A global winner

Dr Ashok Jhunjhunwala

Chennai: Electrical Sciences Block (ESB), dull the name might sound, is housed in one of the nondescript buildings, surrounded by some wild growth, in the Indian Institute of Technology, Madras, compound. Nevertheless, it has an aura.

For, it houses India’s hottest telecom technology group, the Telecommunications and Computer Networks Group (TeNet), an amalgam of IIT-M’s electrical engineering and computer science and engineering departments.

It is TeNet that developed the ‘disruptive’ corDECT wireless in the local loop (WLL) technology that commands a global order book position of Rs 2,000 crore. (See ‘Midas dialling money’).

Today, corDECT is the world’s only WLL technology offering simultaneous voice (telephone) and data (Internet) services. The technology offers a speed of 75 kbps when a subscriber is logged on to the Internet and the speed halves when the telephone is used for making or receiving a call.

Curiously, this service is available in some Indian villages, and not even in metros (See ‘n-Logue’s digital edge to rural India’).

And now work is on at a hectic pace to storm the global markets by further slashing the per line capex by half, to around $100. Worth several million dollars, corDect provides direct employment to around 1,000 people in India and many overseas.

En route to its success, the TeNet group also incubated several technology companies, with their total turnover and market valuation running into some hundreds of crores of rupees. A couple of them have attracted high-profile investors like Analog Devices, a global digital signal processor (DSP) and integrated circuits (IC) major, US-based Intel, and venture funds like Venture East and Sycamore Ventures.

Soon IIT-M will be earning around Rs 70 crore in royalties from the sales of products developed by TeNet group, making it nearly self-sufficient. The annual central grant to this premier technical institution is around Rs 80 crore.

Undoubtedly IIT-M could be termed as the MIT (Massachusetts Institute of Technology, USA) of India, with corDECT being the one shining success story of industry-institute interaction in India. corDECT also tells us the story of grit and determination that is needed to cross hurdles and vested interests.

Making an MIT out of IIT
It started in the late 1980s when the trio — Dr Ashok Jhunjhunwala and Dr. Bhaskar Ramamurthi, both from department of electrical engineering, and their colleague Dr Timothy A Gonsalves, department of computer science and engineering — agreed that telecom was the emerging field and also an area where they could make a difference.

Dr Bhaskar Ramamurthi

“We also agreed that if India had to stand up, it required around 100 million telephone and Internet connections. At that time the country had barely 10 million connections,” says Jhunjhunwala.

Contrary to other academicians, who give two hoots to market economics while designing a product, the professors, keeping the commercial aspect in mind, decided to look at the root cause for the slow growth in the telecom sector.

They found that it cost a minimum of Rs 40, 000 per line as capex. Factoring a finance cost at 15 per cent, 10 per cent depreciation and operation and another 10 per cent for maintenance, an annual revenue of Rs 14,000 was necessary per line just to break even — a sum that a vast majority of Indian homes couldn’t afford to pay.

“If one could reduce the infrastructure cost to Rs 10, 000 per line, almost 50 per cent of homes could afford telephony was what we concluded,” explains Jhunjhunwala. For the West, where the telecom penetration is high and the costs are already low, there was no need to reduce the capital cost. “Their research and development (R&D) focus was on to offer additional features for an extra charge.”

Realising the need for an Indian solution for the Indian problem the three decided to work backwards and develop a cheaper telecom technology on a wireless platform, obviating the need to lay copper cable — a major cost head in traditional landlines.

Around the same time N Vittal, as secretary, department of telecommunications, spoke about increasing telecom penetration in India through wireless telephony. He also encouraged Jhunjhunwala and Ramamurthi to start developing a telecom technology that was suitable for India.

The IIT professors were encouraged, as they were already doing some work on time division multiple access (TDMA) and time division multiplexing (TDM) systems — both wireless telephony technologies suitable for Indian conditions, developed by Sam Pitroda’s Centre for Development of Telematics (C-DOT). The group was also executing the development of a personal computer-based messaging system for Hindustan Teleprinters.

Dr Timothy A Gonsalves

They then contacted some of their former students who were ready to buy their vision and take risks. Six youngsters — Shirish Purohit, Rene Abraham, Sanjay Gupta, Prakash B Khawas, Jawahar P Murugesh and Deepak Khanchandani — bit the bullet by quitting their respective business or jobs. For instance, Gupta and Khawas were with C-DOT and Purohit had his own company Texel Systems, which was sold to the Murugappa group.

“I may sound naïve. What is true is that we all wanted to develop some technology sitting in India. That was the motivating force,” says Abraham, a founder director.

So, in 1994, all the six incorporated the R&D company Midas Communications Technologies, the company that would own the technology. Subsequently Murugesh and Khanchandani quit the company to pursue a career in R&D.

At a chance meeting in Bangalore with Ray Stata, the chairman of US semiconductor major Analog Devices, Jhunjhunwala sold him his vision and business proposition.

Says Stata: “Jhunjhunwala presented a vision on how to substantially lower the cost per line in India through corDECT technology and, thus, ultimately expand the connections there to 100 million lines. Clearly, it was a risky proposition, but one which I believed deserved our support.” So Analog Devices decided to design and supply the chipsets needed for the technology.

While sweat equity was available in plenty, all business ventures require hard cash at some point of time. Once again the TeNet group sold its vision to Crompton Greaves, Himachal Futuristic Communications (HFCL), Shyam Telecom and Electronics Corporation of India (ECIL), and raised money in the form of an advance licence fee.

Shirish B Purohit

“The four companies didn’t lay down any conditions but took the risk of giving us a total of Rs 4 crore as advance licence fee. But payments were based on milestones,” says Shirish B Purohit, CEO, Midas Communications.

But designing a complex system to work 24 hours a day and 365 days a year costing around Rs 10,000 per line was not an easy job as the team didn’t have any such prior experience. The group had to innovate several things.

Says Ramamurthi: “The innovations were many. The architecture was cost-optimised by combining the base station controller and switch, adoption of V5.2 access protocol to enable modular design, compact tower-mounted modular base stations, and a quite different architecture to a cellular network.”

With extensive use of DSPs and software programmes, the hardware expenses were cut and component localisation efforts were followed religiously. For instance, an imported antenna costing $20 was made locally at a paltry cost of Rs 70.

After some delays, the first prototype was installed for trials at the Adyar telephone exchange in Chennai, though overshooting the target cost per line by a few thousand rupees. This infuriated the telecom multinationals. Soon problems and various non-technical issues started troubling the TeNet group (See ‘Tackling side goals’).

Even as the fight was being waged — between the TeNet group on one side and telecom officials and competition on the other — Midas Communications started bagging small overseas orders. The first one was for the supply of 3,700 lines from Madagascar, followed by another small order from Fiji.

Mastering the WLL technology, the TeNet group decided to develop technologies and products that could leverage the existing copper line connections, and floated Banyan Networks to develop a direct Internet access system and some hardware components (See ‘Banyan Networks’ resurgence after changing business plan’).

The group also promoted a couple of technology companies like NMS Works Software (for the development of network management systems (See ‘NMS Works Software to launch CygNet’); Integrated Soft Tech Solutions (high-end software services) and Nilgiri Networks, a software company that has developed a Linux-based technology enabling the small-sized neighbourhood Internet service provider (ISP) business and a billing software for small ISPs.

Technical alliances were also signed with others like Vembu Systems (for development of protocols like V5.2); Object Oriented Programming Services (See ‘OOPS WeSee to go with corDECT’) and Chennai Kavigal Kanini (language software interface).

Not losing sight of its mission statement, ‘towards a hundred million telecom and Internet connections in India’ and providing world class cost-effective telecommunication services to rural India, the TeNet group floated n-Logue Communications, a category A ISP.

In terms of ownership, there is not much of cross holdings among the TeNet companies. Curiously, none of the TeNet faculty members hold stakes in the companies incubated by them.

The reason: they don’t want to be looked down upon by their colleagues as people going after money. The group holds its stakes through Swabiman Trust, and a company called Vishal Bharat Com Net.

What next?
The successful global commercialisation of corDECT got the Padma Shri award to Jhunjhunwala. Further, the group is now attracting big names in the telecom industry (See ‘TeNet begins netting big names in Indian telecom industry’). Nevertheless, the TeNet group is not resting on its laurels and is busy working on enhancing the service features of this disruptive technology.

Says Ramamurthi: “corDECT evolution to lower cost points with ever-improving performance is already mapped. Always-on Internet connectivity at 35/70 kbps, 384 kbps downstream speed, Rs 1,500 per line multi-line option, larger capacity per system are being planned. A new chipset is being developed for this.”

More importantly, the team is now working to halve the cost per line to Rs 5,000, which is easier to install and gives higher speed Internet in addition to voice.

This has made Jhunjhunwala and his team enlarge their ambition towards making India a telecom powerhouse with 200 million telephone connections with a capacity to offer voice (telephone) and data (Internet) facilities across the entire length and breadth of the country.