Digital Infrastructure The Prerequisite for Modern Economic Development Presented By: TV Ramachandran President Sep 12, 2018
Contents The Indian Telecom Sector Story Telecom Sector Moving from ‘Traditional’ to ‘Digital’ Digital Infrastructure to Drive Digital Growth Challenges in Rolling Out Digital Infrastructure Possible Way Forward
The Indian Telecom Story Entry of LF Reduction 3rd & 4th new player ADC NTP Rev Share 12-10-8% to operator Phase 2012' ADC 10-8-6% 25 1400 out Regime 21.8 Introduction 1152 1169 1200 of UASL 21.8 1191 Effective charge (cents/min) 20 Subscriber figures (in mn) NLD/ILD LF 1036 1000 NTP ‘99 896 915 971 Reduction 15%-8% 15 812 800 600 10 562 9.3 400 391 5.6 5 261 0.7 0.6 0.5 3.1 2.5 0.7 200 0.7 0.7 0.5 0.8 158 0.8 0.5 0.7 0.3 0.5 52 97 0.3 6.5 13 1.2 1.9 0.5 33 0.9 3.5 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Effective charge (in cents/min) Subscriber figures For converting Effective charge to Cents/Min, conversion rate of 1 USD = INR 64 has been used. Source: TRAI Result of Entrepreneurship, Forward Looking Policies and Enabling Regulation “Things Do Not Happen. Things are Made to Happen.” - John F. Kennedy 3
The Indian Telecom Story Contd. The Story of Creation of TRAI & TDSAT The Story of Reforms The Story of Continuous Engagement with The Story of NTP 99 Government & Regulator Unique Solutions to Address the Challenges 4
The Indian Telecom Story Contd. Outsourcing non-core Infrastructure sharing activities like IT, network • The sector witnessed high competition • With as many as 12-14 operators in a Paradigm shift from ARPU to revenue circle (Year 2008) now coming down to 4 per min Low cost Focus on distribution, prepaid e-Charge as sector undergoes consolidation. The Story of Competition Low acquisition cost (no handset subsidy) Economies of scale The Story of Innovation Competition and Innovation have Led to Growth of Telecom Sector 5
India Growing from Data Poor to Data Rich Nation Data usage per sub per month 10 6.8 4.9 GB 5 1.3 0.4 0 FY16 FY17 FY18 FY19 Projected Source: TRAI Offers Huge Opportunities for Digital Infrastructure Creation 6
Entry of New Player in the Market – Increasing Data Traffic Data Traffic grown 144% YoY in 2017 Source: Nokia, TRAI Paradigm Shift in Data Consumption, With 4G Traffic Capturing 82% of the Total Data Traffic 7
Four Factors Driving Digital Growth in India • $33.62 Bn have been invested into start-ups since 2014. • Half that amount was invested in 2017 ($13.7 bn) and Q1-2018 ($2.26 bn). • India has about 500 million Internet subs as of Mar 2018 • 4G driving mobile Internet usage Source: AT Kearney Analysis, TRAI, YourStory Report-2018 Demographics, Internet, Start-ups and Government Focus to Drive Digital Growth 8
Digital Ecosystem Devices Connectivity Inputs PCs, Tablets Spectrum, Towers Semiconductors Mobiles, wearables Fiber, Satellites, Wi-Fi Sensors Software Hubs Community IT systems Data centers Public Access Platforms Cloud Computing Essential Services 9 India Needs Digital Ecosystem for Economic Development
Our View of Digital Infrastructure Digital infrastructure are foundational Products, Services & Applications, for both consumer and enterprise markets, that enable the information technology capabilities of a nation, region, city or organization. 10 Need to Create All Above Infrastructure in a Balanced Manner
Digital Infrastructure - Fibre, Towers, Public Wi-Fi, Satcom & EV Bands Optic Fibre • Digital era cannot happen without India marching towards “Fibre First” Initiative • US has installed over 400 mn km of fibre for less than one- third of our population and China has over a bn km of fibre, while India has deployed only ~100 mn km Fiberization of Towers • Source: India Infrastructure research For 5G, 100% of the towers would need to be fiberized Total Investment for BharatNet - US$ 6 billion Digital Infrastructure to Increase Threefold in 5 years: Aruna Sundararajan, Secretary-DoT
Digital Infrastructure Contd. Public Wi-fi hotspots Hotspots per 100 Sq. Kms Hotspots per 100,000 people At approximately 2.68 hotspots for every 1,00,000 people, India has a lot of potential for Public Wi-Fi Satcom Terrestrial Broadband technologies involve difficult rollout, prohibitive costs and long timeframes to deploy. Satellite broadband can be achieved almost on tap Public Wi-Fi and Satcom Imperative for Digital India 12
Spillover Effects of Digital Infrastructure on Digital Economy • Improving the digital infrastructure will help achieve the goal of trebling GDP to USD 7.5 Impact of Digital trillion over the next five years through increased usage of Internet 1 Infrastructure on • Increased revenues from GST, license fee, SUC, spectrum auctions, corporate tax and property GDP taxes • Of all ICTs, broadband has the biggest economic impact Impact of • 2.5 to 4.0 additional jobs for each new broadband job 2 Broadband • GDP per capita growth is 2.7 to 2.9 percent higher after the introduction of broadband 3 penetration on GDP • Doubling broadband speeds adds 0.3 percent to GDP growth 4 • Data based services or apps add for more value than just access to the internet. Apps contributed at minimum $20.4 billion to India’s GDP in 2015-16 5 . Potential to have this value Impact of Apps on increase to $271 billion by 2020 6 GDP • Each user of Applications in India receives on average $249 of consumer surplus annually. Applied to the total population, this number stands at $74 per capita 7 Sources: 1. Press Trust of India 2 Broadband strategies handbook, Kelly & Rossotto, 2012, available at https://openknowledge.worldbank.org/handle/10986/6009 3 Broadband Infrastructure and Economic Growth, Czernich et al, 2009, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1516232 4 Socioeconomic effects of broadband speed, Ericsson, 2013, available at https://www.ericsson.com/res/thecompany/docs/corporate-responsibility/2013/ericsson-broadband-final-071013.pdf 5 6 Estimating the value of new generation internet based applications in India, Kathuria et al, 2017 available at http://icrier.org/pdf/Estimating_eValue_of_Internet%20Based%20Applications.pdf 7 The economic and societal value of Rich Internet Applications in India, Arnold et al, 2017 13 Spillover Effects of Digital Infrastructure are Immense and Create Huge Opportunities
Making Digital PPPs work 14 India Needs More of Successful PPPs – Represents Opportunities for Japan
Building Blocks in Rolling Out Digital Infrastructure 15 Need to Address the Challenges in Rolling Out Digital Infrastructure
Securing Digital Infrastructure and Data Secure Storage Encryption Virtual IDs (eg. Aadhaar) RBI Guidelines for Collection & Storage of Financial Information SC Guidelines on Data Privacy with Data Protection Draft Data Protection Bill -2018 *India has evolved a Two Level Authentication & Security for its Digital Identity Infrastructure known as ‘ Aadhaar’. Level One uses a Virtual ID by which the Original Biometrics and photographs are not tampered with, in transaction mode . 16 Securing Digital Infrastructure is Focal for Growth
Possible Way Forward Declare ‘Broadband’ as a fundamental right Use of Universal Service Obligation Fund (USOF) for funding Digital Infrastructure Government led ‘Telecom Infrastructure Fund’ Budgetary Allocation for Digital Infrastructure Projects Tax Free Bonds/Infrastructure Development Funds Tax Holiday for Hi-Tech Industries and Tax Incentive on R&D Rationalization of Corporate Tax Rate Simplification of Tax Laws Collaborative approach by various agencies/departments Monetisation of world class infrastructure To Take a Holistic View of the Digital Infrastructure keeping in mind the Externalities and Long-Term Vision 17
Opportunities in Indian Telecom Sector 5G Core Network Infrastructure Smartphones and Devices Smart Cities Internet of Things Apps Financial Inclusion Digital Commerce Government of India Initiatives Many Opportunities Arising Out of Liberalised National Digital Communications Policy 18
“Progress is impossible without change and those who cannot change their minds cannot change anything” - George Bernard Shaw Thank You 19
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