The Awakened Dragon and the Crouching Tiger - How China and India are Pushing the Envelope in Telecom  

The Awakened Dragon and the Crouching Tiger - How China and
India are Pushing the Envelope in Telecom

There is considerable scope for the development of
telecommunications to benefit countries such as India and China.
Ericsson is of the opinion that the provision of 3G services can
also be accompanied by other services such as mobile TV and
high-speed data services without too much investment.

Ericsson's view of Cingular's deployment of the 850 MHz band for
the development of 3G services is that this is a very clear
indication of the popularity of Wideband Code Division Multiple
Accessor WCDMA in markets that have good scope for expansion.
Cingular feels that this band is best suited to providing
connectivity for rural population because this frequency can
accomplish its objective with significantly fewer base stations.

<b>Hope for the future?</b>

As a result, the 850 MHz band can play an important part in
providing telecom links among communities that are financially
weak. Millions of people in India live in the villages and often
lack the most basic of health care and other essential services.
The Indian government has pledged to work towards improved
coverage for rural communities to the extent of aiming for as
much as 75% coverage in these areas by the end of 2006.

<b>Running neck and neck?</b>

India and China are both pushing for the development of
economically priced 3G handsets. It was expected that there
would be about 40 new manufacturers producing such handsets in
China by 2005. The deployment of WCDMA may make it possible to
set up terminals for fixed line-cellular services in rural areas.

This will mean that users will be able to make calls as well as
access the Internet at speeds of 384 kbps. The use of High Speed
Downlink Packet Access or HSDPA technology could increase this
speed to 1 Mbps.

<b>Scaling new heights with HSDPA</b>

The use of HSDPA can do a great deal to increase efficiency by
expanding capacity and increasing the speeds at which data are
transferred. This technology will enable operators to attend to
the requirements of different communities and charge them a
nominal amount to recover the investment. In fact, HSDPA offers
potential for developments that would not be possible with GSM.

<b>Hard facts</b>

India enjoyed one of the highest rates of growth with the number
of cellular subscribers in the country expanding at 105% between
1995 and 2001. This was a higher rate of growth than that of the
world as a whole and even of China, which recorded a growth rate
of 85% in terms of cellular subscribers.

However, statistics show that India's teledensity is far lower
than it should be and that the country has been outpaced by
others such as Libya and Namibia, which have fared much better.
China and Indonesia are also way ahead of India in this regard,
a fact that does not show India up too well, considering that
both these countries were level with India at teledensity levels
of 0.6 in 1990.

The only other comparisons that can be made with countries that
have had a worse performance are those of Pakistan, Bangladesh
and Nigeria. Considering that India is a democratic country with
a fair proportion of technically qualified people, it appears
that infrastructure factors could be behind India's poor showing
in this regard.

On the other hand, you can hardly ignore the fact that China now
has approximately 145 million cellular subscribers. When you
consider that the country has 179 million main lines, that is
saying quite a lot, don't you think?

It's also been suggested the proliferation of cellular phones in
India presents a threat to companies offering fixed line
services in India. You could say it would make more sense for
wireless services to surpass fixed line services in a country
like India. India's fixed line network can hardly compare with
that of the United States.

<b>Critical differences</b>

The Finance Minister, Mr. P. Chidambaram suggested that it would
be a mistake for India to follow the example set by China. China
chose to compel international telecom companies to partner with
Chinese companies. The idea was to encourage the development of
manufacturing facilities within the country.

This approach, he felt, would only slow down the growth of the
country's telecom industry. He emphasized that India was
depending heavily on BPOs and the service model. He therefore
claimed that India would not benefit from following China's
example.

He also stated that China welcomed foreign investment and
equipment suppliers, but China Telecom held the monopoly for
operating companies. Subsequently, that monopoly gave way, with
China Telecom being allocated 21 provinces, while Netcom was
granted 10 provinces.

China introduced mobile phone services in 1992, two years before
India, although this was the same year that India applied for
telecom licenses. While China has two government owned mobile
operators, India has eight. These include two public sector
undertakings. While China is still closed to foreign investment
in the telecom sector, the FDI cap in India is 49%. However,
while India now has 42 million mobile phone subscribers, China
has more than 300 million, despite the absence of FDI.

<b>Room for improvement</b>

Mr.Chidambaram's conclusion was that although there had been
spectacular growth in the number of telephone lines, it would
take nothing less than major foreign investment to maintain the
pace of growth and accomplish network coverage of 70%. While it
is certainly true that India needs investment in the telecom
sector, it is doubtful whether this would give villages and
other remote areas access to telecom links.