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Mobile Development Strategies in India

Regulation of Indian Mobile Network Industry: Enabler or Disabler

1. INTRODUCTION

With the advent of new technology the way of communication has altered. In

the past pigeons were the mode of communication. After that post was introduced

were people wrote letters and sent them by post, and later came the telephone and

today its is an era of wireless communication which has given the world a new form

of communication. Cellphones are the most simple way of communicating in todays

life.

Mobile phones are long range, portable and wireless electronic device of

communication. Mobile phones are now very cheap, user friendly, and comfortable

and operational with all the new features and facilities that we require. Cellphones

now have facilities like video conferencing and interent with which people can

download stuff and can make life much more simple. It has also programs which can

alert the user about natural disasters for exemple in japan cellphone industries

propvide information on earthquakes without any additional charge. The cell-phone

novel is the first literary genre to come out with something that can via text to a

website that gathers the novels as complete (New Yorker, 2008). In good quality

online computer games, users can play games as first person. The novels make a

personal space for every reader. Paul Levinson, in Information on the Move (2004),

says "...nowadays, a writer can write just about as easily, anywhere, as a reader can

read" and they are "not only personal but portable".

Mobile communications play an important role in any modern society and economy.

Mobile accounted for 51 per cent of household spend on Telecoms (Yahoo surveys,

2008). Mobile services are also a major contribution for business, with cellphones

communications now a fundamental part in an even more services-based economy.

Being one of the fastest emerging economies in the world, India has come up in

leaps and bounds in all aspects of development. Communication is one of the mostimportant sectors for high-speed growth and technological advancements are

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quintessential for punctuating the progress. The mobile industry has played a great

role in channelizing access to communication into the width and depth of India. The

prospect of catering to a population of one billion people has attracted a flowing

number of entrants in the mobile phone industry in India.

Such an attractive market and suitable business environment has resulted in

fierce competition among the players and overloading of customers using mobile

phone services. The fierce rivalry and potential for overwhelming business has

upshot different business models and strategies in the industry. With international

handset and service providers sneaking in, there has been constantly changing

strategies to adapt to the changes in the competitive environment.

Inspite of all the quick spurge in the industry, customers are largely finding it

difficult to enjoy hassle-free services and connectivity. Users find it difficult to access

destination numbers, consistent internet, speedy Short Messaging Services (SMS) at

busy times in the urban areas and most of the time in rural locales. This can be due

to a lack of proper network scope and/ or number of issues that prevent the existing

network from functioning at its optimum level. While the network infrastructure is a

vital part of the development, there are a number of factors controlling the latent

development.

Since the sector has been opened up for privatisation, there have been many local

and international operators flooding the market like Vodafone in 2007, Virgin in 2008,

etc. This has lead to an over-crowded sector with limited infrastructure. Added to this

is huge no. of customers in the customer list and few more in the potential list in the

form of target audience. There are also many examples of an individual with more

than one mobile phone connection.

Another controlling factor is the management and involvement of regulation of the

mobile telephone sector. As in the case of most sectors in India, regulation plays a

very important and influential role in determining the evolvement and success of the

mobile industry. There have been disputes over the sharing of infrastructure between

the government owned BSNL and the private operators. There are constant revisionsin the way the tariff is shared and managed regarding roaming services provided.

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There was a serious debate surrounding the privatisation of this sector. There is an

on-going discussion regarding the adoption of better frequency bands and further

liberalisation of the mobile telephone sector.

Thus, there are a number of important factors determining the performance of

infrastructure development and the mobile telephone sector. I shall analyse them one

by one and see how they affect the network infrastructure and in turn, the mobile

industry development in the country.

1.1 Structure

My report will take the following structure which is based on Fishers ideal structure

of a dissertation (Fisher, 2007). First, I shall make clear the Area of my interest, the

aims and objectives of the research, the research question and the significance this

research carries for the industry players, regulators and for future researchers to

evaluate the industry performance. Then, I shall perform a critical literature review of

the definitions, their scope and all other existing literature in the area. This will

include the analysis of many theoretical framework and they shall form the foundation

on which I shall base my analysis upon. After the literature review, I shall lay out my

hypothesis that is to be tested in this research. This will be based on the gaps

identified in the literature review section. In this section, I shall also depict the

research design that includes the research methodology to be adopted, the data

sources used to collect relevant information for the research. It will include the

reasons for adopting all of the above techniques. Next, I shall present the analysis of

the data collected using the methodology defined and present the findings born out of

the analysis. This will lead on to the conclusion of the research, revealing the results

of the hypothesis test and establish any recommendations and suggestions that I

intend to make out of my research. In the last section, I shall display a summary of

the findings, any suggestive conclusion and comment on what needs to be done

further in this area.

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Figure 1.1 Dissertation Structure

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2. Research Overview

2.1 Area of Interest

An important feature of Asian cellular markets that does not find a strong

parallel in America and the EU is that existence of more than one competing but

compatible wireless standard. Whereas the dominant cellular standard is still GSM,

CDMA networks may be found coexisting with GSM in numerous markets in India,

China, Indonesia, Malaysia, Hong Kong, Korea and Japan.

Frequency bands are an important determinant of such differences. They go

on to decide the quality of the waves that are diffused to the cellular mobile phones.

Operators have to make sure that the customers are happy and are have minimumtrouble using this frequency bands as per the growth for demand and technology.

With the technological part on one side, there are other factors that also affect

the mobile telephone industry. But, this being a technology-based industry, I believe

that it is technology that needs to co-ordinate with other factors in order to facilitate

development. Hence, my research will revolve around the area of technology and the

ancillary network infrastructure imparting the existing technology in order to beutilised to render efficient services to the public.

2.2 Aim & Objectives

Primary aim is to further the interests of consumers in relation to mobile

communications services, with mobile network infrastructure being a key focus.

In addition to this overall duty to consumers, we also have specific duties to

ensure optimal use of the mobile infrastructure regarding radio spectrum and topromote competition.

These are particularly important in the context of the mobile sector because

availability, and efficient use of, spectrum, and competition between providers, are

pre-requisites for realising the full benefits of mobile communications. Thus primary

objectives are:-

To study the implications factors like competition and regulation haveon the mobile network infrastructure.

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Establish how the above factors can be reformed in order to benefit the

industry infrastructure.

Analyse the effect the mobile network infrastructure has on the mobile

telephone industry in India.

2.3 Research Question

How does the mobile network infrastructure enable or constrain mobiletelephone industry in India?

The advent of cellphones faces an engineering difficuty that can overcome well-

organized and consistent wireless communication. The requirement for wirelesscommunication have developed in a very stylish way which has paved the way for

understanding the primary issues in communication theory and electromagnetism as

well as the and their propositions for the planning of highly-capable wireless systems

(Kekas, 2003).

Among the influencing factors, I shall focus on the network infrastructure in the Indian

mobile industry. The other factors shall be feeders to the main variable identified andshall interpret as issues affecting the main variable. I shall then conclude on how the

combination shapes the overall industry and go on to establish my recommendations

2.4 Significance of the Research

At a critical stage of its economic development, India is under serious

pressure from China to improve its internal infrastructure in all sectors.

Communications being such an important part and mobile telephone seemingly the

future, it is important for the Indian policymakers to give importance to the mobile

network infrastructure in order to develop a competent mobile telephone service

sector.

A recent report, Indias international bandwidth sector 2007-11 by India

Bandwidth analysed the upcoming trends in the Indian telecom industry. The report

stated that the network availability and quality in the Indian mobile connections would

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improve up to capable standards after its privatisation. Unfortunately, the consumers

continue to face poor signals and there seems to be other indulgent factors that need

to be addressed collectively to solve this issue. This paper will throw light on those

factors and show to what extent these factors are influencing the network framework.

Also, it will test the possibility of liberalisation in the industry and its probable benefits

and drawbacks. This will be a consideration before the regulatory bodies eventually

liberate the sector.

2.5 Implications for Organisations

The main implication of this research will be for the regulatory authority in

India Telecom Regulatory Authority of India (TRAI). The report analyses issues like

existing competitive structure, frequency sharing & distribution, bandwidths offered

and customers logged in, etc. It shall go on to include an examination of the potential

reasons, methods and consequences of implementing further liberalisation of

competitive policies and frequency generation in India. My research shall highlight

where the probable glitches lie as far as troubled mobile telephone service is

concerned. For operators, it will show the potential benefits of better frequencyavailability as a result of liberalisation and the option it would generate for them in

terms of product variety, innovation and quality distribution of services. It also bears

significant implications for handset manufacturers who might have to customize their

handsets to the new technical scene. They could enjoy added opportunities in the

form of more possible applications and facilities supported by the reformed network

design. Other dependent divisions like broadband which is inclined towards going

mobile in the near future, mobile gaming which is already very popular in the sectorand mobile novels and offices mentioned in the introduction will also have noteworthy

connotations out of this paper.

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3. CRITICAL LITERATURE REVIEW

3.1 Introduction

The purpose of the critical literature review is to introduce some of the

concepts and theories that would be using in the research. The relevance of these

theories to the research shall be re-examined and critically assess their link to the

work. It shall include a comprehensive review of the conclusions and findings

established in previous work in this field and use this to gain a better understanding

of the mobile industry in general and the development of the network infrastructure in

specific. The researcher shall then extend this to include the aspects covering the

Indian context.

First, The Researcher shall sketch a map of the source of the literature The

Researcher am going to review in this section and the reasons for choosing them.

Then, The Researcher shall pick the areas within the selected literature that The

Researcher am going to examine in detail. Then, The Researcher shall present his

critical analysis of the literature. This will start with defining the variables involved and

the scope of the terms used in this report. Then The Researcher shall analyse the

characteristics of the industry according to theory and explicitly depict the likely

issues identified by previous authors as ones affecting the industry and the network

infrastructure in particular. This will be a followed by a detailed analysis of the issues

identified individually and review how these issues have looked upon by researchersin their frameworks so far. Under every topic, The Researcher shall start with the

theories relating to the mobile industry in the global scenario and then prolong the

discussion of the frameworks to include its link to the Indian mobile industry context.

All this shall lead to a conclusion regarding what needs to be done further and

this shall form the basis of his hypothesis.

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Figure 3.1 Critical Literature Review Structure

Mapping the Literature

Identifying Areas within Literature

Critical Analysis Definition and Scope

Related Terms

Characteristics of the Industry

Likely Issues Identified

Competitive Structure

Technology

Regulation & Role of government

Conclusion

Hypothesis

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3.2 Mapping the Literature Review

The mobile industry is a field that has been frequented a lot by researchers in

the field of telecommunications. Many of them have even paid close attention the

development of network infrastructure. The literature the researcher is going to

review shall be ones that bear close resemblance in their content to his perspective

of research. At the top his list are the papers in the field by Klein (1999) and

Chakravarthy (2007). Also, since this is a field with constant developments and large

coverage, The Researcher has referred to a lot of journals which have a say on the

overall industry or the issues in specific. The Telecommunication Policy journal is themain supply, closely followed by market reports on specific issues coherent with his

research. The Researcher has also reviewed the articles by industry experts to get a

view of what they think is and should be happening in the industry. The Researcher

shall critically look into all the concepts and ideas established in these sources of

literature to bring out what has been found out so far about the sub-division The

Researcher am researching in and how valid they are to the network development

scene in India and the Indian mobile telephone context.

3.3 Area to be reviewed

Breaking down his research question into three parts, The

Researcher recognises three variables the network infrastructure, the mobile

telephone industry and the Indian milieu to both of these. His analysis of the literature

collected shall be from the perspective of the variables identified above. They are

connected to each other and this linkage between them shall help me determine how

they enable or constrain the development of the Indian mobile telephone industry.

So, The Researcher shall be concentrating on areas concerning these variables and

analyse the theories about them in detail. The Researcher shall evaluate the validity

of these concepts to his research and say to what extent they have covered ground

in the path leading to his research objective.

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3.4 Critical Analysis of Theoretical Framework

Within the area identified in the above section, The Researcher

shall now give his critical review of the relevant concepts and theoretical frameworks

formed before and link them to his research. The mobile industry has been

frequented by academics and researchers and hence, a lot of derivations have to be

drawn from related work to ensure that all the established theories have been

covered.

3.5 Definitions and Scope

In this section, I shall clearly state the definitions that I refered to

while researching are used in the following terms in his report. It shall define the

scope they cover and any are picked to suit his research objectives.

The mobile industry is considered to be a part of a much bigger

sector that is collectively termed as the Telecommunication sector. The New

American Oxford Dictionary (2005) defines telecommunications as:

the science and technology of communication at a distance, especially the electronic

transmission of signals. In this definition, the distance factor and the sector

involving the broadcast of electronic signals are prominent. This highlights the

importance of transporting information on the electronic format over a distance of

kilometres in the industry and is relevant for the mobile telephone sector as well.

A basic telecommunication system consists of three elements:-

a transmitterthat takes information and converts it to a signal;

a transmission medium that carries the signal; and,

a receiver that receives the signal and converts it back into usable

information.

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For example, in a radio broadcast the broadcast tower is the transmitter, free

space is the transmission medium and the radio is the receiver. Often

telecommunication systems are two-way with a single device acting as both a

transmitter and receiver ortransceiver. For example, a mobile phone is a transceiver

(Haykin, 2001).

Telecommunication over a mobile phone is called point-to-point communication

because it is between one transmitter and one receiver. Telecommunication through

radio broadcasts is called broadcast communication because it is between one

powerful transmitter and numerous receivers and hence referred to as a radio

broadcast.

Network Industry

From the above definition, it can be observed how the

telecommunications sector itself is a part of a much larger network industry. ATIS

Telecom Glossary (2000) defines a network as a collection of transmitters,

receivers and transceivers that communicate with each other.

Digital system is a combination more than one routers which collectively passes data

to the required user. An analogue network contains more than one switch that helps

to set up a link between users. In both the cases repaters are required to amplify or

restore signal while it is being send out over long distances (Solderblom, 1974).

The network industry is a dense one and consists of many more terminologies that

are defined below.

Analogue or digital

Signals can be both analogue or digital. The signal that changes constantly

according to the information is an analogue signal. Whereas in a digital signal data is

fixed as a set os separate values (for example ones and zeros). At the time of

transmission the data enclosed in analogue signals is ruined by noise. Equally,

except the sound goes over a certain limit, the data enclosed in digital signals will be

undamaged (Ambardar, 1999).

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Spectrum

Cave et al. (2007) define: Spectrum is a term to describe a band of electro-

magnetic frequencies. It is often used to refer to a specific band and this is further

divided with various different parts which are being used for different application. A

user can get a license which will help the user to access or broadcast on some part

of this spectrum, e.g. 800 MHz 850 MHz (Cave et. Al, 2007).

3.6 Related Terms

The mobile sector is one which contains a lot of jargons and terminologies that

one does not come across outside the field. Hence, The Researcher am laying down

a list of terms that are closely related to his research and shall be repeatedly used in

literature review and the consequent analysis of his dissertation report. Throughoutthis document the a lot of technical terms are used. A list of technical terms with their

description is provided in Appendix 1 (OfCom Report, 2009).

3.7 The Indian Context

Indian Telecommunication Sector has gone through a major

development of change form time to time by having new important policy reforms,

process undergone a major process of transformation through significant policy

reforms, mainly with the declaration of NTP 1994 which was consequently

highlighted and passed forward under NTP 1999. The indian telecommunication has

observed a whole new change in the last decades by the different policy schemes.

As per licensing conditions:-

Any dispute, with regard to the provision of SERVICE shall be a matter

only between the aggrieved party and the LICENSEE, who shall duly notify

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this to all before providing the SERVICE. And in no case the LICENSOR

shall bear any liability or responsibility in the matter. The LICENSEE shall

keep the Licensor indemnified for all claims, cost, charges or damages in

the matter.

Telecom Regulatory Authority of India, shortly known as TRAI in the industry, an

independent legal entity, was established to regulate the telecommunication

services and discharge the various functions, two of them are as follows :-

To ensure compliance of terms and conditions of license which includes

customer service, Quality of Performance, Tariff also apart from other

conditions.

To lay down the standards of quality of service to be provided by the service

providers and to ensure the quality of service and to conduct the periodical

survey of such service provided by the service providers so as to protect

interest of the consumers of telecommunication services.

3.8 Characteristics of the Industry

In the above section, it was seen how the mobile industry falls under the

telecommunications sector. The telecommunications sector, in turn, comes under the

network industry that consists of a lot of other sectors included in its scope. In this

section, The Researcher present a review of the framework theorising the

characteristics of the network industry and then connect it with the possible features

of the mobile industry.

According to Bergman et. al (1998), network industries have three key

elements: upstream production; an infrastructure; and downstream service provision.

The Upstream production is one which involves the production of the

product or service. This is more related to heavy-industries like Electricity generation,

Aircraft manufacturing, etc and not is completely applicable to the

telecommunications sector.

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The Infrastructure is the building block that merges with the product from

the upstream stage to be delivered successfully in the downstream region. It is the

medium that connects both ends of the industry and enables deliverance of the

service to the end customer. From this, it can be understood that the presence of an

efficient infrastructure in a network industry is very essential for its successful

performance. In the mobile industry, it will refer to the availability of spectrum and

the ancillary physical infrastructure like frequency towers, etc.

The Downstream constituent part of three elements refers to the part

where the generated product or service is actually delivered to the customer. This

includes the service part that is dominant in a mobile sector and forms the

characteristic for it to be referred as a service industry. The players are referred to

as service providers.

In their Chapter talking about the Structure of network industries,

Bergman et. al (1998) say that there are many possible structures that network

industries such as the mobile industry could take. They provide five cases that differ

from one another based on competition in the infrastructure element. They are:-

(i) Vertical integration and monopoly, in this there is only one company which

manages the the upstream and downstream mechanism and the network

infrastructure.

(ii) Vertical integration with struggle in the downstream or upstream mechanism. This

is similar to (i) except that the vertically integrated firm faces resisitance in the

downstream or the upstream mechanism.

(iii) Vertical partition with upstream and/or downstream competition, but the

organization working on the network infrastructure does not function in either the

upstream or downstream mechanism.

(iv) Joint ownership, where the infrastructure is owned jointly by firms competing in

the upstream and / or downstream components.

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(v) Infrastructure or facilities-based competition: competing vertically integrated firms

that may or may not be interconnected.

In the first four cases, there is only one network infrastructure provider

due to a case of a natural monopoly condition, where the regulators might need to

step in to regulate it. In the last case, there is room for competition in the

infrastructure component of the industry.

Core Products Core Products

Infrastructure Infrastructure

Customer Service Customer Service

Provision Provision

Figure 3.2: Facilities-Based Competition

Adapted from: Bergman et. al (1998: 15)

The mobile telephone industry belongs to the fifth case Infrastructure

of Facilities-based Competition. The service providers may be having their own

infrastructure components and competing with each other on the basis of

infrastructure that forms the foundation for the delivery of their products and services.

The services rendered to the customers by the mobile phone operators are enabled

by the infrastructure bridging them and hence, the quality of this infrastructure is adetermining factor in the quality of service that reaches the customer using their

service. This, further, insists the significance of network infrastructure in the mobile

industry. In the Indian context, it is to be noted that the mobile telephone industry was

an example of the fourth case. There was a natural monopoly in the infrastructure

with the government-owned BSNL owning most of the network infrastructure and all

the other operators jointly sharing it. After the first phase of liberalisation, the Indian

Mobile Industry has moved on to the fifth case cited.

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Bergman et. al (1998) say that the relation between network industries

and economic development is difficult to measure quantitatively and this topic has

generated a lot of debate. Most of the studies examining this relationship has been in

the context of the United States. So, The Researcher shall use this as a foundation

and build his analysis for the Indian industry on this.

Premature studies by academics like Aschauer (1989) on the impact of

network industries on economic performance found a significant connection. As far

as the infrastructure constituent of the network industry is concerned, most of them

have not found any useful link. Hulten and Schwab (1984, see also their 1991 study)

concluded that technological infrastructure in homogeneous and hence, only other

parts of the infrastructure system like public transport affect productivity more.

Being more specific in the area, there have been studies relating the

investment in the telecom and information technology infrastructure with the

economic development. Resting on US data again, Greenstein and Spiller (1995)

studied the impact of telecom infrastructure on economic growth measured by the

amount of fibre-optic cable employed. He found a positive effect and a significant one

in some of the industries.Lichtenberg (1995) uses firm level data on information technology investments

and finds very high growth effects. Roller and Waverman (1998) investigate the

impact of telecoms infrastructure (as measured by the penetration rate of exchange

lines) on economic growth. Using a sample of OECD countries and accounting for

the simultaneous interaction between growth and telecoms infrastructure, they find

evidence that there is a positive causal link, with telecoms infrastructure accounting

for as much as a sixth of economic growth.

All this said, all the effort and investment in the Telecom industry is worth it

only if the network infrastructure lies above a certain critical mass (Bergman,1998). In

spite of the severe studies detecting the exact relationship between network

industries and economic performance, it is beyond doubt that these industries hold

the key in competitiveness. Thus, for an emerging country like India, it is very

important for the mobile infrastructure to improve if India has any ideas of climbing up

the ladder and facilitating economic augmentation.

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Telecommunication has a significant social, cultural and economic impact on

modern society. In 2006, estimates placed the telecommunication industry's revenue

at $1.2 trillion (USD) or just under 3% of the gross world product (VoIP Magazine,

2006).

On the microeconomic scale, companies have used telecommunication to

help build global empires. according to academic Edward Lenert, even the

conventional retailer Wal-Mart has benefited from better telecommunication

infrastructure compared to its competitors (Journal of Communication 48 (4): 323).

Even relatively poor communities have been noted to use telecommunication to their

advantage. In Bangladesh's Narshingdi district, isolated villagers use cell phones to

speak directly to wholesalers and arrange a better price for their goods. In Cote

d'Ivoire, coffee growers share mobile phones to follow hourly variations in coffee

prices and sell at the best price (Samaan, 2003).

Because of the economic benefits of good telecommunication infrastructure,

there is increasing worry about the inequitable access to telecommunication services

amongst various countries of the worldthis is known as the digital divide. A 2003

survey by the International Telecommunication Union (ITU) revealed that roughly

one-third of countries have less than 1 mobile subscription for every 20 people and

one-third of countries have less than 1 fixed line subscription for every 20 people.

Given the economic importance of the mobile phone industry, it is now

essential to recognize the factors that affect them and analyse them one by one. This

shall give a direction regarding what needs to be done next in the journey towards

complete development of the Indian mobile industry.

3.9 Business Theories on Network Industry Management

Considering the competitive nature of the Indian Mobile Telephone Industry, it

can be clearly seen that competition and regulation are two decisive factors in an

otherwise technology-oriented business. Regarding the concentration on regulation

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in this research, it might be of interest to point out that regulation of network

industries have undergone changes over an era and liberalisation and technological

innovations demand a different pattern of regulation. Buigues (2006) says that the

prominent kinds of regulation of network industries are still debated and their

consequences are yet not clear.

3.9.1 Ex Ante Approach versus Post Ante Approach

Ex Ante approach refers to the regulatory approach whereby regulatory agencies

are pro-active in nature, intervene and seek actions before events take place like

imposing price controls, defining network sharing, etc. Due to this, enterprises are

controlled in their movements by the regulatory authorities but there is less

uncertainty involved in the style as a clearly defined set of regulations exist.

The post ante approach is the competitive approach whereby there are no set rules

to abide by for the companies but if the regulatory body finds any conduct as

inappropriate or exploiting, they shall intervene and seek action on the company. The

companies, in this mode, are much freer to indulge in various market combinations

but there is uncertainty of whether the authority will penalise their actions later

(Derker C and Yarkabots, 2000).

Ex Ante Approach Market Event Post Ante Approach

In his contribution, Buigues (2006) takes a business-case scenario of pricing. In the

mobile telephone industry, one of the most pertinent issues is the pricing of

interconnection among competitors (OECD, 2004). He opines that it is important for

new entrants to know what price they are paying for a particular service or agreement

when they are making the initial outlay. In such a case, it would be easier to take a

post ante view and decide if the price charged was exorbitant rather than taking a ex

ante approach and pre-deciding a price. But again, the former will create uncertainty

for the new entrant as to how much they need to shell out. These approaches will

have to be considered while reviewing the Indian regulatory scenario in the analysis.

It should also be kept in mind that the Indian Mobile Industry is still maturing in terms

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of development. So, any current approach from the authorities is not necessarily the

permanent one and it could be to assist a growing industry coming of age.

The IDEI Report (1999) mentions that to design an effective networking policy

requires not only: (a) a sophisticated understanding of economic incentives and

effects, but also and to a varying degree depending on the regulatory mode, (b)

substantial technology expertise and (c) considerable cost and demand information.

The ex ante or Sector-specific regulation approach makes sure that the consumer is

not harmed while the post ante or competition policy approach makes sure that

companies do not mis-use their dominant positions and engage in improper business

conducts. The former implies high costs to companies and is based on the forward-

looking ability of the regulatory body. Their general lack of economic knowledge

(Buigues, 2006) and the excessive speed of technological development are hurdles.

The latter does not prevent opportunities for companies by restricting access or

controlling prices but abuse of dominant positions may take deep investigation and

time to be penalised. A summary of the two approaches is provided in Table 3.1.

Table 3.1 summarizes the differences between competitive policy approach and

sector specific regulation.

Competition policy

approach

Sector-specific

regulation

General approach Ex-post, harm based

approach

Ex-ante, prescriptive

business conductAmount and nature of

information required

Only information on the

allocated abuse

General and detailed

information on the sectorNature of the remedies

imposed on undertaking

Structural remedies

addressed to specific

conduct

Detailed conduct

remedies requiring

extensive monitoringNature of public

intervention

Permanent based on

general competition policy

principles

As competition is more

effective, part of sector

specific regulationreplaced by competition

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law

Table 3.1: Differences between competition policy approach and sector-specific

regulation (Adapted from: Buigues, 2006:11)

An observation made by industry experts is that sector-specific regulation is

effective in the initial phases of network industries when there are chances of a

monopolistic situation due to technological innovation (Buigues, 2006). The aim of

the ex ante approach is mainly to ensure that there are no market failures and once

competition is flowing in the sector in line with other industries in the economy, the

approach should shift towards competition. In the initial phase, when there was a

domination in the Indian mobile telephone industry by players like BSNL and VSNL,

regulation intervention was necessary to prevent abuse and more importantly to

enable new entrants into the market in a smooth process. In the long term, when

there are established players like Airtel, Vodafone, Reliance, it becomes better to

switch to the competition policy as it will result in price equilibrium, efficiency, better

customer treatment and offers, etc. Hence, at some point, the TRAI has to draw a

balancing line and decide to liberalise the mobile telephone industry further.

3.9.2 Market Failures

Market failure in an industry results in a situation where a competitive

structure is not possible or if possible, it would not be efficient (Kay, 1996). Other

than creating a monopoly with too much of market power with one player, there are

factors like pricing, capital regulation and product offering which makes way for

regulation of an industry. Another cause might be information asymmetry, whereby

the seller knows more than the buyer resulting in exploitation.

With the factors for regulation in mind, a look at the telecommunications

industry will reveal that market failures are more likely to occur in an industry at its

start-up stage. Especially with a technology-based product, occurrences of

information asymmetry have high probability and the resultant over-pricing of a new

service is also possible. Moreover, in a globalised world, it also becomes important to

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protect upcoming industries from international leaders. These can be accepted as

strong reasons for regulation at the initial phase in the Indian telecom industry.

But as Kay (1996) and Buigues (2006) say, as the industry moves ahead and

competition is more spread out and pricing has been stabilised, it is important for

regulation to be eased (liberalised) in order for the industry to grow beyond normal

levels.

Kay (1996) talks of two kinds of issues that companies encounter with regulation. He

says that as per business economics, companies have to manage the regulation,

whereby businesses have to look to manage regulatory and government actions and

make sure that their statute is met. The second issue is that companies have to

manage regulation and competition. Stressing on the latter, it can be inferred that

companies with excellent resources and know-how are limited in their growth by

regulatory action that restricts their development in the name of controlling market

power. This is highly possible in a growing industry like the Indian mobile industry,

where the authorities are still holding on to regulations that were laid out at the initial

phase. This kind of stunted growth can result in missing the peak time for company

growth and in turn, the industrys growth. Kay (1996) agrees with this and says that

companies will gain competitive advantage based on market share and not historic

strength. For this market share to evolve on a true and competitive basis it is

important for an industry to be liberalised or their resources wouldnt be converted to

productive efficiency on time. Such a phenomenon would delay the growth of the

overall industry.

Market Regulation - Dynamic

There are reasons for and against the need for market regulation. While talking of

regulation in the telecommunication industry, Buigues (2006) has mentioned the

existence of static and dynamic criteria. Static criteria refer to the existence of natural

monopolies due to high initial investment and infrastructure barriers preventing new

entrants. It involves huge sunk costs as we have already seen. This calls for

regulation in the industry as it involves certain technological requirements that cannotbe replicated economically (Buigues, 2006).

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Under the dynamic criterion, it should be considered that innovations in a developing

field like telecommunications can ease entry barriers to a great extent and this

dynamic nature of the industry should be kept in mind (Buigues, 2006). One might

also infer from this that new players might themselves bring in innovations with them

and thus might attract the initial outlay required from different sources like venture

capital or a joint venture. This new entrants innovation will boost competition and

benefit the overall industry. Hence, the persistence of entry barriers is only till a

period of time in life cycle of the telecom industry and Indian regulatory authorities

must identify this to decide on the timing and phasing of deregulation. This will be

discussed further based on the collected data in the analysis section.

It can be seen how regulations must be checked at regular intervals. Beardsley and

Farell (2005) agree with this in their report on industry regulation and say:

A regulator should continually assess not only the kind of rules each of them

requires but also, if competition is already established, whether fewer rules might

make sense.

The idea of regular assessment is stressed here as well. The logic of making

flexible regulations based on the non-existence level of market failures and the

presence of competition will be more beneficial for an industry like the Indian Mobile

which is in its developmental phase. Beardsley and Farell (2005) also talk about a

sunset clause whereby regulations are reviewed in pre-determined intervals and

extension or removal of the sunset clause will be decided on the performance

observed. This was successfully implemented in the U.S airline industry which

resulted in tighter competition and competitive prices, benefitting the consumers and

industry at large. Such a methodology could work for the Indian Mobile Industry after

providing for certain infrastructural changes.

3.9.3 Market Forces

The Indian Mobile telephone industry is at a stage in the peak of its growth stage.This is a crucial phase of development for the industry. Any technological innovations

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that are efficiently utilised and competition of properly channelized can boost the

productivity and reach of the industry. It has been seen how the probability of market

failure is an important determinant in the plan of action. There are various other

market forces that act on a market and direct competition. These market forces shall

now be studied in detail using the Porters Five Forces tool to gain a better

understanding of the zones where market power rests. This shall be strategic issues

to consider while the regulatory authorities and companies make decisions.

Porters Five Forces

The Porters five forces tool is now used to measure the different forces in the

market and how, when combined, they act on competitive rivalry. The extent of each

force is measured in zones ranging from Low, Medium and High.

Bargaining Power of Sellers - Medium

The mobile telephone industry in India started as a luxury product subscribed

by the early adopters in the late 90s and has gone on to become a standard

technical product bought by the common man. The constantly advancing nature of

technology has meant that new products and service packaging are being offered on

a continuous basis. New products like new handsets or new technology like 3G, etc

can bring a premium price for the sellers. But, the tight competition that exists in the

industry and an on-going price war mean that the bargaining power of sellers is

limited to the extent of them receiving subscription from the customers over other

providers. Thus, the technological progression equips companies with a lot of market

power. Bu the quick distribution of technology among competitors becomes another

consideration. The power of the companies is limited by the price discounts and other

forms of promotional offers presented by rival companies. Hence, their overall power

is medium.

Bargaining Power of Buyers Medium High

As seen above, the mobile phone customers have a heavy bunch of serviceproviders to choose from. The current price regulations, even technology and

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competition mean that customers have considerable switching power. A recent

regulation that has enabled customers to switch providers without changing phone

numbers at an ignorable fee shifts more power into the customers hands. All these

mean that there is relatively high power with the buyers.

Threat of New Entrants Medium High

This is one of the sharpest indicators of industry position. The Indian mobile

industry has seen many developments in the incumbent players zone of the market.

The private companies exploited a phase when privatisation was new to the industry

and they also carried their corporate reputation along with them (Bharti, Tata,

Reliance, Idea). The mobile telephone industry is a capital-intensive one, involving

high sunk costs and extensive economies of scale (Bergman et al, 1991). Another

factor to be considered is that any company with a breakthrough innovation can enter

the industry with the help of private equity and venture capital. There is also a strong

possibility of international players entering India on individual or joint ventures like

Vodafone did and Docomo being the latest example (Indian Express, 2008). This is

more likely with India being an emerging economy with a 100 million subscriber base

and average technological advancement. Considering all these factors, it will be fair

to say that the threat of new entrants in the market is Medium High.

Threat of Substitutes Low

The replacements for a mobile phone are very rare. Even the very few that

exist like the traditional telephone, computer and wrist watch phones are either

lacking certain key features of the mobile phone (telephone, computer) or rarely

available (wrist watch phones). Also, with more computer features being embeeded

in mobile phones like Blackberry, Palmtops and iphone, mobile phones are gaining

importance and utility. Even with technology development at a very high pace and

distribution, the threat to mobile phones from possible substitutes are low.

Competitive Rivalry High

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The inception of mobile services in India saw public sector providers like

BSNL and later MTNL dominating proceedings. Once the industry was opened up,

players like Airtel, Hutch and Essar came into the scene. The private players list has

now grown in numbers. This has been a combination of international entrants like

Vodafone and Docomo and joint ventures for specific products and offers like Airtel

Blackberry. The Mobile service subscribers in India have a bunch of Tier-1 service

providers to choose from and a lot of Tier 2 sellers. The tier 1 consisting of the

technology and market leaders like Airtel, Vodafone, Reliance and BSNL and the tier

2 lot being bigger with players like Idea, Spice, Aircel, etc. There are other players

who are relatively small but well established in their states like Aircel in Tamil Nadu,

BPL in Maharashtra and Spice in Karnataka. These private players have a

considerable share of the market in these circles and force the tier 1 players to adopt

a more tight strategy in these stages.

Another influencing factor, as in most businesses, is price. The wave of regulatory

changes and mixed strategies from companies has set-off highly stiff pricing margins

and non-financial incentives through promotional offers. Increasing competition with

existing and new players, improving technology like 3G and UMTS and more

disposable income from the bulging Indian middle class have all lead to high

competitive rivalry in the industry. The competitive structure is discussed in more

detail in Section 3.10.1and its affects are analysed in the Findings and Analysis part

of the research.

Threat of New Entrants(Medium - High)

Buyer Power Competitive Rivalry Seller Power (Med - High) (High) (Medium)

Threat of Substitutes(Low)

Figure 3.3 Porters Five Forces Indian Mobile Telephone Industry

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3.10 Likely Issues Affecting the Indian Mobile Industry

The International Telecommunication Union estimated that

mobile cellular subscriptions worldwide would reach approximately 4.1 billion by the

end of 2008 (International Telecommunication Union, 2009). Mobile phones have

gained increased importance in the sector of Information and communication

technologies for development in the 2000s and have effectively started to reach the

bottom of the economic pyramid (Heeks, 2008).

Looking at Figure 3.4, it can be seen how the graph is evening out towards the end

for developed countries showing the relative maturity of the markets. Comparatively,

the graph for the developing countries is rising continuously signifying the growing

nature of the mobile markets. This theory also applies to India, it being one of the

fastest developing countries.

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Figure 3.4 Source: NewYorker, 2008

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The market for cellular mobile technologies in Asia has seen explosive growth

in the nineties and the first few years of the millennium. In his paper, Chakravarthy

(2007) says that the main reasons for the growth of mobile telephony in Asia are the

opening up of markets to competition, introduction of digital cellular technologies and

the presence of an independent telecom regulator. Looking at it from the India

perspective, the markets had been opened up for competition after it was being

dominated by the government-owned BSNL and MTNL. The technology has been

constantly upgraded ever since the market opening and new kinds of expertise in the

field has been pumped into the sector by the innovative and high-paced private

players. But still, it has not advanced as it is in the developed countries.

Comparatively, countries like China, which has a similar density of population like

India, has much better technology, which sometimes is replicated by the developed

countries. It has also achieved a much better penetration and has a much larger

subscriber base. This shows the potential India can explore if it develops the mobile

telephone sector in a proper and structured way. The above two factors lead us to the

next element the regulatory framework.

The step to launch a separate department and then an independent regulatory

body TRAI, was a crucial step in developing the sector. This made sure that therewere now specific policies being made for the sector and the general events in the

industry was being monitored by an authoritative body. Moreover, the decisions on

competition and acquiescence of technology into the country are also controlled by

the regulatory and political bodies. This shows how the third variable overrides the

first two as the prime issue. In this section, these issues will be taken up individually

and elaborated on.

3.10.1 Competitive Structure

Theoretical Framework

Substantial empirical evidence reveals that privatization or deregulation in the

telecommunications sector can lead to performance improvements. Megginson, et al.

(1994) compare pre- and post-privatization financial and operating performance of 61

companies (in 32 industries, including telecommunications) from 18 countries. They

find increased sales, profits, investments, and employment following privatization.

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The early empirical work in this area compares average performance indicators

across firms or countries before and after deregulatory reforms. Most of that

evidence is from Latin America, a fact that is not surprising, given the region's

relatively early start in reforms. In general, these studies find positive effects of

reforms (e.g., Kikeri, et al. 1992; Wellenius and Stern, 1992).

Though privatization has yielded significant benefits, allowing entry and

competition in the sector tends to yield far greater benefits (Wallsten, 2002). A

monopoly provider, whether state-owned or private, experiences fewer incentives to

improve service and lower prices than do firms that operate in a more competitive

environment. As Ambrose, et al. (1990) argue, "simply moving a monopoly from the

public to the private sphere will not result in competitive behavior." This wisdom is

reflected in results obtained from a broad class of studies, which finds that

competition leads to the biggest improvements in the sector (Fink, et al. 2002; Li and

Xu 2001; McNary 2001; Petrazzini 1996; Ros 1999; Wallsten 2001).

The detrimental effects of monopoly provision are also exacerbated in network

industries (such as telecom), where the presence of network effects, switching costs

and supply side economies of scale, may lead to 'lock ins' where a producer with

market power charges a premium that customers may be willing to pay given that

their cost of moving to a new product or technology may be prohibitively high. (2)

'Locked in' customers may give rise to imperfect competition even if there is free

entry to the market, as new firms may not be able to ever build up the installed base

of consumers or realize the cost advantages that they require to compete. Again, no

anti-competitive behavior is necessary in order to create market inequality in network

markets (Economides, 2003). The natural monopoly that occurs due to the large

installed base of a dominant firm results in it wielding market power with no explicit

strategy of entry deterrence.

The Indian Mobile Industry Perspective

India, the worlds second-largest mobile-phone services market after China

(ITU, 2009), added more than 10 million subscribers for the third straight month in

November and is set to attract more operators as it prepares to auction licenses for

starting high- speed wireless services next year.

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Talking of competitors, India has a market that has a lot of divisional and

national players. But the overall scenario is dominated by a few big operators.

Airtel

Airtel comes from Bharti Cellular Limited - a part of the biggest private

integrated telecom conglomerate, Bharti Enterprises. Bharti Enterprises has

been at the forefront of technology and has revolutionized telecommunications

with its world class products and services. Bharati-AirTel is a GSM mobile

phone service provider in worldwide and the surrounding areas. It offers

various pre-paid and post-paid plans, as well as value added services.

Bharat Sanchar Nigam Limited - BSNL is the largest Public Sector

Undertaking of India and its responsibilities include improvement of the

already impeccable quality of telecom services, expansion of telecom network,

introduction of new telecom services in all villages and instilling confidence

among its customers.

BPL Mobile - Having started its services in 1995, BPL Mobile operates in

Mumbai, Maharashtra, Goa, Kerala, Tamil Nadu and Pondicherry- with a

network spanning across 209 cities currently. Today, BPL Mobile, India's

premier mobile phone service provider serves over 2 million happy andsatisfied wire-free citizens across all our markets. It provides cutting-edge

solutions, services and products in the broader areas of Enterprise

Communications, Digital Consumer Electronics and Information Technology,

with a dedicated focus towards hardware and software solutions for highly

competitive global markets.

Hutch

One of the bigger players in India. Bought in 2008 by Vodafone of the U.K.Some of the figures shall refer to them as Hutch.

IdeaCellular - Servicing Mumbai initially and a lot of other regions later. A

telecommunications venture from the Aditya Birla Group, one of the biggest

corporate houses in India.

MTNL - MTNL was set up on 1st April, 1986 by the Government of India to

upgrade the quality of telecom services, expand the telecom network,

introduce new services and to raise revenue for telecom development needs

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of Indias key metros Delhi, the political capital and Mumbai, the business

capital of India.

Reliance Infocom - The Reliance Group founded by Dhirubhai H. Ambani

(1932-2002) is India's largest business house.

Reliance Infocomm will offer a complete range of telecom services, covering

mobile and fixed line telephony including broadband, national and international

long distance services.

Spice Telecom - Spice Telecom the brand name of Spice communications

Limited is presently operating Cellular Phone Services in the states of Punjab

and Karnataka. Considered as one of the best providers of mobile telephony

in India. Spice brings quality cellular services at attractive prices. These

include Auto Roaming facility, special services like voice-mail, and Spice Plus,

and the option of charging cell phone account with pre-paid Spice currency,

the easiest way to pay.

Tata Indicom - Tata Teleservices ltd offers its products and services to

customers across India under the name of "Tata Indicom". TATA Teleservices

limited is India's leading Private Basic Service Operator. This is from the TATA

group one of the biggest and well-known corporate groups in India.

Videsh Sanchar Nigam Limited - VSNL was incorporated on April 1, 1986

under the Indian Companies Act , 1956 to take over the activities of the

erstwhile Overseas Communication Services (OCS). The company operates a

network of earth stations, switches, submarine cable systems, and value

added service nodes to provide a range of basic and value added services.

A Detailed list of mobile operators in India is provided in Appendix 2.

It can be seen how the operators in the sector are scattered. But in spite of so

many operators being present, the business in the markets are dominated by the

major players like Airtel, Reliance, BSNL, Hutch (Vodafone), etc. From figure 3.5, it

can be seen that the market in the metropolitan cities and the states in general have

been captured by the chief operators like Airtel, BSNL, Reliance, Hutch (Vodafone),

Aircel, Spice, Tata Indicom , etc. This depicts a picture of competition being lead by a

few players, but due to the cut-throat nature of the mobile sector, stage of

development and its scope for further growth, it is very healthy.

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Estimates put the total worth of Indias telecommunications sector at nearly

US$100 billion in 2007 (Budde, 2008). This was on the back of soaring valuations of

the countrys telecommunications companies, both listed and unlisted. Listed

companies like Bharti Airtel and Reliance Communications could claim valuations in

the range of US$26-27 billion and US$19-20 billion, respectively. And big operators

like Bharat Sanchar Nigam Ltd and Idea Cellular would be likely to range in value

from US$8 billion to US$30 billion if they were listed. Over a 10 year period, the

telecom industry saw numerous high profile exits by multinational companies such as

AT&T, Telecom Italia, British Telecom, Telstra, Cingular and France Telecom. Others

to exit included some local companies as well such as Aircel, BPL, Escorts, RPG,

Usha Martin, JT Mobile and Hindujas.

Figure 3.5 Market share region-wise (Asia Telecom Report, 2006)

Vodafone, which had also exited the Indian market earlier on, had made a comeback

in recent times with its successful bid for Hutch. Over the years, the exits and entry of

new players have been part of market consolidation, ultimately resulting in strong

value creation. A joint venture between AT&T and Mahindra Telecommunications

saw the US-based company become the first foreign telecom operator to get a

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licence under the Indian governments revised FDI policy increasing the foreign

ownership cap from 49% to 74%.

There are a few experts who predict the entry of more foreign players as the

market progresses and consolidation. These issues will be looked upon later. Before

analysing the existing competition, it would be very useful to have a look at the

market share occupied by the few dominant operators in the country. On June 30,

2008 the market share in the Indian mobile market looked like this:-

Figure 3.6 (CAOI)1

The heavy competition marked by the abundant number of players means

that there is a problem for customers in the respective regions in accessing the

frequency network of their service providers. There have been numerous complaints

in the recent past being network being blocked during peak hours due to colossal

overloading of customers. A reason to bring in regulation can clearly be seen. But,

like what Klein (1999) says, it should be in the nature of network industries to keep

1

CAOI - The Cellular Operators Association of India (COAI) was constituted in 1995 as a registered, non-profit,non-governmental society dedicated to the advancement of communication, particularly modern communication

through Cellular Mobile Telephone Services.

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the sectors as deregulated as possible and promote free competition. While this

paradox needs to be addressed, the other factor this feeds is the issue of technology.

The overflowing number of operators and ever-increasing number of customers

should be supported by efficient network infrastructure and other related technology.

This issue is now analysed in the following section.

3.10.2 Technology

The importance of infrastructure in a network industry has been

seen in the initial part of this literature review. Technology and infrastructure

development has been a persistent hurdle in the economic progress of India.

There are over 1.5 billion cellular phone subscribers in the world,

according to International Telecommunication Union (ITU, 2005). The developmen in

mobile phone subscribers today is faster than the growth in fixed telephone

subscribers and Internet users. In some developed countries in the EU like Sweden

and Iceland (and Hong Kong on the Pacific Rim) cellular diffusion is around 100

percent. Sweden today has a mobile penetration of a 101 percent, i.e. there are more

cellular phone subscriptions than people in the country. Most advanced industrial

countries have historically displayed a significant diffusion rate for cellular

technologies. According the Organization for Economic Cooperation and

Development (OECD, 2003), in 2001, mobile penetration in Netherlands, Iceland,

Italy, Finland and the UK were 81.3, 82.6, 80.4, 87.1 and 77.1 percent respectively,

with the overall penetration rate for EU being 74.3 percent. Among the other

developed countries, the US stood at 45.1 percent, Japan at 58.8, Australia at 57.1

and Germany at 68.3 percent in cell phone penetration (OECD, 2003). However an

important aspect of cellular technology diffusion among advanced industrial countries

is that mobile penetration has levelled off in the early part of the millennium with the

growth centres for cellular technology shifting to countries such as Russia, China,

India, Korea, Malaysia, Indonesia and the Philippines and Taiwan. The first basic

requirement for the Industry to grow is the need for a competent handset market. The

global players for mobile handsets are present in India as well.

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Figure 3.7 Global Mobile Handset Market

In the global scene, it is seen how Nokia dominates proceedings and India is no

different. The operators have been coming up with efficient mobile devices for the

Indian market.

Radio frequency spectrum is a limited natural resource. The word Spectrum

basically refers to a collection of various types of electromagnetic radiations of

different wavelengths. In India, the radio frequencies are arbitrarily confined between

9kHz and 3000 GHz and are being used for 40 different types of services like fixed

communication, mobile communication, broadcasting, radio navigation, radiolocation,

fixed and mobile satellite service, aeronautical satellite service, radio navigational

satellite service etc.

Some of the important and typical characteristics of the radio frequency spectrum assaid by Kaul (2006).

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In this section, it could be seen how the spectrum and other related

technology needs to be given attention and should be studied before formulating on

them. From the section on Competitive Structure and Technology, it can be seen

how anything that has to be controlled has to go through the regulatory bodies. This

key variable is now analysed in the following section.

3.10.3 Regulation and Government Bodies

There has been significant research on the adoption of new technologies from

both national and practical point of view. In telecommunications, the subject oncompetition generates furthur values to minimize cost to it has been argued that

competition creates additional values to reduce costs to innovate and eradicate un

clear pieces (Laffont and Tirol, 2000).

The cellular mobile industry has always been much less regulated than its

fixed line counterpart and indeed most public utility provision. In Asia this more liberal

policy environment led to mobile provision at a premium in the nineties by either

incumbent operators or by monopoly/duopoly private firms who were charging high

rents to consumers with relatively inelastic demand for voice communication services

in countries with low mainline penetration. However the relative lack of regulation that

prevailed in this industry also meant for more competitive entry as the level of

supernormal profits increased. In the study (Chakravarthy, 2007) of the number of

countries in Asia that had a certain industrial structure (e.g.--monopoly, duopoly,

three firms or more than three firms) from 1993-2004, we see that up to 1996, the

number of monopolies exceeded the number of oligopolies but from that point on the

number of countries with two or more firms increased significantly until in 2004, 10 of

the 31 countries surveyed had a monopoly whereas 21 had multiple providers. What

is clearly seen the change in the average peak-rate tariff for a three minute local cell

phone call for the different regions in Asia. The graph shows that 2000-2002 was the

only phase in the decade when the peak-rate tariff decreased for all three broad

regions of Asia. Thus an increase in competition is seen to be directly linked to a

falling of prices in this market. It may be mentioned that almost all countries had

"liberalized" or "corporatized" their telecom incumbents by the middle of the nineties

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(except the countries of the Middle East which even in 2002 had a number of

monopolies). This however did not make for higher consumer welfare or rapid market

growth, which came in the 1999-2002, as a concomitant to higher competition and

falling tariffs. It must also be mentioned that for developing countries even though an

increase in mobile penetration may be observed with more entry, a significant portion

of this increase may be because of unsaturated demand for telecom services, rather

than a response to "better" quality of service per unit of consumer expenditure.

Klein (1999) putting your self in the front that when we are uncertain, the

policymakers should not limit the admission of the competitive firms in such

networks. If they want to limit the admission he says that the limit should be

according automatic test after a set time, and observe for costs and profit.

An industry-agreed set of spectrum trades could represent a better and

quicker solution than one imposed through regulation. The future spectrum

distribution should be resolved quickly and it should allow for re-use of the spectrum

whilst maintaining a competitive market.

3.11 Summary & Conclusion

From the review, it has been seen how the quest for the development of

the Indian mobile telephone industry breaks down to the three factors of Competitive

structure, Technology and Regulation. In the individual analysis, it was also seen

how both competitive structure and the network infrastructure providing the

technology need to be managed properly for the over enhancement of the sector.

This leads us to the main variable recognised Regulation of the Industry, which not

only controls both the factors identified above but also plays a very important role in

its independent functions. In a nutshell, the literature review brought out the following

issues:-

Development of Mobile Communication is quintessential for the overall

development of India as an economy.

The network infrastructure acts as a bridge between the creation and delivery

of the services and should be given priority in policies.

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Competitive structure determines the traffic in the industry and this

concentration influences the industry through innovation, spillover and other

effects.

Technology is the backbone of the industry and is upgrading by the minute.The spectrum has to be managed strategically to squeeze the optimum use

out of it.

Regulation plays the most important role; it has to maintain a balance in the

competitive composition in the industry and also divide, utilize and impart the

spectrum distribution cleverly.

What needs to be done? - Further liberalisation of the spectrum and the adoption of

discernible technology manifested by novelty are needed to be implemented further

by the authorities to enable the network infrastructure facilitate overall development.

These areas have will form the nucleus of his research design and subsequent

analysis.

4. RESEARCH METHODOLOGY

4.1 Introduction

The research and the methodology implemented are key essentials in

deciding the success of the research carried out (Fisher, 2007). They portray the

procedure as how the research is going to take place and how it is linked to the aims

and objectives mentioned in the research.

4.2 Research Proposition

From the literature review, it was seen how the mobile industry can be broken

down into three segments for the purpose of infrastructure analysis. It has been

identified that, in the Indian Mobile Industry, given the current state of affairs, for the

network infrastructure to be developed and competition to be channelized efficiently,the regulatory authorities hold the key. From the background of this research, the

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wider research area of network infrastructure enabling mobile telephone industry

progress has been restricted down based on the three important variables

recognized Competitive Structure, Technology & Infrastructure and Regulatory

Framework. Among these variables, the importance of the regulatory function has

been recognised. The project proposition is supports the key variable which has its

benefit on the research attained n general will be based on this chief variable to help

the research achieve its overall purpose. The research is done to give spotlight on

the regulatory body of the indian telecommunication industry.

Regulation of network infrastructure shall enable development in the Indian

mobile telephone industry.

Figure 4.1 Breakdown of Hypothesis

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4.3 Research Design

The research aims to demonstrate the different parts of the research gathered

models and data,the technique of working and estimating results, all this is done to

overall add just before the main research objectives (Trochim, 2000). This part shows

an general view of the information sources and the set methods, also what kind of

methodology to be This section gives an overview of the data sources and collection

methods, methodology to be taken on and ways of analysis.

4.3.1 Research Approach

The research has elements relating to the cellphone infrastructure and when

merged , they add or reduce in general the sector efficiency. By braking the research

into various components, it is makes it more simple to set up cause and the outcome

connection between the variables recognized and the rigid structure.

Then, resulting model is found from different cases and the will be tracked across

cases and strategy proposition will be set up. These kind of models are mostly used

to describe possible events or explanation that are necessary from the rigid part of

the sector to sort out the efficiency roll-out communication for the firm. Forcasting

future happening and describing out action plans for the firm can be a subject to

argue about in a growing market like the indian cellphone industry, the research

states that it can cope up with the one-sided advise overcoming the flaws, which is a

part of practicality (Fisher, 2007). This means that information relevant to the known

variables in the indian framework would be gathered and kept as a viewpoint, the

network communication organization will be the key source to recommend future

plans.

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4.4 Data Sources and Collection

Rationally, this gives the way to the next step in the plan, that is searching for

suitable sources of information and gathering them in a systematic manner tominimize loss of value and have usefull understanding. The method of gathering

information used here is desk-bades orientation. It comes under secondary sources

of information (Fisher, 2007). The information gathered according to this method is

done from a large range of sources which also has the surveys about the situation of

the inidan telecom industry.

The report by OfCom drawing a phasing out plan for the UK mobile industry would be

considered as a basis to frame similar maps for the Indian mobile industry. Issues

specific to the Indian context would then be accounted for on the basis of recent

industry reports.

4.5 Methodology

The research takes the realist route and will require a detailed analysis of

factors contributing into the industry and finding the outward effects they bear.

Papers and concepts in the telecommunications would be referred to look at

the applied methods of dealing with network infrastructure prescribed by various

authors. This would then be compared with the articles from journals on the

telecommunications sector to bring out what the recent developments in the sector

mean for the research. Then, news and critiques on the incumbent firms in the Indian

mobile telephone market and their future plans would be analysed to see how the

competitive elements in the industry match with the industry trends noted in the

previous task. Then, the regulatory issues facing them would be examined via

reports from and about the concerned authority, TRAI. Putting all of the above into

perspective, a rough draft of what needs to be implemented in the process of

liberalising infrastructure would be made. The opinions of industry experts would be

consulted to sharpen the items and make a listing of what needs to be done. To this

advanced report on analysis, the research would add its view of how the liberalisation

needs to carried out and what the factors are to be addressed in the process. The

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qualitative report would then be summarised and recommendations will be presented

as the result of this research.

4.6 Objectives, Hypothesis and Analysis

Based on the research objectives, three significant variables were introduced

in the previous section Competitive Structure, Technology and Regulation. In order

to identify how best to liberalise the network infrastructure in the Indian mobile

industry, these variables will be scrutinised with context and the policy actions born

out of them will be listed. The likely outcome of the regulatory moves on each of

these variables will be analysed. The research will a qualitative analysis and use the

results to evaluate the requirement for each of these variables. After considering the

likelihood of events, the results on each of the variables are pulled together to frame

the overall implications.

The research foresees significant consumer and citizen benefits from the

liberalisation of better spectrum bands. The deployment of better infrastructure could

mean deeper and wider availability of communication services. A case for improving

connectivity to rural areas would also be considered as means of closing the digital

divide within the country. Future trends in the industry would be predicted based on

the global technology scene and ideas for how to keep pace with them would be

discussed. In its race to economic dominance, the mobile telephone industry

development holds a key role. Whether the network infrastructure could be

developed to enable India communicate itself with the world at large is the hypothesis

to be tested.

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5. FINDINGS & ANALYSIS

5.1 Introduction

Data pertaining to the identified objectives were collected from various

sources to ensure full coverage and overcome any possible bias. In this chapter, the

research shall present this collected data, process it and establish the out born of the

analysis.

Since the collected data and their interpretations are inter-related, they are

connected stage-wise and their implications are laid out as they are being presented.This chapter will take the following structure. First an overview of the general

scenario on the Indian Telecom industry in which the research is carried out is laid

out. The next section shall combine the two primary variables Competition and

Technology and present the data found on them. These shall be examined and their

implications for regulation will be sketched. The subsequent section will focus on

regulation in the industry. This will connect the previous section with what form of

liberalisation is required. It will discuss the factors to consider, how to implement itand other facts that form a part of the results of this research. The last focus section

shall bring out some of the future developments in the mobile industry to be

considered. The chapter will end with an overall conclusion.

5.2 General Scenario

Indias telecom industry is in a phase of transition. Process of change is often

volatile and responsive to intervention and global circumstances impacting it such asa Britian based telecommunication Vodafone investing in the indian market and

taking over the existing company called Htuch. In such an inherently dynamic

situation it is convenient to assume that cross-country experiences incubate the most

recent seeds of change. This is because countries at various stages of development

encapsulate developmental experiences that occur with the passage of time. The

striking dissimilarity of mobile networks with infrastructure provision historically is the

strong legacy of private provision. When it was introduced in countries of the

developing world it initially was a small service commanding a huge price premium

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and more of a status symbol for a small wealthy fraction of residents. Over time, due

to demand and supply side economies of scale, the profits accruing to the cellular

providers grew. This supernormal industry profit attracted other firms that started

providing cellular services like Airtel, aircel, and many more during this time and now

india has more than 10 major cellular indusries. In most countries in Asia, entry into

this industry was not particularly restrictive and by the late nineties it was not

uncommon to have multiple providers of technology and fairly intense competition

among these providers. The associated lowering of price that came with competition

suddenly put this technology within the reach of the masses, and changed the

character of mobile services from a consumer convenience product to an

infrastructure service that often substituted for a mainline phone in countries where

basic fixed line telephony was weak. This rapid growth in the late nineties and the

early part of the millennium has found several Asian countries like India, Malaysia,

Hong Kong, Japan and Taiwan witnessing tremendous competition in mobile

provision. This has led to considerable erosion in profits for operators. Net profits of

four mobile telecommunications service providers (VSNL, MTNL, Bharti

TeleVentures and Tata Teleservices) in India declined as much as 47 per cent in

2002-03 (Chakravarthy, 2007). The Cell

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