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Telecom Sector in India since liberalization

Indian telecom industry underwent a high pace of market liberalization and growth since the 1990s and now has become the world's most competitive and one of the fastest growing telecom markets. The Industry has grown over twenty times in just ten years.

It all started with Sam Pitroda joining and spending nearly a decade with Prime Minister Rajiv Gandhi as technology advisor and becoming the father of Indian IT and Telecom Industry. The task was to extend digital telecommunications to every corner of the country, including remote villages, like the one of his birth in Orissa. Pitroda launched the Center for the Development of Telematics (C-DOT) and served as Advisor to the Prime Minister on Technology Missions related to water, literacy, immunization, oilseeds, telecom, and dairy. He is also the founding Chairman of India’s Telecom Commission.

Prior to this, in 1981, Prime Minister Indira Gandhi liberalized telecom industry in India by signing contracts with Alcatel CIT of France to merge with the state-owned Telecom Company (ITI), in an effort to set up 5,000,000 lines per year. In 1985, the Department of Telecom(DoT) was separated from Indian Post & Telecommunication Department. DoT was responsible for telecom services in entire country until 1986 when Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam Limited (VSNL) were carved out of DoT to run the telecom services of metro cities(Delhi and Mumbai) and international long distance operations respectively.

The demand for telephones was ever increasing and in the 1990s Indian government was under increasing pressure to open up the telecom sector for private investment as a part of Liberalisation-Privatisation-Globalisation policies that the government had to accept to overcome the severe fiscal crisis and resultant balance of payments issue in 1991. Consequently, private investment in the sector of Value Added Services (VAS) was allowed and cellular telecom sector was opened up for competition from private investments. It was during this period that the Narasimha Rao-led government introduced the National Telecommunications Policy (NTP) in 1994 which brought changes in the following areas: ownership, service, and regulation of telecommunications infrastructure. The policy introduced the concept of telecommunication for all and its vision was to expand the telecommunication facilities to all the villages in India. Liberalisation in the basic telecom sector was also envisaged in this policy. They were also successful in establishing joint ventures between state-owned telecom companies and international players. Foreign firms were eligible up to 49% of the total stake. The multi-nationals were just involved in technology transfer, and not policymaking.

The country was divided into 20 telecommunication circles for basic telephony and 18 circles for mobile services. These circles were divided into category A, B and C depending on the value of the revenue in each circle. The government threw open the bids to one private company per circle along with government-owned DoT per circle. For cellular service, two service providers were allowed per circle and a 15 years license was given to each provider.

In 1997, the government set up TRAI (Telecom Regulatory Authority of India) which reduced the interference of Government in deciding tariffs and policymaking. The political powers changed in 1999 and the new government under the leadership of Atal Bihari Vajpayee was more pro-reforms and introduced better liberalization policies. In 2000, the Vajpayee government constituted the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) through an amendment of the TRAI Act, 1997. The government corporatized the operations wing of DoT on 1 October 2000 and named it as Department of Telecommunication Services (DTS) which was later named as Bharat Sanchar Nigam Limited (BSNL).

After March 2000, the government became more liberal in making policies and issuing licenses to private operators. The government further reduced license fees for cellular service providers and increased the allowable stake to 74% for foreign companies. Because of all these factors, the service fees finally reduced and the call costs were cut greatly enabling every common middle-class family in India to afford a cell phone. India has opted for the use of both the GSM (global system for mobile communications) and CDMA (code-division multiple access) technologies in the mobile sector. In addition to landline and mobile phones, some of the companies also provide the WLL service.

Today, India's telecommunication network is the second largest in the world by a number of telephone users (both fixed and mobile phone) with 1.206 billion subscribers as on 30 September 2017. It has one of the lowest call tariffs in the world enabled by mega telecom operators and hyper-competition among them. India has the world's second-largest Internet user-base. As on 30 September 2017, there were 324.89 million internet subscribers in the country.

Major sectors of the Indian telecommunication industry are telephone, internet and television broadcast Industry in the country which is in an ongoing process of transforming into next-generation network, employs an extensive system of modern network elements such as digital telephone exchanges, mobile switching centres, media gateways and signalling gateways at the core, interconnected by a wide variety of transmission systems using fibre-optics or Microwave radio relay networks. The access network, which connects the subscriber to the core, is highly diversified with different copper-pair, optic-fiber, and wireless technologies. This is the story so far. We will review Office Telecom Equipment market in India in our next article.