THE RESURGING
TELECOM SECTOR
Shyamal
Ghosh*
The Indian telecom sector has made rapid
progress during the past five years. In fact, with more than 52
million lines, India has one of the largest telecom networks in
the world. The growth of this sector has been greatly facilitated
by certain major reforms undertaken in 1999. While the process of
reforms had been initiated several years earlier with the opening
of value added services including cellular mobile services in 1992
and subsequently of Basic Services in 1994 for private sector participation,
the reforms process had been stalled by litigation, lower than expected
revenues leading to non-payment of license fees and a lack of clarity
in the regulatory regime. Consequently, the nascent private sector
in telecom was in doldrums.
Two major steps
were taken in 1999. Firstly, the New Telecom Policy, 1999 (NTP-99)
was approved on 26th March, 1999, to become effective from 1st
April, 1999. NTP-99 laid down a clear roadmap for future reforms,
contemplating the opening up of all the segments of the telecom
sector for private sector participation. It clearly recognized
the need for strengthening the regulatory regime as well as restructuring
the departmental telecom services to that of a public sector corporation
so as to separate the licensing and policy functions of the Government
from that of being an operator. It also recognized the need for
resolving the prevailing problems faced by the operators so as
to restore their confidence and improve the investment climate.
NTP-99 also contemplated
a license fee regime based on revenue sharing. Therefore, there
was a need to enable the migration of the pre-NTP-99 private operators,
who were required to pay a fixed license fee based on a bidding
process, to a similar revenue sharing regime. Accordingly, a migration
package was evolved which enabled these operators to clear all
their dues and move to a revenue sharing regime. This was the
second major decision which enabled the cellular mobile operators
to bring in new investments and increase the subscriber base from
a little above 1 million in 1999 to nearly 12 million at present,
which is a phenomenal growth.
The regulatory regime
was changed through significant amendments to the TRAI Act, which
clearly defined the role of the regulator and also enabled the
setting up of TDSAT (Telecom Dispute Settlement and Appellate
Tribunal) so that all disputes arising in the telecom sector could
be settled by this special Tribunal. Appeals against the decisions
of TDSAT could be made only to the Supreme Court.
Progressively, steps
were taken, as prescribed by NTP-99, to open up various services
like National Long Distance, International Long Distance and Internet
telephony. Side by side, steps were taken to resolve the existing
problems of the telecom operators by setting up a High Powered
Group on Telecom and Information Technology under the then Finance
Minister. This Group dealt with a large number of problems that
had beset the operators and was successful in resolving most of
them. Steps were also taken to induct new operators in basic and
other services and also allow for a fourth cellular operator in
each circle. Meanwhile, BSNL and MTNL were allowed to become the
third cellular operator. The roll-out of cellular services by
BSNL over the past few months has clearly demonstrated a healthy
demand for such services even in mofussil areas as it was able
to enroll nearly 1.7 million new subscribers in a short span of
time.
The corporatisation
of the Department of Telecom Services was a huge task since it
involved more than 3.5 lakh government employees to ultimately
become corporate employees. It was possible to accomplish this
task of corporatisation by October, 2000, well ahead of schedule.
The procedure for
allocation of spectrum for various usages was streamlined. The
National Frequency Allocation Plan (NFAP) for 2000 was finalized
which was again reviewed in 2002. The process of allocation of
spectrum would be further streamlined with the implementation
of the World Bank-assisted project for computerization. A committee
was set up with representatives of some States for facilitating
the right of way expeditiously. Model guidelines were issued for
this purpose.
Another major step
was to set up the Universal Service Obligation Fund with effect
from April 1, 2002. An administrator was appointed for this purpose
and the process for disbursement of funds for providing the present
Universal Services has already begun.
To take into account
the synergies provided by technologies facilitating convergence
of information technology and communication and broadcasting,
a Communication Convergence Bill was introduced in Parliament.
The recommendations of the Standing Committee of Parliament have
been received and are being further processed.
The basic philosophy
behind NTP-99 was to allow free play of market forces by not restricting
the number of operators in almost all sectors, subject to fulfillment
of certain prescribed entry conditions. The only exception was
in the cellular mobile sector on account of limitations posed
by availability of spectrum. Even then two more cellular mobile
operators were inducted in almost all the circles of BSNL and
MTNL along with another private operator. The impact of the reforms
process has led to enhanced competition, rapid growth of network,
lowering of tariff and rapid enhancement of facilities and the
subscriber base. A multi-operator regime needs a transparent Inter-connect
User Charge regime. This has recently been done by the regulator
who has also taken major steps for rebalancing of tariff.
There has been an
unprecedented growth in the telecom sector over the past 5 years.
While the basic telephone lines are expected to have doubled by
31st March 2003, the mobile subscriber base would have increased
ten-fold by that time. Tele-density has more than doubled and
is currently over 5 per cent. What is more significant is the
emphasis given for establishing the rural communication network.
Rural telephone lines have increased three-fold and the percentage
of rural telephone lines to total telephone lines has nearly doubled
during the period. Furthermore, the total rural exchanges have
increased from 19,000 to 28,000 and Village Public Telephones
(VPTs) have increased by more than one and a half times. The most
significant factor is that on account of the exponential growth
in establishing a reliable media backbone, it has been possible
to provide dependable telephony to almost all rural exchanges.
The coverage provided by optical fibre has increased six times
in the public sector alone, increasing from 64,809 route kilometres
in 1998-99 to 3, 67, 452 route kilometres by 31st January, 2003.
In addition, the private sector is estimated to have provided
optical fibre facilities for more than 60,000 route kilometres.
If the facilities being set up by other public sector units like
RAILTEL, GAIL and Power Grid Corporation are taken into account,
the reach of the reliable media would be huge enough to provide
not only reliable voice connectivity but also broadband access.
The support from Universal Service Obligation Fund would further
facilitate public access in rural areas for both voice and data.
With all these initiatives, a broad frame-work would be in place
to create an environment which would largely overcome the digital
divide.
The most significant
development since 1999 has been the progressive drastic reduction
in tariffs which has been facilitated by competition through a
multi-operator environment. Both domestic long distance and international
long distance rates have been brought down substantially. While
the former has been reduced by 62 per cent, the latter has come
down by 50 per cent. More reductions are expected in the next
financial year. The most dramatic reduction in tariff has been
in the cellular mobile sector. When the mobile cellular services
started, the peak air-time charges were very high at Rs. 16 per
minute. This has come down to Rs. 2 per minute in most cases and
even less in some instances. The incoming calls are progressively
becoming free and should be totally free very soon.
In terms of the growth
in the telecom sector, India is second only to China. There is
a huge potential market still to be tapped and, therefore, India
should attract substantial investment in this field as well. With
limited investment opportunities in the telecom sector in the
developed countries and the telecom sector in China reportedly
showing signs of slowing down from a regime of high growth, India
is in the best position to leverage the market potential to attract
investment. There is every reason to believe that all the tele-density
targets prescribed in NTP-99 will not only be achieved but may
even be exceeded. (PIB Features).
*Former
Secretary, Department of Telecommunications
