Telecommunication Sector in India

Telecommunication Sector

The substantial progress made in telecommunications since the early 1990s is a success story. The number of telephone lines has grown by 25-30 per cent each year throughout the 1990s.

The telecommunication sector witnessed revolutionary change in the recent years and the Indian Telecom network is now the second largest in the World after China. From only 76 million subscribers in 2004, the number has increased to more than 1200 million in 2016. The increased has been entirely due to spectacular increase in wireless connections or mobile phones. The number of mobile connections rose from 35 million in 2004 to 1150 million in 2016. Tele density an important indicator of telecom penetration increased from 7 percent in 2004 to 93 percent in 2016.

Telecommunication Reforms

  1. Reform in the telecommunications sector began in 1992-93 with the opening of value added services to the private sector. Subsequently, after intensive deliberation within the Government and outside, the National Telecom Policy (NTP 1994) announced the opening of basic telecom services to competition, and the initiation of cellular mobile services.
  2. Private initiative was to complement public sector efforts to raise additional resources through increased internal generation and the adoption of innovative means like leasing, deferred payments, build-operate transfer, and the like.
  3. The NTP 1994 also envisaged the provision of a public telephone becoming available for every 500 persons in urban areas and at least one in every village.
  4. The method employed for inducing the private sector into both basic and cellular services was through the auction of licence fees, consistent with what has been followed by many other countries. The consequence was that the auction process elicited excessively high bids, even from bidders who had no previous history of substantive telecom experience, or even any other experience. Once the licences had been awarded, and operations had begun, inevitable complaints arose about the licence fees being too high and uneconomic.
  5. Since various developments had taken place in the telecom sector and new issues had arisen, a New Telecom Policy (NTP 1999) was announced. The issues that had arisen during this period related to:
  • Perception of the original licence fee bids having been excessive
  • Inadequate competition resulting from the existence of only two operators in each circle
  • Continuing changes in technology
  • The emergence of India as a significant player in the IT industry
  1. Under the NTP 1999, a package for migration from fixed licence fee to revenue sharing was offered in July 1999 to the existing cellular and basic service providers.
  2. The MTNL was allowed as a third operator to provide cellular services to promote competition. Government opened national long-distance services to private operators without any restriction on the number of operators and with moderate entry fees.
  3. International Long Distance Services were then opened in 2001, also with no limit on the number of operators and moderate entry fees. Both are subject to licence fees being paid as revenue sharing. Thus significant competition was introduced in the Indian telecom market starting in 2000-2001.
  4. The consequence has been dramatic: cellular mobile tariffs have fallen by about 90 per cent since 1999, and long distance tariffs, both domestic and international, fell by 75 per cent between 2000 and the end of 2012.
  5. Corresponding organisational changes also took place during 2000-01. The two service providing departments of the telecom sector were corporatised, viz., Department of Telecom Services (DTS) and Department of Telecom Operations (DTO).
  6. A new public sector company ‘Bharat Sanchar Nigam Limited’ (BSNL) was given all service providing functions of these two departments with effect from October 2000. A fourth cellular operator in all the circles was permitted.
  7. With the introduction of effective competition in the cellular mobile services sector, the Telecom Regulatory Authority of India (TRAI) made cellular mobile tariffs free from regulation while reserving the right to intervene in the case of any malpractice such as the offer of predatory tariffs.

Telecommunication in India: Recent Developments

 

The Telecom Market Segments

 

Telecom subscriber base expansion

 

Wireless Subscription dominates the Indian Markets

 

Market Share of Wireless Service Providers

 

Fixed Line/Land Line Segment

 

Internet Subscription is on the Rise

 

By
Himanshu Arora
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

 

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