1. The importance of backbone Rohan Samarajiva and Harsha Vardhana Singh (at time of data collection: Secretary, TRAI; since September 2005: Deputy Director General, WTO Usable knowledge for growing the sector: ICT policy and regulation research from LIRNEasia, New Delhi, 6 March 2006

2. www.lirneasia.net www.lirneasia.net Importance of backbone  Original decisions re open access based on recognition of the significance of backbone  Backbone networks = essential facilities  Essential facilities, as commonly defined Controlled by one/more operators Competitors must have access to them Not feasible to substitute economically/technically

3. www.lirneasia.net www.lirneasia.net Limitations of the claim  Backbone network does not have to be owned by one entity Though this may make sense in micro or city states  It is especially important in early stages of market opening when Entrants are much smaller than incumbent

4. www.lirneasia.net www.lirneasia.net India, demand  Massive growth, not only across the country, but also in circles Only 4 out of 23 circles have less than a million fixed+mobile customers But unless infrastructure sharing is the practice (commercial arrangements or regulatory mandates), total subscribers not relevant  However, shows the significant effects that can be achieved if sharing occurs

5. www.lirneasia.net www.lirneasia.net India, demand  Decisions are taken by individual operators based on their current/projected demand In 18 circles, BSNL and MTNL (govt-owned incumbents) have >1 million fixed customers in each circle; also in mobile  Incumbents have incentives to build backbone In contrast, fixed entrants have >0.5 m only in 8 (1 m in 3); and mobile entrants have >0.5 m only in 9 (1 m in 3)

6. www.lirneasia.net www.lirneasia.net Fixed (unified) entrants with > 0.5 million customers per circle (8/23) Reliance Infocom (‘000) Bharati (‘000) Tata Telesvcs Ltd (‘000) Delhi 1,1191,554195 Mumbai 926647147 Kolkata 449501 Service Commenced after Dec ‘04 Maharashtra 72959755 Gujarat 66541061 Andhra Pradesh 800871165 Karnataka 6141,13785 Punjab 4911,251 Service Commenced after Dec ‘04

7. www.lirneasia.net www.lirneasia.net Mobile operators with > 0.5 million customers per circle (10/23) BSNLMTNLHutchIdeaReliance Telecom Delhi 2731,407603 Kolkata 239 617 Maharashtra 690 1,213 Gujarat 521 1,152583 Andhra Pradesh 776 361562 Karnataka 640 501 Tamil Nadu 765 Kerala 670 545 U. P. (W) 548 561 U.P. (E) 716 744

8. www.lirneasia.net www.lirneasia.net Supply, India  Data reported in terms of route kilometers, not capacity (in Gbps) Not all fiber may be lit Route km is a reasonable proxy for capacity at this level of abstraction  Dark fiber can be lit easily if fiber has been laid  Capacity can be upgraded easily

9. www.lirneasia.net www.lirneasia.net Backbone supply by operators (route km; March 2005, incl. leased capacity) FiberMicrowave BSNL462,52766,932 Reliance58,607644 Bharati28,210 Tata27,777 Other private18,20023

10. www.lirneasia.net www.lirneasia.net Backbone supply by infrastructure operators (route km, Q1 2005) RailTel26,668 Power Grid15,204 Gail India8,000 Others600 + Total50,472 +

11. www.lirneasia.net www.lirneasia.net Backbone status of incumbent ExchangesConnected by fiber Connected by digital microwave Chennai 210 0 Kolkata 518 0 Maharashtra 49414687226 Gujarat 3289 0 Andhra Pradesh 33412965238 Karnataka 2708264761 Tamil Nadu 2147204362 Kerala 120912020 Punjab 153615330 Haryana 111511094 U. P. (W) 9558910 U.P. (E)# 27602385292 Rajasthan 2341225431

12. www.lirneasia.net www.lirneasia.net Backbone status of incumbent (2) ExchangesConnected by fiber Connected by digital microwave Madhya Pradesh &Chattisgarh 3437308519 West Bengal A&N 1416136735 Himachal Pradesh 934714132 Bihar &Jharkhand 159115343 Orissa 113611294 Assam 594475115 North East 48523479 Jammu &Kashmir 36325755 Total 37,02634,5281,356

13. www.lirneasia.net www.lirneasia.net Connecting supply and demand  Estimated that 1 route km will cost USD 4500- 5500 (INR 200,000-250,000) TRAI calculation for India, based on consultation  Long-distance ARPUs in India = USD 14/yr (INR 600) Based on TRAI data on incoming & outgoing LD minutes and current prices  Possibly better if ARPUs estimated for circles, not India as a whole  Conclusion: revenues from 140 subscribers needed to make fiber viable

14. www.lirneasia.net www.lirneasia.net Viability analysis for Reliance (viable if ratio 1) License AreaSubscribersNotional Subs if 140 subs per RKm. Notional subs/subs Delhi1,285,388228,9000.18 Mumbai1,068,606262,6400.25 Chennai479,020182,1400.38 Kolkata535,193102,0600.19 Maharashtra818,9441,253,2801.53 Gujarat771,463887,0401.15 Andhra Pradesh857,2381,335,4601.56 Karnataka663,433825,3001.24 Tamil Nadu515,095894,4601.74 Kerala532,565545,7201.02 Punjab582,277498,1200.86 Haryana225,063360,9201.6

15. www.lirneasia.net www.lirneasia.net Viability analysis for Reliance (viable if ratio 1) License AreaSubsNotional Subs if 140 subs/RKm. Notional subs/subs U. P. (W)347,786567,5601.63 U.P. (E)469,139512,9601.09 Rajasthan361,730584,7801.62 Madhya Pradesh342,986682,2202.71 West Bengal and A&N114,634407,8203.56 Himachal Pradesh3,72114,4203.88 Bihar & Jharkhand202,132677,3203.35 Orissa122,795263,6202.15 Total10,299,20811,334,680 1.1

16. www.lirneasia.net www.lirneasia.net Analysis  India as a whole is unviable for Reliance according to the analysis  However, 10% growth/yr (very realistic) will move India as a whole into viable range for Reliance Various methods of estimating growth  Fiber has been built in areas that are “unviable” Because traffic comes from “viable” areas

17. www.lirneasia.net www.lirneasia.net Analysis  USO funds (supply), government programs to increase broadband (demand) can change the viability frontier  Interconnection and access revenues Better access regime can shift frontier  Infrastructure sharing can change the frontier Likely to be highly significant in small markets