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Introduction
Telecommunications, also known as telecom, is the exchange of information over
significant distances by electronic means and refers to all types of voice, data and
video transmission. This is a broad term that includes a wide range of information
transmitting technologies such as telephones (wired and wireless), microwave
communications, fiber optics, satellites, radio and television broadcasting, the
internet and telegraphs.

Comparing Indian and US telecom industry, why has the US industry become much less
competitive and anti-consumer as compared to its Indian counterpart, although the US is
relatively a more market based economy?
Background
The US telecom industry is consolidated in a classic economic sense. In the US,
there are 2 players which account for ~80% of the subscribers (both mobile and
fixed line). The next biggest ~10 handle another 15%, and then there are about
1200 which take care of the remaining 5%. There are essentially no subscribers
who are "un-served". This is not the case in India. As of April 2011, only 12 million
users had broadband internet. Mobile penetration is better at ~70%. However, that
still leaves ~400 million people who have no telephone service in India. There are
multiple carriers (both mobile and fixed line) who are still expanding their coverage
to capture this. Of course, many of those un-served consumers in India cannot
afford service in any form what so ever, so they are not necessarily the most
attractive area of expansion.

In the US, the Universal Services Fund reimburses US operators (both mobile and
fixed line) for providing and expanding services to un-served subscribers. This is
funded by a tax on every phone bill. This is in fact how many of the 1200 operators
remain solvent. They take funds from the 80% to pay for operations to the 5%. The
regulatory system in India does not look or act anything like the USF system in the
US. India's environment is not stimulating land-line based services in any
meaningful form. The benefit of the USF system in the US is that virtually everyone
can have a single party phone line and broadband internet. And as a result, for the
most part, they have these things. The downside of this is that there are many
telephone operators who are not economically solvent without it. There are tariffed
rates for operators who participate in USF recovery. They have certain prices and
product offerings that they have to abide by.

For many of them, once they start to exist as an operating entity by way of this
government subsidy, they no longer have the incentive / skills / resources to
innovate product outside the tariff structure.
Consolidation can be naturally less 'competitive' for many customers. Individually,
these customers are not financially interesting, and so there is a form of tacit

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collusion which occurs. If you don't like the term 'collusion', we can call it "detente".

Government regulated subsidies take a lot of the wind out of the sails of many
would be competitors for the remaining consumers.

I think if you looked at the market for enterprise services, the US market is much
more competitive.
-Robert Adams, 20 years with global mobile / fixed line service providers.
Written Aug 6, 2011

Alternatives
In today's highly competitive telecommunication market, customers expect and
demand reliable and high-quality service. In order to please customers, new
telecommunication systems and networks which support a wide range of voice,
data and video services are being designed with extremely high
reliability/availability requirements, but usually without much consideration of
cost. These super-reliable systems are generally very complex and therefore
extremely expensive to develop, build, and operate. Increased costs are going to
be reflected in the price of the services the system is offering, and the reliability
benefits may be overshadowed by the fact that the procurement and operations of
the system may be too costly; customers will be drawn to competitors
with less expensive network solutions and more affordable services. This paper
discusses alternative approaches to the system design from the point of view of
future costs. We will illustrate that the system can be improved not only by
increasing reliability of subsystems, but also by effectively utilizing system
operations support. The operations support alternatives may be less expensive
than reliability improvements and, in addition, may provide many strategic
marketing advantages. In the telecommunication industry, a high-quality service
requirement usually translates into a high-quality network. Network support is
defined, and customers' expectations are discussed. In an example, based on the
concept of distributed switching systems, we show how the selection of the
maintenance/repair operation policy may influence the cost of the system
operations and reduce the hardware costs involved.
D.R. Doll, where to spend money to improve system availability, Data Commun. 3
(4) (1974)152156.Google Scholar
Proposed Solution

Living the change - Increase competitive edge

The dramatic advances in online services, smart phones and high-speed fiber
networks have created entirely new business ecosystems. This has led to huge
challenges for the telecom industry that enabled the breakthroughs.

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 Business-driven IT is creating new telecom winners

With more investment in business-driven IT, operators, service providers and media
companies can strengthen their position by:

increasing cost-efficiency

sharpening the customer experience

identifying new revenue streams

Tried and tested business models are being challenged, networks and systems are
converging, and customer loyalty is becoming increasingly hard to retain.
Meanwhile, demands for profitability in the industry are already driving a trend of
mergers, acquisitions and new partnerships.

Future success in the telecom sector will not only be a matter of delivering better
and more efficient services to end customers, it will also require the release of
capital, time and resources for internal change and transformation.

Sustainable operators

The ultimate aim is to enhance the customer experience, sharpen the offering and
increase profitability. And the pace has to be fast because time-to-market is
business-critical.

In a market where the uncertainty is greater than ever, operators and service
providers will need to become even more agile and responsive. Thus business-
driven IT is becoming an increasingly critical success factor.

The path to sustainability is to build on core knowledge, while cutting costs and
reinvesting the savings in new developments, improvements and customer-oriented
solutions. Standardization is increasing and more and more services are moving up
to the cloud.

Recommendations
The aim of this recommendations is to provide guidance on the treatment of
telecommunication services in the HICP in order to support the requirements of
comparability, reliability and relevance of the legal obligations. The explanatory text
will give some more background on the recommendations and explain the meaning
of several terms used. Measuring price development for telecommunication has
been the subject of much discussion and the current practice is well understood.
The recommendations codify current best practices. The telecommunication
services industry is very dynamic, developing new products and integrating
previously distinct services into new bundled products. Therefore, it is not possible

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to give more detailed recommendations. Telecommunication services are to be
treated in the HICP following the definitions and procedures laid down in
Commission Regulation (EC) No 2646/98 of 9 December 1998 for the treatment of
tariffs. At the time this regulation was adopted, the majority of households used
fixed line telephones. Mobile telephones and connections to the internet were not
very significant and the bundling of telephone, internet and television was
practically non-existent. The challenge for index compilers today is to produce
indices which on the one hand maintain the fixed basket concept and on the other
hand remain representative, reflecting the constantly changing dynamics of the
telecommunication market. These recommendations recognize that any one
approach may not be suitable for all market sectors or all telecommunication
services offered in any particular Member State, and that a mixture of methods may
be required. Some definitions of terms used: Binding contracts are contracts that
are in general valid for a longer period. In the telecom market, one and two year
contracts are typical examples of binding contracts. Migration rates describe the
transition of consumers from one tariff to another in terms of what proportion of
consumers change and at what pace. Call plans are packages of
telecommunication services which a consumer buys e.g. a certain number of call
minutes, SMS and internet usage per month for a certain price.
EUROPEAN COMMISSION EUROSTAT Directorate C: National Accounts, Prices and
Key Indicators Unit C-4: Price statistics. Purchasing Power Parities. Housing statistics

Angco, John
Ezekiel
Talavera,Kobe
James Barcelo

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