx + 180, Rs 525. Tiwary, Nishant (2012); Celebrating the Charm of Champaran: Bihar (New Delhi: Oxford University Press); pp x + 93, Rs 1,495. Utting, Peter, Shahra Razavi and Rebecca Varghese Buchholz, ed. (2012); The Global Crisis and Transformative Social Change (Hampshire and New York: Palgrave Macmillan); pp xvi + 289, price not indicated. Vanina, Eugenia (2012); Medieval Indian Mindscapes: Space, Time, Society, Man (Delhi: Primus Books); pp viii + 336, Rs 995. Venugopal, K R (2012); The Integrated Child Development Services: A Flagship Adrift (New Delhi: Konark Publishers); pp xvii + 185, price not indicated. World of Work Report (2011); Making Markets Work for Jobs (New Delhi: Academic Foundation with ILO); pp xviii + 138, Rs 795. World Economic Situation and Prospects (2012); (New Delhi: Academic Foundation on behalf of United Nations); pp xxvi + 174, Rs 995.
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