January 15, 2002

Reforms Transform Telecommunications and IT sectors.

 

Communications and information technology (IT) have emerged as the key to overall economic development. The dream to make India a superpower in IT can be realised only by creating a reliable international quality telecommunications infrastructure. The road map to develop such a telecom network in the country has been spelt out in the New Telecom Policy, 1999 for providing affordable telecom services to all. Major initiatives have been taken to achieve the objectives of the policy and its results have started becoming visible with a rapid growth of subscribers and lower tariffs.

    The Indian telecommunications sector has undergone a major process of transformation because of significant policy reforms during the recent years. Historically, although telegraph services in India started in 1839 and telephone services in 1882, the process of expansion of the network was being managed and used primarily by the Government for long.. Due to interconnection problems telecommunications was universally accepted for a long time as a natural monopoly – whether it be in the public or private sector. In India, as in many other countries in Europe and Asia, telecom services were operated by a Government Department. By the early 1990s this concept of "natural monopoly" was increasingly challenged in many countries by technological changes leading to the reforms process for ushering in competition and greater consumer welfare, particularly in terms of lowering of tariffs and improvement in the quality of service. This led to dismantling of monopolies and restructuring of the sector.

    An independent institutional regulatory mechanism in the shape of TRAI and TDSAT has been set up. The service provisioning functions of the Government have been separated from the Department and corporatised. Telecom services have been opened up gradually for private sector participation. Manufacturing had been delicensed in the early 1990s. Steps have been taken to speed up investment and develop infrastructure.The Communications Convergence Bill has been introduced in Parliament to replace the Indian Telegraph Act, 1885. The momentous changes in the telecom sector are bound to have a significant economic and social impact.

Growth

    The telecom network in the country had a slow growth during the first four decades after Independence. During the last few years, the network has spread considerably. It can be seen that the growth pattern has been synchronous with the telecom reforms. The teledensity which was 0.03 in 1951, grew upto 0.31 in 1981 in three decades. It touched a level of 0.60 in 1991, 1.07 in 1995 and 2.80 in 2000. At present it is touching 4.0 per cent. The growth rate in this sector has been consistently more than 20 per cent from 1994-95 onwards. There are about 4 crore telephone connections including 52 lakh mobile phones, 8.38 lakh PCOs and 4.11 lakh village public phones. In addition, 150 Internet service providers are catering to around 35 lakh Internet customers. India has the eighth largest telecom network in the world. After attaining the target of providing phone-on-demand by 2002, it is intended to sustain the momentum so as to achieve a teledensity of 11.5 at the national level and 3 in the rural areas by March, 2007. It is also intended to provide affordable and effective communication to all citizens as also universal service to all uncovered areas.

Initiatives

    Major initiatives have been taken to speed up the development of the telecom sector. Service providers have been allowed to migrate from license-fee regime to revenue-sharing regime. All telecom services have been opened up for private sector participation; international long-distance is slated to be opened from 1st April, 2002. Unrestricted entry is allowed in the basic services, national and international long distance service, in global mobile personal communication by satellite (GMPCS) service, DTH, VSAT and Public Mobile Radio Trunked Service. In the basic services sector, private operations have started in 6 circles and 28 new licences have been issued. In the cellular mobile segment, the services are operational in 18 telecom circles and 4 metros, each having 2 operators. The third operator , MTNL / BSNL, has started providing cellular services. For the 4th operator, 17 licenses have been issued. For the Internet Service Provider category, over 500 licences have been granted. Unified Messaging Service (UMS) has been incorporated as a new faculty for voice mail/audiotex service. Internet telephony will also be opened this year.

    Recognising its importance for Information Technology, the availability of bandwidth has been made easier and faster. Right-of-way procedures have been simplified for laying optical fibre and other media. For creating a backbone for National Information Infrastructure, the creation of National Internet Backbone and Sanchar Sagar projects have been planned. Phase-I of the Sanchar Sagar project has been completed connecting 33 large cities. The Phase-II will cover 33,000 route kms adding 150 cities to the network. Private companies are also setting up their optical fibre network across the country.

    Call charges up to 200 kms have already been reduced. The tariff in the range of 50-100 kms stands reduced to 1/8th while rates for calls beyond 51-200 kms have become close to local calls. Telephone registration charges have been reduced from Rs 3,000 to Rs 2,000 in urban areas and Rs 1,000 to Rs 500 in rural areas. All types of forms have been simplified and are being made available free of cost. In tune with the Government’s commitment to provide world class telecom services at affordable prices, the public sector Mahanagar Telephone Nigam Ltd. (MTNL) has introduced cellular mobile service, Dolphin, in Delhi and Mumbai and a WLL-based limited mobile service called Garuda at very affordable rates. These developments have led to the companies cutting down their rates almost to one-half. Recently, due to introduction of competition in national long-distance services, the STD call rates have also been slashed drastically.

    Experience shows that private sector participation can improve the quality and quantity of infrastructure services while reducing the burden on public finances. During 2000-01 the investment by the public sector in the telecom services alone has crossed US $ 4 billion. Foreign Direct Investment in this sector has been over US $ 1.8 billion and it has gone up steeply during the current financial year. The time has come when the Indian telecom sector is ready to leap forward as the growth potential of the network is enormous. This is a huge opportunity for the industry and investors.

    For the telecom sector in India, an environment for growth has been created through policy reforms. As a result, the sector has started growing rapidly with benefits reaching the people. It is expected that the new environment will catalyze the national growth and facilitate world-class telecom services. The Department is conscious of the challenges ahead and every effort will be made to fulfill all the objectives of the National Telecommunications Policy-99.