Hope floats for 40-year-old Rajinder Singh Pal, a public call office (PCO) owner in

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east Delhi’s Mayur Vihar, who’s been running his telecommunications business for the past 12 years. That’s a long time in India’s telecom evolution, which started 15 years ago, and Pal has witnessed its impact, particularly on his business.

“Earlier, I used to get about 40-50 customers a day. Now, I am lucky if 10-12 come along,” he says.

Of late, though, Pal is seeing a glimmer of hope for his business, with the advent of 3G telephony that will enable video calls. “Ericsson approached me with a proposal to supply 3G-enabled handsets for customers who wish to speak to their families in other states about three to four months back and since MTNL (his PCO’s access provider) already has 3G services, I decided to give it a try,” he said.

This could well be a new lease of life for India’s millions of PCOs, which with their advent in the 1980s, came as a boon to the Indian consumer who often had to wait indefinitely for a personal landline connection. The proliferation of PCO booths enabled people across different socio-economic strata to connect through telephony and many probably made their first call through a PCO rather than a home phone.

But PCOs began to experience a slow death as India’s mobile phone market exploded to over 700 million cellphone connections in a country of 1.2 billion people.

Several PCOs shut shop, changed business interests or added other services like photocopying, internet or grocery supply to sustain themselves. Ericsson India’s in-house research pegs the number of PCOs across the country at five million at the end of December 2009, and they are decreasing 10 per cent year on year.

According to the 2008-09 annual report of the Telecom Regulatory Authority of India (Trai), the number of PCOs increased just 0.25 per cent from March 2008 to March 2009, from 6,185,904 to 6,201,441. In the previous year, the growth was 11.51 per cent, from 5,547,336 to 6,185,904.

Cities such as Delhi and Mumbai have shown a decline in the number of PCOs. At the end of March 2007, Delhi had 91,510 PCOs under MTNL, which fell to 82,692 in March 2008 and to 75,493 a year later. Similarly, in Mumbai, the number of MTNL PCOs fell from 168,567 to 156,643 to 137,409.

Ericsson appears to have chosen its market well. The area where Pal operates has thousands of labourers from Bihar who earn their bread by plying cycle rickshaws or selling fruits and vegetables. Many of them have left their families behind in search of a better future.

“This activity was started in September 2009 with market research on the PCO business to understand their customers and their communication needs. The pilot on the ground started in mid-July with paid calling services starting in mid-August 2010,” said Ericsson India’s VP, communications, corporate affairs and business development, P Balaji. The pilot project, called Amne Samne or Face to Face, brings upfront the 3G element.

Currently, the company has tied up with eight PCOs – four in Delhi and four in Bihar’s Begusarai district targeting the migrant population who wants to remain in touch with families day to day. According to Balaji, the areas for the pilot project were chosen after studying the movement of migrants.

The company has tied up with both MTNL and BSNL, the two largest PCO operators who also offer 3G telephony across India. PCO owners charge one rupee per minute from customers at both ends, while BSNL’s tariff is 75 paise per minute. As of now, the handsets are supplied by Ericsson, a practice the company intends to discontinue after the national commercial rollout.

Ericsson India is also in talks with other private sector operators for a tie-up. “We have showcased this concept to operators and they have shown interest. It is now up to them to take it forward once the 3G infrastructure is ready,” said Balaji.

Private 3G operators have since talked of innovative solutions to drive volumes in a business seen traditionally associated with premium tariffs.

For now, Pal has only invested in a pre-paid card, the amount for which will also be reimbursed by the company, according to him. He gets daily about two to three customers who make video calls, but there could be days when no one turns up (this correspondent went thrice over two days at different times of the day but not one customer turned up to make a video call). “There are also some issues with connectivity,” said Pal.

Those, however, could be teething troubles in a concept that is a direct spinoff — and one that may not have been intended —of India’s 3G telecom evolution, which is expected to give a much needed boost for the country’s leading telecom companies that haven’t exactly been in the pink of financial health of late. The Face to Face project might well lower the entry cost barriers to 3G telephony and raise volumes faster than anticipated.