INDIA TELECOM: Way Forward R K Upadhyay CMD, BSNL September 2012

Private & Confidential The Backdrop  The Telecom Sector is in overall good shape, though, there have been some clouds of uncertainty  All stakeholders – Operators, Consumers, and Government – have benefitted from Telecom Sector Policies 1 Consumers have benefitted Lower Tariffs Better services Operators have benefitted Revenue Sharing Licence Fee enabled Operators to lower tariffs continually, & make services affordable for all This propelled explosive growth in subscribers and yielded healthy growth in overall revenues Government has gained Overall sector growth has delivered higher licence/ spectrum fee and service tax revenues Improved teledensity has positively contributed to social and economic development and empowerment

Private & Confidential The Backdrop…  The ‘voice-centric’ policy focus so-far has delivered rapid growth in mobile services and an impressive 78% teledensity  Yet, the Urban- Rural divide remains wide  Broadband proliferation remains poor with penetration of ~1%  Broadband penetration targets have been missed  Regulatory Uncertainty and on-going litigations are causing some worries for investors POLICY CHALLENGES AND TASKS AHEAD Future focus on ubiquitous digital connectivity for inclusive growth of the society Articulate Government’s Social Priorities and Orient the Telecom Sector Policy towards them Resolve the “knotty” Spectrum and Licencing Issues of the Past Deliver a fair-play and growth oriented environment for the future POLICY CHALLENGES AND TASKS AHEAD Future focus on ubiquitous digital connectivity for inclusive growth of the society Articulate Government’s Social Priorities and Orient the Telecom Sector Policy towards them Resolve the “knotty” Spectrum and Licencing Issues of the Past Deliver a fair-play and growth oriented environment for the future 2

Private & Confidential The National Telecom Policy 2012 has spelt out the Vision, Key Thrust Areas and Targets for the next decade VISION “To provide secure, reliable, affordable and high quality converged telecommunication services anytime, anywhere for an accelerated inclusive socio-economic development.” KEY THRUST AREAS  Seamless telecom coverage with focus on rural & remote areas to bridge the digital divide  Broadband on Demand across the nation.  Reposition the mobile device as an instrument of socio-economic empowerment of citizens  Increase availability of spectrum  Convergence at the carriage level and Ubiquitous coverage KEY TARGETS  Increase Rural tele-density from current 39% to 70% by 2017 and 100% by  Broadband on demand by 2015; Broadband access to all village panchayats by 2014  175 mn broadband connections by 2017 and 600 mn by 2020 at minimum 2 Mbps speed  Promote domestic manufacturing: By 2020, domestic manufacturing should meet 80% demand with 65% value addition  Strive to create One Nation - One License across services and service areas 3

Private & Confidential Towards meeting the NTP goals, both Supply and Demand side Programs would be required Supply-side (Infrastructure, Network, Costs…) Actions  Assess the Role of each kind of Network – Fibre Networks, Cable Networks and Wireless platforms – and develop strategies to spur investment in each  Improve availability of network resources  Development of shared telecom infrastructure  Fiscal Benefits to spur investment Demand-side (Applications, Services) Actions  Identify Priority areas where broadband is expected to play a critical role in effective delivery  Sectors specific key Government Programs and Actions to spur usage 4

Private & Confidential Low broadband penetration is cause for worry; Strong Wireless Broadband push is a crucial way forward  India is amongst the least penetrated markets… Penetration ~ 1%  India’s Broadband Penetration today is equal to Mobile Penetration in June 2002  Mature Markets have reached Broadband penetrations of 20-40%  Broadband penetration also lags far behind the other rapidly growing consumer services  850 mn (71% tele-density) mobiles  80 mn (6.8% tele-density) cable and satellite TV subscribers  Low Availability from conventional wired networks (Telephony, Cable) is one of the key reason for the low Broadband penetration, low computer penetration & low digital literacy.  Globally, Wireless networks have started to make significant contribution to broadband access; By 2012, these are estimated to serve more broadband customers than the fixedline networks  India would need to continue its focus on wireless networks, for broadband as well 5 Source: The Economist

Private & Confidential Importance of FTTX will need to be recognized, as Wireless Broadband will not be able to quench the massive video thirst Asian Countries – China, Japan, South Korea - are pioneers in adopting FTTX technologies, and lead the world in market shares and FTTX penetrations 6 Data Source: As on June 2011www.point-topic.comwww.oecd.org Global Broadband Technology Mix - Total 558 mn Global Broadband Technology Mix - Total 558 mn FTTX Country Mix – Total 82 mn 82 mn Share of FTTX in Total Broadband Subs

Private & Confidential The NTP recognizes that Spectrum Availability for Telecom is low in India  India has had a lower spectrum availability for Telecom Usage as compared to Global Practices  Balance with Defence, Department of Space, Doordarshan, and others  Even in evolved markets with far better availability, spectrum is felt inadequate to meet future forecast needs  Operators in USA have asked FCC to increase total spectrum availability to beyond 1 GHz.  More spectrum improves not just the service quality, it also reduces the pressure to build more “expensive ugly- looking environment unfriendly” towers 7 Band (MHz) Typical Use Specific Range (MHz) Total Quantu m (MHz) Typical Intl Allocation (MHz) India Allocation (MHz) 700BWA and variants Typically *2 To be Decided 850 CDMA/ 3G paired with *210*2-20*2 15*2 to 17.5*2 in various circles 900 GSM/ 3G paired with Upto 35*2 25*2-35*2 18.6*2 to 22.2*2 in various circles 1800GSM paired with *2 37*2 to 70*2 in various circles 21003G paired with *2 20*2 in most 25*2 in some 2300BWA BWA ~ SPECTRUM FOR TELECOMS: INDIA vs EVOLVED MARKETS SPECTRUM FOR TELECOMS: INDIA vs EVOLVED MARKETS Spectrum Availability in all Telecom Bands needs to be improved

Private & Confidential … and shows the way for improving spectrum availability Objectives of the Policy include:  Ensure adequate availability of spectrum and its allocation in a transparent manner through market related processes.  Make available additional 300 MHz spectrum by 2017 and another 200 MHz by  De-licensing additional frequency bands for public utility services.  Optimize transmission of services …. by Fixed-Mobile Convergence… Objectives of the Policy include:  Ensure adequate availability of spectrum and its allocation in a transparent manner through market related processes.  Make available additional 300 MHz spectrum by 2017 and another 200 MHz by  De-licensing additional frequency bands for public utility services.  Optimize transmission of services …. by Fixed-Mobile Convergence… 8 Strategies of the Policy include:  Delink spectrum from licences; Spectrum shall be made available at price through market related processes.  To permit spectrum pooling, sharing and later, trading  Refarm spectrum from Government Departments & PSUs to alternative bands or media to make spectrum available for introduction of new technologies.  To make available adequate globally harmonised spectrum in the bands of 450 MHz, 700 MHz, 1800 MHz, 1910 MHz, 2.1 GHz, 2.3 GHz, 2.5 GHz, 3.5 GHz and bands identified by ITU for mobile services.  To identify additional frequency bands periodically, for exempting them from licensing requirements for operation of low power devices for public utility services. Strategies of the Policy include:  Delink spectrum from licences; Spectrum shall be made available at price through market related processes.  To permit spectrum pooling, sharing and later, trading  Refarm spectrum from Government Departments & PSUs to alternative bands or media to make spectrum available for introduction of new technologies.  To make available adequate globally harmonised spectrum in the bands of 450 MHz, 700 MHz, 1800 MHz, 1910 MHz, 2.1 GHz, 2.3 GHz, 2.5 GHz, 3.5 GHz and bands identified by ITU for mobile services.  To identify additional frequency bands periodically, for exempting them from licensing requirements for operation of low power devices for public utility services.

Private & Confidential The NTP lays a lot of stress on shared infrastructure and networks Objectives of the Policy include:  Recognize telecom as Infrastructure Sector  Address the RoW issues in setting up of telecom infrastructure.  Mandate an ecosystem to ensure setting up of a common platform for interconnection of various networks for providing non- exclusive and non-discriminatory access.  Evolve a framework for financing the sector and streamlining taxes and levies for long term sustainability of telecom sector. Objectives of the Policy include:  Recognize telecom as Infrastructure Sector  Address the RoW issues in setting up of telecom infrastructure.  Mandate an ecosystem to ensure setting up of a common platform for interconnection of various networks for providing non- exclusive and non-discriminatory access.  Evolve a framework for financing the sector and streamlining taxes and levies for long term sustainability of telecom sector. 9 And accordingly, Strategies of the Policy include:  Put in place a framework to regulate carriage charges, which are content neutral and based on the bandwidth utilisation. This will also encourage services such as provision of data and information over mobile platforms  To work towards recognition of telecom as Infrastructure Sector  To review and simplify sectoral policy for RoW/ Installation of Tower for facilitating smooth coordination between operators and State Governments/ local bodies.  To review process for faster and simplified site clearances for Telecom Towers  To facilitate increased use of alternative Renewable Energy  To promote use of In-Building Solution (IBS) and Distributed Antenna System (DAS)  To encourage use of innovative methods like camouflaging, landscaping, monopole towers and stealth structures to conform to aesthetic requirements.  To mandate mapping and submission of information on infrastructure assets on inter-operable GIS platform by all infrastructure and service providers And accordingly, Strategies of the Policy include:  Put in place a framework to regulate carriage charges, which are content neutral and based on the bandwidth utilisation. This will also encourage services such as provision of data and information over mobile platforms  To work towards recognition of telecom as Infrastructure Sector  To review and simplify sectoral policy for RoW/ Installation of Tower for facilitating smooth coordination between operators and State Governments/ local bodies.  To review process for faster and simplified site clearances for Telecom Towers  To facilitate increased use of alternative Renewable Energy  To promote use of In-Building Solution (IBS) and Distributed Antenna System (DAS)  To encourage use of innovative methods like camouflaging, landscaping, monopole towers and stealth structures to conform to aesthetic requirements.  To mandate mapping and submission of information on infrastructure assets on inter-operable GIS platform by all infrastructure and service providers

Private & Confidential Supply Side Actions to consider Network Resources  Given that dominant role wireless access is projected to play globally, there is a need to free up more spectrum in existing bands and open up new spectrum bands  More spectrum can be made available for 3G and 4G services in 2.1 GHz, 2.3 GHz and 2.6 GHz bands  Spectrum availability in 900 MHz and 1800 MHz needs to be improved in line with globally harmonized availability  Spectrum in 700 MHz band  “White Space” spectrum in sub 700 MHz band  Planning deliberations are already on for development of shared optic-fibre infrastructure; This needs to cover Urban Areas also  “Digital” Highways and “Digital” City Roads – that connect “last mile” networks to core networks  Easy and fair-value access to Right-of-Way (ROW) Fiscal Support to Investment, and End User Devices  Recognize Telecom as the “Digital Highway”, and grant Infrastructure status to broadband  Provide Income Tax benefits under section 80-IA of Income Tax  Consider indirect tax benefits (Excise, Special Additional Import Duty) on computing devices, consuming devices and modems  Consider service tax exemption for Internet and Broadband Services to improve affordability  Continue the nil licence fee on internet access and broadband services 10

Private & Confidential Demand Side Actions to focus on  Masses will appreciate the fruits of broadband when they find applications that fulfill fundamental needs of Communication, Information, Learning & Transaction  We – Government, Regulator and Operators – need to continually enable broadband powered applications and contents in identified priority sectors that meet these fundamental needs  In line with global experiences, our assessment is that these areas would be eGovernance, Education, Healthcare Delivery, Inland Security & Emergency Services  Specific Programs should be defined for each of these sectors, and should be consolidated into a National Mission alongwith the already initiated Programs; Some illustrative programs are:  eGovernance Applications (Information and Transactional) in Central, State and Local Governments  Education Applications: Virtual class-rooms using video-conferencing platform in Government Education Institutes, Online Educational Courses for self study, Online Examination Centres for Competitive Entrance, Online Training Centers.  Enable Government Medical Institutions with Video-consultation Centres to deliver consulting and possibly advanced diagnostic services. These centres should be equipped with reliable optic fibre connectivity. Customers, however, should be able to connect at 256 kbps or higher speeds.  Install Terminals/ Kiosks to enable online Banking and Money Transfer in Rural areas 11

Private & Confidential Key Focus Areas for leveraging ICT Infrastructure Priority sectors for empowerment through ICT Infrastructure, in line with global experiences:  eGovernance  Education  Healthcare Delivery  Inland Security &  Emergency Services 12

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