Monday, May 28, 2007

Indian broadband lagging

A study has shown that while China's uptake of broadband is accelerating, India's is stalling. The reason is simple. India has yet to liberalize it's telecommunications industry.
Mobile phone companies in India are relatively unregulated and as a result, we see a huge surge in mobile telephones and innovative services to consumers. This has worked miracles by reducing the information barriers for the poorest people - a farmer in India can now decide where to sell his produce (and command the highest possible price) by telephoning his contacts. Consumers can similarly call different sellers and get the best prices. Information parity means efficient markets.

By contrast the old fixed line business is still heavily regulated in India (such as only allowing 74% foreign ownership of Indian telecoms companies, imposing foreign equity caps and prohibitions, complex licensing procedures, high licensing fees and difficult local labor laws). The result is an unbelievably awful fixed line phone system to which anyone who has done business in India can attest (me, for example). It is no wonder that broadband just has not taken off.

Open telecommunications is a great equalizer. It enables information transparency allowing consumers and businesses to make smarter, better informed decisions. It is vital for a country's success. The only way to ensure it is to get rid of regulations. The US has certainly seen the benefits of telecommunications deregulation.

An aside to the US Federal Communications Commission (FCC). The only way to continue to keep the US innovation edge in this area is to start to open up the radio spectrum and to allow ownership of parts of the spectrum instead of the spectrum being declared "public property". Keeping radio spectrum ownership public is a relic of the past when transmission equipment was not precise enough to transmit at a narrow range of frequencies and so radio frequencies had to be allocated in chunks. The FCC should move on. Thanks to the FCC, FM radio was delayed by several years and satellite radio may come under the FCC jurisdiction, stifling innovation there as well. Oh yes, I forgot, privatizing the spectrum would also mean they have less say as to how the spectrum was used and words like "wardrobe malfunction" would become a thing of the past.

Interesting article about privatizing the spectrum and the FCC policy can be found here.

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