A closer look at South Asia

Introduction

South Asia, which comprises Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka, has a combined population of over 1.3 billion people (see Table 1). India is by far the largest South Asian country, in terms of population, economy, and telecommunications network. For a region that makes up over one fifth of the total world population, South Asia accounts for only 2 per cent of world Gross Domestic Product (GDP) and 2.4 per cent of the total telephone subscribers (fixed and mobile). The region has one of the lowest per capita incomes in the world, about one tenth the world average and is home to four least developed countries (LDC). With 29 per cent of its population living in urban areas, South Asia remains predominantly rural.

Telecommunications scenario

With a total of 43.7 million fixed lines in operation and 8.5 million mobile subscribers, South Asia accounted for 4 per cent of the world’s fixed lines and less than 1 per cent of cellular subscribers in the year 2001. South Asia’s average fixed-line teledensity was 3.2 and the mobile teledensity was 0.63. The compound annual growth rate of fixed lines and mobile subscribers in the period 1996–2001 has been 20 and 78 per cent respectively, while during the same period the world growth rate was only 7 and 48 per cent. When compared with the rest of the world, South Asia is one of the fastest growing markets despite its low telephone penetration.

In 1981, South Asia had a fixed-line teledensity of 0.31, which increased to 0.65 in 1991. Another decade later, this teledensity had increased by over fivefold, reaching 3.2. The telephone network growth rate in South Asia has accelerated for every five-year period for the last two and half decades. For example, between 1976 and 1981, the annual average growth rate was 7 per cent; between 1986–1991 it was 11 per cent and from 1996 to 2001 it was 20 per cent. This continually increasing growth rate is beginning to impact the long-established correlation between GDP per capita and fixed-line teledensity. The correlation would have predicted that South Asia’s fixed teledensity would be 1.2 in 2001. Yet it was almost three times higher, at 3.2 (see Figure 1). The figure is all the more astounding considering it does not factor in mobile penetration. This is evidence that old assumptions about telecommunication development no longer apply.

Despite South Asia’s high telecommunication growth rate over recent years, the official waiting list for a fixed telephone line did not decrease significantly. During the period 1996–2001, while main telephone lines in operation in South Asia grew at 20 per cent a year, waiting lists decreased by only 7 per cent a year. Overall, South Asia’s waiting list stood at 2.6 million at the end of 2001, down from 3.8 million at the end of 1996. In some countries, the waiting lists have actu ally increased. This suggests a high level of suppressed demand in South Asian countries where teledensity is very low. Ironically, the waiting list probably grew because of the rapid telecommunication growth. People who had never signed on before because they did not believe they would ever get a telephone began to change their thinking. Economics also played a role. Per capita incomes grew, raising demand. At the same time, prices dropped in relative terms, also increas ing demand.

The phenomenon of mobile phones surpassing fixed telephone lines has not yet generally occurred in South Asia, except in Bangladesh and the Maldives. Ironically, the former has the region’s lowest fixed-line teledensity while the latter has the highest. In the Maldives, mobiles could be said to have been supplementing fixed lines. Mobile tariffs are relatively high and fixed lines are available on demand on densely populated islands. The introduction of pre-paid service in September 2001 has begun to shift mobile demand from supplement to substitute. In Bangladesh, where there are few fixed telephone lines relative to the population, mobiles are a substitute for telephone service.

In other countries in the region, mobile subscriber growth rates are much higher than the fixed lines growth rate hence it is only a matter of time before the former surpasses the latter. The region will be relatively late to achieve this crossover with several factors holding mobile penetration back. One is a late start with only Pakistan and Sri Lanka having mobile networks in the early 1990s. Another is market structure. India experimented with regional duopolies that proved to be a constraint. Only recently has consolidation occurred, providing the needed economies of scale. In Nepal, mobile service is a monopoly and thus not benefiting from the lower prices and wider coverage achieved through competition. Bhutan has yet to launch a mobile service. Another constraint has been unfriendly billing practices such as Receiving Party Pays, pre-paid cards with less than their face value and short validity dates and national roaming charges. The introduction of Calling Party Pays in Pakistan in 2001 gave a boost to its cellular market, growing it over 100 per cent.

During the past decade there has been a phenomenal increase in the number of public telephone facilities in South Asia. In 2001 the number of public telephone facilities exceeded the one million mark, while only a decade ago there were just over 100 000. In 2001, public telephone facilities accounted for 2.7 per cent of the main lines in operation in the region. Public calling facilities represent a significant contributor to expanding access to telecommunication services.

The Grameen project in Bangladesh is a well-known example. With financing from Grameen Bank, women buy cellphones and provide telephone service in their shops or the local market (see Mobiles in rural Bangladesh). In addition to licensed public telephone facilities, there are numerous technically illegal telecentres in the region reselling telephone service for community access (see Public call office in Nepal).

In Sri Lanka alone, there are an estimated 20 000 unregulated communication centres (compared to 5100 payphones) providing a variety of telecommunication services and some even operating 24 hours a day.

Regulatory environment

Sector reform has transformed the telecommunication landscape of South Asia. Governments of most countries in the region have, in recent years, made significant changes in their approaches to infrastructure development. In particular, private sector participation has been or is being introduced. At present, five out of the seven South Asian countries have granted operating licences for fixed and cellular operations to private operators. Table 2 summarizes the basic structure of the telecommunication services market of South Asia.In total, there are 51 telecommunication operators in the region, including 18 basic service operators and 37 cellular service operators. Out of the seven South Asian countries the Maldives and Sri Lanka, the countries with the highest teledensity in the region, have incorporated strategic investors in their respective incumbent telecommunication operators. Sri Lanka, India and Bangladesh have liberalized their local service sectors by allowing private operators to compete with the incumbents. However, complete competition has yet to occur. The international long-distance sector has not been opened up to competition except India. In the cellular services sector, competition has been widespread. All governments, except Nepal and Bhutan, have taken steps to liberalize this sector.

Universal access

In the last decade, as the region witnessed liberalization and privatization, it became necessary to share the responsibility of meeting the universal access targets between the incumbent government-owned monopolies and new entrants. A country’s commitment to the availability of communication services is usually manifested in the incorporation of universal access goals in its National Telecom Acts, or equivalents, and the establishment of regulatory mechanisms that ensure the fulfillment of these goals. A growing number of regulatory agencies in South Asia oversee the telecommunication sector. Most national telecommunication regulatory agencies have some kind of stated universal access policy goal. In most cases, a rural roll-out obligation or contribution conditions applicable to all licensed telecommunication operators accompanies the universal access policy guidelines. Furthermore, provisions are made so that policy tools such as revocation of licences or imposition of penalties can be used to enforce the universal access conditions. Additionally, most have scheduled specific targets for achieving universal access. In the case of the Maldives, the target was set for 2000, but it was able to provide 100 per cent universal access ahead of schedule by May 1999 (see Leveraging on post offices). Overall, the regulatory framework for universal access provision in the region is already in place. What are lacking are concrete efforts to implement, enforce and monitor developments.

Rural networks

With 71 per cent of its population in rural areas, South Asia is an overwhelmingly rural region. Therefore ensuring access to communications in rural areas should be a prime goal. There are several possible ways of measuring rural access to telecommunications. These include rural teledensity; the number of rural localities with telephone services and mobile population coverage. Rural and urban teledensity are not always available for all countries; however, available data suggests that rural and urban teledensity in South Asia stands at one and nine respectively. Rural teledensity compared to the average urban teledensity of South Asia suggests that rural areas are not adequately served.

However, rural teledensity may not be the best way of looking at the problem. Because incomes are lower in rural areas and the cost of installing a line is much higher than in cities, it is more realistic to expect that telephones in rural areas should be shared. Another way of measuring rural access is to ascertain how many villages have a telephone. Rural South Asia is made up of some 850 000 villages with populations ranging from 50 to 10 000 persons per village. Table 3 summarizes the rural telephone coverage in South Asia.

The numbers are not precise but the message is clear. Some 60 per cent of rural localities in South Asia have access to some kind of telecommunication service. In India, rural telephone access is provided through Village Panchayat Telephones, in Sri Lanka it is available through post offices (see Leveraging on post offices), while in Bangladesh it is provided through the Village Payphone programme. Transposing the number of villages with telephone service to the number of rural dwellers with access is subject to interpretation. One limitation is that none of the countries compiles data on how many rural inhabitants have access to telephone service. One method is to assume that all the inhabitants of a village have access if there is telephone service available and that the most populated villages in a country have been served with telephones. In the latter case, not all the countries have a breakdown of the population distribution across villages. Here we assume that the rural population is distributed equally across villages. Based on this assumption, some 800 million rural dwellers or 83 per cent of the rural population — in South Asia have access to telephone service. These are rough estimates, however they suggest that telecommunication access in rural South Asia is not as lacking as would be reflected by the regional rural teledensity of one.

Access to telephone service is also being expanded through the rapid deployment of mobile service, particularly as competition intensifies. For example, the percentage of the Bangladeshi population covered by a mobile telephone signal has increased tremendously over the last five years since the market was opened. It is estimated that over half the population is within the range of a mobile cellular base station. On a regional basis, roughly 750 million inhabitants of South Asia are within mobile cellular coverage. Ironically, despite the role mobile communications can play in alleviating telephone shortages, few of the governments in the region track mobile population coverage.

Conclusion

Telecommunication infrastructure of South Asia is not as lacking as many make it out to be. During the past five years, there has been unprecedented telecommunications network growth in the region. Practically all inhabitants of urban areas have access to telephone service. For example, India reports that all of its some 5000 cities and towns have access to the telephone network. Sri Lanka notes that telephones are available on demand in all its cities. This suggests that the some 28 per cent of South Asia that is classified as urban has access to telephone service. There has also been improvement in rural access to telecommunications. Roughly 80 per cent of the rural population has access to basic telephone services and over 50 per cent of the population is covered by mobile signal. All together, over one billion inhabitants of South Asia, or 88 per cent of the population, have access to telephone service. 

These are estimated figures given that complete data is unavailable. Of course having theoretical access or being within range of a mobile signal is not the same as actually using telephone service. For many, telephone service still remains unaffordable. For some, they may not even know telephone service is close by. But what these figures do reflect is that restrictions to telephone service are becoming more an issue of economics and awareness. These issues are likely to become even more important as demand shifts from traditional telephone service to Internet access.

The initial steps taken by most countries at opening up their telecommunication markets to the private sector have produced encouraging results in network expansion, and in some cases, in expanding rural access. However, the full potential of the private sector to meet South Asia’s telecommunications needs remains largely untapped. If South Asian governments keep up their commitment to liberalization of the telecommunications sector and universal access, we can expect further improvements. However, the governments need to make greater effort at providing effective incentives for the private operators to expand to less profitable rural markets. Furthermore, the need for better monitoring of rural network expansion and access should be a priority for governments that are genuinely committed to the development of rural telecommunications (see Figure 5).