Indian Telecom Industry With Brief History



Indian telecom industry with brief history

India’s telecommunication network is the second largest in the world by number of telephone users (both fixed and mobile phone) with 1.153 billion subscribers as on 31 May 2018. It has one of the lowest call tariffs in the world enabled by mega telecom operators and hyper-competition among them. As on 31 May 2018, India has the world’s second-largest Internet user-base with 432 million internet subscribers in the country.

India’s telecom industry has been through a paradigm shift over the last three decades. A brief overview of the telecommunications market structure reveals there are some dominant market players with their associated competition.

The industry has also undergone significant policy and regulatory changes through the years, in essence, leading to a control of market share of services by a few players. But it was not always so.

The early 1990s saw the Telecom sector dominated by the Department of Telecommunications (DoT), which was the sole service provider. The first whiff of reform came about in 1994 when the sector began a transition from a monopoly to a competitive structure. During this period, beginning with the deregulation of the sector and followed by the issuance of two major policy instruments — the National Telecom Policy, 1994 (NTP94) and the New Telecom Policy 1999 (NTP99) — the transition to a competitive market based structure was successfully accomplished.

The dominance of DoT, as the sole operator subsided with the entry of a number of private operators in various services such as fixed line, mobile telephony, international long distance and internet service providers. Telecom licenses were allocated by the DoT through auctions at a circle level with the country divided into 23 circles (in most cases each circle represented a state). Each circle was allotted two licensed operators.

The market for fixed telecom services was highly concentrated in all the telecom circles, although in seven of them the H. Herfindhal* Index had a value less than 0.8000. Apart from competition, the existence of a telecom regulator in the form of TRAI (Telecom Regulatory Authority of India) too has acted as a check on service providers abusing their dominant position. BSNL (Bharat Sanchar Nigam Limited) made substantial progress; reduced tariffs, improved efficiency and it can be argued that this was entirely due to the force of competition leading to efficiency gains.

The transition for BSNL from a monopolistic firm which had a previous history of being impervious to consumer demands to a firm that adapts and responds to market competition ultimately led to providing a surplus to its consumers. At a national level, after privatization the market for fixed telephone services was much more concentrated than the one for mobile services.

Competition in the mobile services industry  

The growth of the mobile services industry was also phenomenal; it started from 1997 as one dominated by private sector enterprises. The government followed a policy of “managed competition” by licensing more than one service provider in a telecom circle. In fact, a majority of the 28 Telecom circles that were present at that time had at least four to six services providers.

The private mobile operators grew on new and latest state-of-the art technologies. Entry of a new player Reliance Infocomm Ltd. in 2002 saw introduction of CDMA (Code Division Multiple Services) services across 17 circles on a countrywide basis. CDMA has since been growing faster than GSM. The existences of the two standards have made both the markets for GSM and CDMA services very competitive. This is especially so when the market for CDMA services was highly concentrated with just two service providers accounting for almost the entire output.

Exploring the ‘Spectrum’  

Every telecom operator has been assigned certain portions of spectrum to use in India through auctions and administrative allocations. Essentially, the spectrum “bands”, and frequencies around a particular band are then auctioned off.

The years of 1998 and 2004 saw 2 rounds of spectrum auctions with major share being grabbed by the existing players. Later in 2008 the government’s policy bypassed the spectrum auction process leading to controversies. The Government’s move of selling spectrum by way of a first come first serve basis rather than by auction and fixing of prices based on 2001 prices was alleged to be an outcome of the nexus between a few dominant players and government representatives. The result was that major frequencies was captured and held by a very few operators and in some cases even by few non-serious telecom players leading to hoarding of spectrum.

These controversial auctions lead to legal suits, investment pullbacks and eventually the cancellation of spectrum licenses. There was distrust leading to huge losses and stagnation in the sector for a while. All these led to upward revision of prices, consolidation and smaller players exiting from the industry.

National Telecom Policy

Vision

To provide secure, reliable, affordable and high quality converged telecommunication services anytime, anywhere for an accelerated inclusive socio-economic development.

Mission

  • To develop a robust and secure state-of-the-art telecommunication network providing seamless coverage with special focus on rural and remote areas for bridging the digital divide and thereby facilitate socio-economic development.
  • To create an inclusive knowledge society through proliferation of affordable and high quality broadband services across the nation.
  • To reposition the mobile device as an instrument of socio-economic empowerment of citizens.
  • To make India a global hub for telecom equipment manufacturing and a centre for converged communication services.
  • To promote Research and Development, Design in cutting edge ICTE technologies, products and services for meeting the infrastructure needs of domestic and global markets with focus on security and green technologies.
  • To promote development of new standards to meet national requirements, generation of IPRs and participation in international standardization bodies to contribute in formation of global standards, thereby making India a leading nation in the area of telecom standardization.

Objectves

  • Provide secure, affordable and high quality telecommunication services to all citizens.
  • Increase rural teledensity from the current level of around 39 to 70 by the year 2017 and 100 by the year 2020.
  • Provide affordable and reliable broadband-on-demand by the year 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand.
  • Enable citizens to participate in and contribute to e-governance in key sectors like health, education, skill development, employment, governance, banking etc. to ensure equitable and inclusive growth.
  • Provide high speed and high quality broadband access to all village panchayats through a combination of technologies by the year 2014 and progressively to all villages and habitations by 2020.
  • Promote innovation, indigenous R&D and manufacturing to serve domestic and global markets, by increasing skills and competencies.
  • Create a corpus to promote indigenous R&D, IPR creation, entrepreneurship, manufacturing, commercialisation and deployment of state-of-the-art telecom products and services during the 12th five year plan period.
  • Promote the ecosystem for design, Research and Development, IPR creation, testing, standardization and manufacturing i.e. complete value chain for domestic production of telecommunication equipment to meet Indian telecom sector demand to the extent of 60% and 80% with a minimum value addition of 45% and 65% by the year 2017 and 2020 respectively.

TRAI (Telecom Regulatory Authority of India)

The entry of private service providers brought with it the inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government.

TRAI’s mission is to create and nurture conditions for growth of telecommunications in the country in a manner and at a pace which will enable India to play a leading role in emerging global information society.  

One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition.  

In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market.

The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service as well as governance of the Authority.  

The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision or order of TRAI.


APPSC GROUP 1 Notes brings Prelims and Mains programs for APPSC GROUP 1 Prelims and APPSC GROUP 1 Mains Exam preparation. Various Programs initiated by APPSC GROUP 1 Notes are as follows:- For any doubt, Just leave us a Chat or Fill us a querry––