September 24, 2007

In India, Rural Poor Are Key To Cellular Firm's Expansion

Heat, High Costs Pose
Problems for Towers;
Mr. Price's Innovations
September 24, 2007; Page A1

GURGAON, India -- Don Price got his start in the cellphone industry in the 1980s installing clunky phones in luxury cars in Orlando, Fla. Today, most of his millions of prospective customers don't have cars, regular electricity or even running water.

The 44-year-old former Navy technician is the director of networks for India's largest cellular company, Bharti Airtel Ltd., which is trying to blanket this hot, mostly poor country with radio towers. Mr. Price spends his time directing experiments with cold-gel packs and solar panels in an effort to solve a puzzle: How to make service cheap enough for the rural poor, yet profitable? "When you look at cost, it is really a challenge," he says.

Eric Bellman
In July, Bharti Airtel commissioned one of its newest towers in a village 300 miles from Mumbai. To let the villagers know service had arrived, Bharti staged a traditional dance performance next to the new tower.

Cellular providers initially tapped developed markets, and when those were saturated, big cities and suburbs in the developing world provided easy growth. But to expand further, cellular companies want to reach hundreds of millions more potential customers who live outside the main population centers.

Almost two billion new subscribers are projected to start using mobile phones in the next five years, and 80% of them live in developing-world markets, according to estimates by Sweden's Telefon AB L.M. Ericsson. In India alone, more than seven million new cellphone subscribers recently have been signing up each month, bringing the total close to 200 million subscribers in a country of 1.1 billion.

The economics of that growth get dicey. Indian cellular companies charge less than two cents a minute, among the lowest rates in the world, and the average bill is under $10 a month compared with about $50 in the U.S. The more that cellular companies penetrate India's rural areas, the higher the costs to set up and maintain networks. Yet rural customers, living on an average of less than $2 a day, tend to spend even less on phone service than their wealthier urban counterparts. Only companies that can cut costs while expanding their networks can profitably pursue the untapped market.

India, with most of its people living in villages in the countryside, has become a laboratory for how to make networks work cheaply in areas where hot climates and unreliable electricity drive up costs. As companies figure it out here, their successful experiments are being exported to other developing regions including Africa and Southeast Asia.


The Finnish-German joint venture Nokia Siemens Networks is testing new, small antennae that can be stuck to the roof of a hut to bring service to a tiny village. India's Essar group is experimenting with liquefied petroleum gas to replace more expensive diesel fuel to run backup generators. Ericsson and India's Idea Cellular Ltd. are jointly testing some unusual alternative fuels: They have abandoned the idea of using methane "biogas" generated in pits of cow dung and water, and are experimenting with using waste oil from deep fryers at restaurants.

At Bharti, Mr. Price says he has trimmed the cost of running its towers by 10% a year since he joined the company in 2002. Company officials declined to discuss figures but said he had achieved a "healthy reduction." That's made it commercially viable for Bharti to add 20,000 towers in the next six months to the 50,000 it operates. Bharti's competitors are also expanding rapidly. In the U.S., companies need far fewer towers because they operate a more effective frequency that in much of India is reserved for the military. T-Mobile U.S.A. Inc. has 36,700 towers, for instance, and Verizon Wireless only 25,000.

Even more Bharti towers are on the way. "We are trying to get deeper and deeper into India, but we have a long way to go," Mr. Price says in an interview at Bharti headquarters in a suburb of New Delhi. "We will have 70,000 sites by March 2008, but a couple hundred thousand is what we need."

Already, Bharti is reaching customers whom it didn't consider worth pursuing not long ago. In July, Bharti commissioned one of its newest towers in the sleepy village of Madilage, about 300 miles south of Mumbai. To let the villagers know cellular service had arrived, Bharti staged a traditional dance performance on the back of a truck parked under the new tower. About 500 villagers -- a fifth of the local population -- gathered to watch the show and learn how cellphones work. "Incoming calls are totally free!" announced the Bharti emcee.

Peanut farmer Sandeep Pati, 23 years old, is one of the first subscribers in Madilage, but his investment -- he says he spends less than $20 a month on calls -- is already paying off. He rents out his tractors to other farmers and his cellphone means he can arrange more rentals quickly with less downtime. "I can run my business even from the field," says Mr. Pati outside his simple home, where his water buffaloes sleep on the ground floor below his bedroom. "When I had problems with the tractors before, we would just have to leave it where it was for a day, now I can call and get it fixed right away."

[Don Price]

Mr. Price, who grew up in Portland, Ore., entered the telecommunications business almost by accident. After his stint in the Navy where he got a crash course in electrical engineering and communications equipment, he went to work in his family's import car business in Orlando. He got hired by McCaw Cellular Communications to help install car phones, then after more training he helped McCaw set up its first towers around Orlando and was gradually promoted to help build new networks across the U.S. After McCaw was sold to AT&T in 1994, Mr. Price stayed with company founder Craig McCaw's new company, McCaw International, and built networks in China, Indonesia and the Philippines.

Mr. Price was back in the U.S. working as a technical supervisor at McCaw company Nextel Partners Inc., (since acquired by Sprint Nextel Corp.), in Pensacola, Fla., when Bharti's chairman, Sunil Bharti Mittal, asked him to come to India to be his networks director in 2001. Mr. Mittal -- who now plans to build a big Indian retail company with the help of Wal-Mart Stores Inc. -- had been scouting Mr. Price for years because of his experience setting up networks in developing markets.

He knew he enjoyed living abroad, but he wasn't sure if he was ready for India, with its power interruptions and cows roaming the streets. Mr. Mittal sent him plane tickets to come to New Delhi for a weekend to get a better feel for India and the company's big plans for its cellular business, which then had less than a million customers. Mr. Price was impressed, but says it was the 18-hole Arnold Palmer Signature golf course near Bharti's office that convinced him to take the job.

Mr. Price's arrival in 2002 coincided with increasing competition in India's cellular industry, as the government eased restrictions on entry into the business. Newcomers -- including one of India's largest conglomerates, Reliance Group -- launched national networks and slashed rates to capture customers.

At a meeting in a hotel near the Taj Mahal that year, Bharti's managers realized they couldn't outspend their new competitors or afford to sell their service at a loss for very long. They decided to cut operating costs to try to maintain profit margins even as rates slid. Rivals also had to look for new ways to cut costs to survive.

Mr. Price focused on transmission towers, the backbone of every cellular network. In India, they usually stand 130 feet high; one tower is needed to provide a signal for an area ranging from three to nine miles in radius depending on the equipment and terrain.

Electrical equipment at the base of the towers needs power as well as air conditioning to operate in India's extreme heat, and India's frequent power outages mean the towers need backup generators as well. "We had to budget for eight hours a day on generators," says Mr. Price. "That was a killer." Running them on diesel is expensive and the valuable fuel is often pilfered.

Mr. Price's managers suggested installing big backup batteries to last through power outages and using stacks of chemical-gel cooling packs to replace electric-powered air conditioning. An Indian company, Acme Tele Power Ltd., helped Bharti develop both, and now is making the parts in China and exporting the technology to Sri Lanka, Tanzania, Indonesia and Kenya. Mr. Price also persuaded Bharti's suppliers to shrink their equipment so it requires less power, and is experimenting with solar and wind energy.

The cost of building and equipping a Bharti tower has dropped around 40% to $75,000, while the time the average rural site runs on diesel generators has been slashed to four hours a day from eight, Mr. Price says.

Bharti has survived the competition and emerged as India's largest cellular operator by number of subscribers, now 47 million, and a 28% share of the market. In the year ended March 31, earnings jumped 89% to $1.06 billion, as its net profit margin rose to 23.0% from 19.4% a year earlier.


Its Indian rivals are innovating as well. Essar Telecom Infrastructure Ltd., which manages towers for cellular provider Vodafone Essar Ltd. and others, is building towers with lighter steel and more efficient designs to reduce construction costs. It's also working on running its towers on liquefied petroleum gas, which is cheaper than diesel.

Reliance Communications Ltd. plans its own massive tower rollout this year. It is using factories in China to build easy-to-assemble tower kits for export to India to double its coverage. Companies in India are also beginning to explore ways to share their infrastructure to cut costs, as cellular operators regularly do in developed markets. Now, there are as many as four towers in one spot. Ericsson also has developed what it calls "expanders" to extend the coverage of each tower antenna by 30%. The technology, partly developed in India, is now being used in Nigeria and Bangladesh.

Mr. Price and other executives in the Indian cellphone industry say they have been consistently surprised by the pent-up demand for phone service in the country's hinterland. Often, when Bharti's new towers go into operation, the added capacity is quickly overwhelmed with new users.

Mr. Price points to the state of Bihar -- one of India's poorest regions, where half the population of around 90 million lives below the poverty line -- as one of Bharti's fastest growth areas. "In the whole state of Bihar we cannot put in the sites fast enough," he says. "It is rocking. It is just rocking."

Such success is gratifying for Mr. Price, who got a taste for the rough side of expatriate life when he first arrived in India. With regular blackouts in his apartment and such persistent stomach problems that he lost 40 pounds, he didn't know if he could see out his first two-year contract. "My best friend was the gastroenterologist," he recalls.

Now, Mr. Price spends long weekends every other month on his 43-foot yacht off the coast of Thailand. He says he has no plans to leave India anytime soon.

--Tariq Engineer contributed to this article.

September 23, 2007

Bilbao, 10 Years Later

A LIGHT patter bounced off the titanium fish scales of the Guggenheim Museum in Bilbao as a tour bus pulled up beside "Puppy," Jeff Koons's 43-foot-tall topiary terrier made of freshly potted pansies. A stream of tourists fanned out across the crisp limestone plaza, tripping over each other as they rushed to capture the moment on camera. After the frisson of excitement dimmed, they made their way down a gently sloping stairway and into the belly of the museum, paying 10.50 euros to see the work of an artist that most had never heard of.

It was a ritual that repeated itself several times an hour, like a well-run multiplex. And if Anselm Kiefer, the controversial post-war German artist, was eclipsed by the metallic blob that held a retrospective of his work, consider how Bilbao, a rusty port city on the northern coast of Spain, stacked up to the very museum that put it on the cultural map.

"We don't know anything about Bilbao besides the Guggenheim," said Luigi Fattore, 28, a financial analyst from Paris, who was taking pictures of his girlfriend under the puppy. As if to underscore the point, they showed up at the museum's doorstep with their suitcase in tow. "We've arrived half an hour ago," he said, "and went straight to the Guggenheim. Aside from the museum, we don't have any plans."

Such is the staying power of Frank O. Gehry's architectural showstopper, 10 years after it crash-landed on the public psyche like a new Hollywood starlet. The iridescent structure wasn't just a new building; it was a cultural extravaganza.

No less an authority than Philip Johnson deemed it "the greatest building of our time." The swooping form began showing up everywhere, from car ads to MTV rap videos, like architectural bling. And in certain artistic and architectural social circles, a pilgrimage to Bilbao became de rigueur, with the question "Have you been to Bilbao?" a kind of cocktail party game that marked someone either as a culture vulture or a clueless rube.

"No one had heard of Bilbao or knew where it was," said Terence Riley, director of the Miami Art Museum and a former architecture and design curator at the Museum of Modern Art in New York. "Nobody knew how to spell it."

September 14, 2007

From Hardcover to Paper, How a Blockbuster Was Born

When Pearson PLC's Viking imprint published Elizabeth Gilbert's memoir "Eat, Pray, Love" early last year, it printed 30,000 copies -- only 5,000 more than the total U.S. hardcover sales of her previous release. "We had high hopes, but we didn't put it out in best-seller numbers," says Viking Publisher Paul Slovak.

The title -- a chatty recounting of the author's divorce, spiritual search and self-redemption as she traveled the world -- was the fourth for Ms. Gilbert, a former writer at GQ magazine. Although her work was well-reviewed, Ms. Gilbert was considered a mid-list author, talented but not a proven seller.

Then a strange thing happened: The paperback edition of "Eat, Pray, Love," published in January, quickly gained must-read status. Women everywhere, it seemed -- on trains, planes and exotic beaches -- were suddenly entranced, making it this summer's break-out publishing hit. The book has had a 32-week run on the New York Times paperback nonfiction best-seller list, where it currently occupies the No. 1 position. Paramount Pictures acquired the movie rights for actress Julia Roberts. The author says a sequel is already in the works.

September 11, 2007

The Insurance Hoax

Julie Tunnell remembers standing in her debris-strewn driveway when the tall man in blue jeans approached. Her northern San Diego tudor-style home had been incinerated a week earlier in the largest wildfire in California history. The blaze in October and November 2003 swept across an area 19 times the size of Manhattan, destroying 2,232 homes and killing 15 people. Now came another blow.

A representative of State Farm Mutual Automobile Insurance Co., the largest home insurer in the U.S., came to the charred remnants of Tunnell's home to tell her the company would pay just $220,000 of the estimated $306,000 cost of rebuilding the house.

"It was devastating; I stood there and cried," says Tunnell, 42, who teaches accounting at San Diego City College. "I felt absolutely abandoned."

Tunnell joined thousands of people in the U.S. who already knew a secret about the insurance industry: When there's a disaster, the companies homeowners count on to protect them from financial ruin routinely pay less than what policies promise. Insurers often pay 30-60 percent of the cost of rebuilding a damaged home--even when carriers assure homeowners they're fully covered, thousands of complaints with state insurance departments and civil court cases show.

Paying out less to victims of catastrophes has helped produce record profits. In the past 12 years, insurance company net income has soared--even in the wake of Hurricane Katrina, the worst natural disaster in U.S. history. Property- casualty insurers, which cover damage to homes and cars, reported their highest- ever profit of $73 billion last year, up 49 percent from $49 billion in 2005, according to Highline Data LLC, a Cambridge, Massachusetts-based firm that compiles insurance industry data.

September 10, 2007

Jobs Abroad Support 'Model' State in India

TRIVANDRUM, India — This verdant swath of southern Indian coastline is a famously good place to be poor. People in the state of Kerala live nearly as long as Americans do, on a sliver of the income. They read at nearly the same rates.

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Border Crossings

Lost Luster

This is the fourth in a series of articles examining global migration and its consequences.

James John Pereira with his wife, Hilda, right, daughter Jacqueline, left, and a granddaughter, Reshma. Three of Mr. Pereira's children and Jacqueline's husband work abroad.

With leftist governments here in the state capital spending heavily on health and schools, a generation of scholars has celebrated the "Kerala model" as a humane alternative to market-driven development, a vision of social equality in an unequal capitalist world. But the Kerala model is under attack, one outbound worker at a time.

Plagued by chronic unemployment, more Keralites than ever work abroad, often at sun-scorched jobs in the Persian Gulf that pay about $1 an hour and keep them from their families for years. The cash flowing home now helps support nearly one Kerala resident in three. That has some local scholars rewriting the Kerala story: far from escaping capitalism, they say, this celebrated corner of the developing world is painfully dependent on it.

"Remittances from global capitalism are carrying the whole Kerala economy,"

September 7, 2007

Anti-Semitism and the Anti-Israel Lobby

A crop of Israel's critics -- most prominently Jimmy Carter and now Stephen Walt and John Mearsheimer, the authors of "The Israel Lobby and U.S. Foreign Policy" -- have managed something of a feat: They express no concerns about the massive pro-Arab effort, funded in significant measure by foreign oil money, taking American Jews to task for participating in the American political process; meanwhile, they inoculate themselves against charges of anti-Jewish bias by pre-emptively predicting that "the Jewish lobby" will accuse them of it. 

Messrs. Walt and Mearsheimer, in particular, have been heralded by Israel's critics for their "courage" in attacking American Jews, who have allegedly "strangled" criticism of Israel. Their case seems one part laughable, and one part eyebrow-raising.

An anecdote from my own experience with the anti-Israel lobby may shed some light on the absurdity of the Walt-Mearsheimer offensive. Not long after Sept. 11, 2001, I received a call from a major defense contractor asking for a favor. I was serving as president of the Boston chapter of the World Affairs Council, a national organization that debates foreign policy, and the defense contractor was one of the Council's principal sponsors.

The Saudi Arabian government was sponsoring a national public relations campaign to cultivate American public opinion, and was sending Saudi emissaries around the country to make the case that Saudi Arabia was a tolerant, moderate nation worthy of American support. Would the Council organize a forum of Boston's community leaders so that the Saudis could make their case?

While this was patently no more than a Saudi lobbying effort, we organized the forum, and it was well-attended by precisely the slice of Boston's political and corporate elite that the Saudis and their defense contractor benefactor had hoped for. The Saudis maintained that their Kingdom should be regarded as a promoter of Middle East peace, and that the abundant evidence that Saudi Arabia was in fact promoting a virulent brand of extremist Islam should be discounted.

Saudi Arabia paid for the trip of its emissaries to Boston, for the Washington, D.C.-based public relations and lobbying company which organized the trip, and for the Boston public relations and lobbying company that handled the Boston part of the visit. And it drew upon the resources and relationships of the defense contractor, which sells hundreds of millions of dollars of military equipment to Saudi Arabia, to support and orchestrate its public relations effort.

The billions in petrodollars Arab states spend in the U.S. for defense, construction, engineering and consulting contracts position them nicely to win friends in high places, and friends are what they have. That is true all over the world, is true in this country, and has been true for quite some time. As U.S. Secretary of State Cordell Hull noted 60 years ago, "The oil of Saudi Arabia constitutes one of the world's great prizes." His successor, Edward Stettinius, opposed the creation of a Jewish state in the Middle East, stating "It would seriously prejudice our ability to afford protection to American interests, economic and commercial . . . throughout the area."

The Saudis and their allies have not been shy about supplementing their considerable leverage in the U.S. by targeting expenditures to affect the debate over Middle East policy by funding think tanks, Middle East studies programs, advocacy groups, community centers and other institutions.

To take one obvious example, just last year Saudi Prince Alwaleed bin Talal donated $20 million each to Harvard and Georgetown Universities for programs in Islamic studies. Prince Alwaleed, chairman of a Riyadh-based conglomerate, is the fellow whose $10 million donation to the Twin Towers Fund following the Sept. 11 attacks was rejected by then-Mayor Rudolph Giuliani after the Saudi Prince suggested that the U.S. "re-examine its policies in the Middle East and adopt a more balanced stance toward the Palestinians."

Georgetown and Harvard had no apparent qualms about accepting Prince Alwaleed's money. The director of Georgetown's newly-renamed Prince Alwaleed bin Talal Center rejected any suggestion that the Saudi magnate was attempting to use Saudi oil wealth to influence American policy in the Middle East. "There is nothing wrong with [Prince Alwaleed] expressing his opinion on American foreign policy," he said. "Clearly, it was done in a constructive way."

In other words, for those who accept the Arab line on the Israel-Arab conflict -- namely, that it is the product of Israeli intransigence in some form or another -- the increasing proliferation of Middle East-funded enterprises all across the country aimed at advancing the Arab view of the conflict constitute "nothing wrong." Nor are those hewing to the anti-Israel line troubled by the way in which the massive Islamic bloc of nations, by dint both of their number and their economic leverage over the rest of the world, are able to guarantee an incessantly anti-Israel agenda at the United Nations and other international fora.

Although the aggressive deployment of petrodollars and oil-based influence from foreign sources aimed at advancing a pro-Arab line constitutes "nothing wrong" as far as Israel's critics are concerned, a new political fashion holds that there is something very wrong indeed about American Jews and other American backers of Israel expressing their support for Israel, and urging their political leaders to join them in that support.

Our major newspapers and networks, with correspondents in Israel able to take advantage of an Israeli political system that is a free-for-all and an astonishingly vibrant and self-critical Israeli press, report daily on every twist and turn of the conflict and are very frequently critical of Israel. As for American campuses, most objective observers would have little difficulty concluding that far from being criticism-free, they are in fact dominated by critics of Israel. Clearly, as strangleholds on criticism go, whatever stranglehold the pro-Israel community has on debate in the U.S. is a very loose one indeed.

If the charge that American Jews are able to stifle criticism of Israel is simply silly, the leveling of the charge that there is something nefarious about Jews urging support for the Jewish state raises questions about whether Messrs. Walt and Mearsheimer have descended into a certain ugliness. And the tactic of trying to neutralize those questions by loudly predicting that they will be asked, however clever a tactic it may be, does not neutralize them.

It is apparently the authors' position that, even in the face of the overwhelming leverage of an Arab world swimming in petrodollars, with a lock on the U.N. and an unlimited ability to pay for pro-Arab public relations, American Jews are obliged to stay silent. In essence, Messrs. Walt and Mearsheimer have repackaged the "the-Jews-run-the-country" stuff which has long been the bread and butter of anti-Semites.

Messrs. Walt and Mearsheimer deny that they are anti-Semitic, and that is certainly good news. But where they are apparently content with foreign oil money being used to advance a pro-Arab position on the Middle East, but devote themselves to criticizing American Jews for lobbying their public officials in support of the Jewish state, one may legitimately wonder what phrase would apply. Surely, one's denial that he is anti-Semitic, while welcome, is hardly dispositive; after all, the marked increase in anti-Semitism around the world is well-documented, and yet one rarely hears anyone actually announce that they are anti-Semitic, or that their views are anti-Semitic.

But if anti-Semitism is too harsh a term, and if the word "bigoted" is also taken off the table, perhaps one can be forgiven for concluding that "anti-Jewish bias" fits the bill here. After all, where there is nothing wrong with foreign money from Arab countries advancing a pro-Arab agenda in Messrs. Walt's and Mearsheimer's world -- but there is something very wrong with American citizens who are Jewish exercising their civic right to speak out on behalf of Israel and taking issue with the pro-Arab agenda -- even the most vehement disclaimers of any bias against Jews lack a certain credibility.

The potency of the Middle East-funded anti-Israel lobby around the world and in the U.S. is difficult to ignore. Yet, Messrs. Walt and Mearsheimer and others who adhere to an anti-Israel line ignore it. In and of itself, this is not surprising. When at the same time they portray American Jews' efforts to make the case for Israel as morally suspect, however, they open themselves up to reasonable charges of something far more troublesome than mere hypocrisy, and that is anti-Jewish bias, by whatever name.

Mr. Robbins, a U.S. Delegate to the U.N. Human Rights Commission during the Clinton administration, is an attorney at Mintz, Levin in Boston.

September 6, 2007

India's middle class failure

India's middle class has been a dynamic presence in the business world, but its lack of interest in the political sphere bodes poorly for the country's future, says a scholar of South Asian politics and culture. Much of the Indian middle class doesn't think political change is necessary or possible, says Chakravarthi Ram-Prasad in Britain's Prospect magazine. India's middle class—which he defines as the 200 million or so people who have a telephone, a motorized vehicle and a color television—focuses mainly on improving its children's earnings. The middle class supports government spending on higher education to gain an edge in the knowledge economy, but not on primary education that would help its poorest citizens.

Prof. Ram-Prasad, a professor of comparative religion and philosophy at Britain's Lancaster University, cites as typical the views of some Indian information-technology professionals in a recent focus group he conducted. They dismissed political activity as dishonest. They thought the most effective way to make a difference was to donate money to their companies' charities. In general, the middle class holds political parties in equally low esteem.

Without greater pressure from the middle class to reform the country's political and social structures, it is hard to see how India's hundreds of millions of poor will see their lives improve markedly. "Middle-class skepticism about the capacity of the state is understandable, but is also at the root of India's troubles," Dr. Ram-Prasad writes. He notes that the most politically active Indians tend to be those who are poor, though not destitute. With much of the middle class remaining apolitical, it is possible that real reform in areas like prejudice against lower-caste members of society lower castes will only come from nascent political coalitions that manage to lump together the votes of more marginalized populations. Robin Moroney

India's 200m-strong middle class is the most economically dynamic group on the planet, but is largely uninterested in politics or social reform. Until it begins to engage politically, India will suffer from a lop-sided modernisation