Telecom Outlook 2003

December 14, 2002
Asia-Pacific emerges largest growth centre for Telecom

Rajendra Prabhu

HONGKONG -- The ITU publication the Asia-Pacific Telecommunication Indicators 2002 released at the ITU Asia-Pacific conference at Hong Kong is both a documentation of a global trend in which the weight of economic growth is shifting to this region slowly but surely and a celebration of the event. g Telecommunication is the best indicator of this shift.

Consider the following facts: The number of telephone subscribers in the region- fixed and mobile put together- accounted for 36 per cent of the world total. Ten years earlier the region accounted for only 22 per cent. The region may have been way behind the OECD countries ten years back but it is rapidly catching up even though the gap is still large. For instance, the region accounts for 58 per cent of the world's population but already it has 40 per cent of the world's total number of new telephone subscribers. Says the ITU publication: " it is the only region to have increased its market share significantly, adding more than one telephone user every second for the last decade."

As the global telecommunications epicentre - and eventually the global economic centre- shifts to Asia-Pacific region, the two trillion dollar telecommunications industry is seeing this region as the market of opportunity since the turn of the century. Australia, Japan and New Zealand and Hong Kong (Special Administrative region of China) had a teledensity close to 50 in 1991. In ten years four more countries have surpassed this level. These four, Republic of Korea (South Korea), Singapore and Taiwan are so forward in deploying the latest technologies that they are dictating the pace of global telecom technology deployment.

In these three countries alone the pace of deployment is stunning.

Korea: Population 46.79 million, per capita income 10,036 dollars and teledensity 110 (fixed and mobile together).
Singapore: 4.13 million, 23,137 dollars, 119 per cent.
Taiwan: 22.41 million, 13,819 dollars, 154 per cent.
Hong Kong: 6.76 million, 24,136 dollars, 143 per cent.

But astounding is the growth that the largest country in the region and in the world (population wise), China is demonstrating. Despite a population of 1.3 billion and a per capita income of only 834 dollars, by year 2001, the country had installed 325 million telephones 9 both fixed and mobile together) and has a teledensity of 24.77 per cent. This is in line with the swift change over to the market economy in China despite the politically restrictive communist regime.

The perception of China as the power house of the future and as a burgeoning market, is drawing all the MNCs in the infrastructure sector rushing for a toehold in that country. It also draws a comparison with democratic India and the comparison is not very flattering to us. At the ITU sponsored exhibition in Hong Kong, Chinese pavilion occupied the centre stage with nothing of Marxism in it but all tricks of the market economy with liveried girls, neon lights and laser shows.

Compared to China's 325 million lines, India installed only 45 million lines by 2001 for a population of 1 billion, very near that of China. Of course India's per capita income is half that of China- which again does not speak well for us. Our pavilion at the ITU show - though a more respectable presence than any time before in such shows- was still far behind the Chinese. But significantly Indian lack of efficiency is projected when the number of main lines serviced by each telecom employee is compared in India and China. In India each employee services 91 mainlines while his counterpart in China services 159 lines, in Malaysia it is 219 per employee, in Korea it is 336 lines per employee. It is a wake up call for Indian telecom specifically and Indian economy generally.

More Mobiles than Fixed Phones
Another significant feature of the Asia-Pacific region is that the mobile phone growth is far exceeding fixed line growth, suggesting that the region is joining the global trend of the mobile communication economy. The ITU says " while five years ago the focus might have been on main telephone lines and international voice traffic, today the emphasis has shifted to the Internet and mobile communications and to high-speed broadband networks. Future networks will be Internet Protocol based and it seems only a matter of time before circuit-switched networks disappear." In many Asian countries with low income, such as Cambodia, there are more mobiles than landline telephones.

The perception that in the Asian countries village populations with access to telephone service, is very low, is challenged in the ITU indicators. In India 98 per cent of the village population is shown as having access to telephone service even though the teledensity as such is very low in villages. In Bangladesh it is 30. Access to telephone service is different from owning a telephone and means that they could get to a public telephone within a reasonable distance. Of course it does not necessarily mean that 98 per cent of the village people do use the telephone. That per centage continues to be extremely low in villages.

Asian leadership in mobile telephone services has begun to challenge the level attained in Europe and the West. Cellular penetration rates have exceeded 50 in Japan, Australia, Korea (South) and Singapore while in Hong Kong and Taiwan it is as high as 84 and 96 per cent. Japan has become the global leader in featuring data and video on mobile including Internet with Third Generation services already started while in Europe operators are still debating over the laying of 3G networks. Korea has become global leader in broadband services while Americans are still experimenting with it. Even China is moving towards 3G networks.

Mobile with Internet
Day after day experts are saying that the preferred telecom way in Asia will be the mobile enabling the Asia-Pacific region to leapfrog the mainline telecommunications of the 20th century. Mobile with access to Internet on the Mobile terminal is opening up an entirely new market with next generation networks being laid in preference to the old circuit switched networks and the market flooded with new mobile terminals the latest ones equipped with tiny cameras that enable user to record the scene as he talks into the phone and then either store the pictures or transmit them.

Asian Contrast
Interestingly, while the telecom equipment makers and operators in Europe and America like Alcatel, Ericsson, Nokia, France Telecom, British Telecom, Deutsche Telecom, AT&T, Lucent etc., are sinking in debt and loss, Asian operators and equipment makers like NTT, Huwaei, Samsung, LG, etc, are going strong. Nearly 60 per cent of Korean mobile users and 72 per cent of Japanese mobile users are now having access to Internet in their mobile while in US it is only less than 8 per cent and in UK less than seven per cent. In intensity of Internet use also some of the Asian countries like Korea, Hon Kong (SAR of China) surpass US.

"Asia-Pacific region is witnessing an explosion of international Internet bandwidth" says the ITU quoting high software exports from India, top broadband usage in Korea and contents explosion in Japan. International Internet capacity in the region now far exceeds conventional telephone capacity.

Internet Popularity Grows
The Asian people are quickly catching on to the opportunity offered by Internet to improve their educational and professional skills. Even in Indonesia 35 per cent of Internet users are high school students
in China it is 30 per cent. In Korea, Singapore, Malaysia, Internet penetration in schools is very high and is growing. Singapore has mandated entire education process through computers and wired every home to enable all families to set up home computers to help with home work of their school going children. In all these three countries school enrolment at primary level is 100 per cent of the eligible population with Korea having an Internet penetration of over 52 per cent. The ITU says that at the tertiary level of school education the pay off for using Internet is the highest and advises developing countries to go in for such an investment to conserve their limited resources. "There are several advantages for introducing ICT use at a young age." Malaysia plans to convert all of its 9000 primary and secondary schools into "smart" ones before 2010.

All these programmes are to be viewed in the context of the projected huge skills gap in the availability of skilled labour force for the developing nations to transit into the Information Society. Referring to the expansion plans of most of the developing countries, the ITU says "it seems a safe bet that the Asia-Pacific region will continue to grow at a rapid pace."