TELECOM REVOLUTION IN INDIA
During the ongoing era of economic reforms, Telecom sector reforms has been a success story, under a scenario of competitive growth shared by the public and private sectors, on the one hand, and the regulated environment, on the other. The planners had realized early that without a globally competent and efficient telecommunication system, the process of globalization of the economy would be incomplete. Hence, this was perhaps the first sector that got adequate attention during the post reforms era and also bore outstanding results. From an outdated and inefficient system, the telecom sector has emerged as state of the art system of international standard within a decade. But the revolution has just begun.
Telecommunication is among the prime support services needed for rapid growth and modernization of various sectors of the economy, apart from improving the quality of life. It was during the eighth five year plan that the exercise to modernize this crucial sector began. Till then the achievements in this sector were just modest. Prior to that, till the year 1988, India was among the large number of Asian and African countries that had a tele-density of less than one, at 0.52. This density in the developed countries of North America and Western Europe was about 50. At that time countries like Pakistan, China, Malaysia and Brazil has tele-density of 0.7, 0.78, 7.37 and 5.5, respectively.
But in terms of growth of direct telephone lines, during the years 1979 to 1989, the growth rate was 8.4 percent, which was much higher than the growth rate of 3.5 percent in the United States of America, 5.7 percent in Europe and 5 percent in the entire world. The reason was obvious. In real terms, before mid-seventies, tele-density in India was virtually negligible and it was at around that time that the country began to experience real growth in this sector. It is because of huge population, rampant poverty and large geographical size of the country that the growth of telecommunications has remained low in the past. But traffic density in the telecom sector in India today is among the highest in the world. This has made telecommunication an attractive proposition for the private sector as well as the foreign investors in India.
Till the beginning of the English Plan in 1992, the investment in the telecommunication sector in India was quite low, at around two percent of the gross domestic product. Hence, when the government decided to reform this vital sector in India, it allowed liberal inflows of the foreign direct investment in this sector. New technologies employed during the eighth plan including digital switching systems, co-axial and optical fiber systems in long distance transmission and digital microwave. There were a few reforms in the services, availability of exchanges and availability of lines also. Availability of telephone on demand appeared to be a distant possibility at that stage.
Eighth plan objectives included provision of telephones in all the panchayat area of India one telephone in all the villages by the year 1997, one public call office for every 100 households in India, laying of 2,000 km of lines, introduction of mobile cellular services, providing email services, radio paging, video conferencing, etc. With a view to achieve these targets, which appeared to be quite ambitious at that stage, a new telecom policy was announced during the eighth five year plan in May 1994, which envisaged addition of 100 lakh direct exchange lines so that by the year 1997, telephone on demand could be provided to the role in achieving the eighth plan targets of the telecom sector. During the mid-term review of the eighth plan, encouraged by the achievements, the government jacked up several targets. The target for creation of new trunk capacity was enhanced from 2.72 lakh lines to 7 lakh lines and the same for optical fiber system was increased from 2,000 route km to 4,000 route km. Even these targets were exceeded substantially at the end of the plan.
Achievements in the telecom sector during the eighth and the ninth plan have been substantial and qualify to be termed as revolution. The growth has been rapid in terms of quantity, as well as quality, with public and the private sectors growing simultaneously. Significant progress has been made through the Telecommunication Regulatory Authority of India in easing out the procedures and cleaning up the regulatory hurdles. With the introduction of healthy competition between various categories of operators, the prices of long distance calls and mobile services are on the decline. This is despite the fact that adequate user charges are levied.
Present communication system in India, particularly in the urban areas, can compare to the best in the world. As compared to about one lakh telephones in the country in the year 1947, the number has now grows to well above 400 lakh, with the tele-density growing to about 4 per one-hundred of population. Growth rate in this sector, particularly the cellular segment, has been outstanding. As per the economic survey for the year 2002-03, during April to December 2002, 19 lakh new landline phones were added. This figure was 26 lakh during the same period in the year 2001 to 2002. But this decline of 7 lakh over the previous years has been more than compensated by the cellular phones were added during same period, when the previous year. This represents a whopping 73.7 percent growth in this segment. If the addition of 7 lakh new wireless local loop connections is also added, total growth in the mobile segment comes to around 110 percent.
With about 25,000 exchanges functioning in the country, in most of the urban areas the telephone is available on demand. Waiting time in rest of the areas has gone down considerably, mainly due to the mobile revolution, under which the number of cellular users is growing with leaps and bounds. Over 90 percent users in the country, added after 1994m have access to STD facilities and there are more than 8 lakh public call offices in the country, out of which about 6 lakh are in the urban areas. Private companies like Bharti, Tata, Reliance and Connect have been granted the licences as basic service providers, providing healthy competition to BSNL and MTNL.
All this has been possible due to several reform measures undertaken since 1991. The process of fundamental, institutional and structural reforms began in 1991 when the telecom equipment manufacturing was completely deregulated. Value added services, including the cellular services, were thrown open to the private sector in 1992, followed by opening up on basic services to the private sector in 1994. Telecommunication Regulatory Authority of India was set up by the government in 1997. As a major reform, the department of telecommunication was bifurcated about three years ago and the policy formulation function was retained by the department, while the operational network of the department of telecommunication was corporatized into Bharat Sanchar Nigam ltd.
A new policy for internet service providers was introduced in the year 1998, under which the private service providers were allowed to enter this field, breaking the monopoly of the VSNL. Any private company that wants a license as an ISP can go in for foreign equity up to 49 percent. The license fee is virtually nil and a company can obtain any number of licenses. ISPs were free to fix their own tariff, subject t review and fixation by Telecommunication Regulatory Authority of India at any time. Earlier, internet telephony was not permitted, but recently the government has decided to open it as a cheaper option for international communication.
It may be observed that during the past about five years, telecom sector has been revolutionized. Telecommunication of global standards be cellular or basic, are available to the users in the country. The number of users is growing at a very brisk rate and in the next one decade, the tele-density in India may be as high as 15 to 20 per hundred of population. With the advent of wireless local loop services, which are the cheaper mobile option, the number of mobile users in the country is expected to increase even more rapidly.
Telecom sector has been benefited largely from the foreign direct investment inflows. As per economic survey for 2002-03, during the period August 1991 to June 2002, 831 proposals of foreign direct investment worth Rs 56,226 crore were approved and the actual inflow of foreign direct investment was Rs. 9,528 crore. In terms of approvals of foreign direct investment, the telecom sector is the largest after energy sector.
Telecom continues to be a high priority area for the policy makers. Among the fastest growing sectors of the economy, this sector is potentially profitable. With the traffic higher than the global standards on Indian Telecom channels, the private companies are vying with each other to gain a larger share in Indian market. Healthy competition between the multiple telecom players, stronger role of Telecommunication Regulatory Authority of India and competitive policies should be the goals of this sector in near future.
Investment in the telecom sector by the private parties was quite high during the Ninth Plan and it is expected to play a dominant role in overall investment in the economy even during the Tenth Plan. Since the rate of return in this sector is quite high, the quantum of investment by the private sector is also expected to be high.
A few bottlenecks in the policy, however, are required to be smothered. Rural connectivity in the country continues to be an area of serious concern. While the private operators are more than willing to venture into the basic, cellular and wireless local loop services in the urban services in the urban areas, they are not interested to expand interested to expand to the rural and backward areas, where the telecom traffic is low and the tariff rates are also lower. The private operators in basic services should be required to provide some percentage of their lines in the adjoining rural areas. The number of village public telephones should also be enhanced and the facility of satellite telephones should be provided by the government in very remote and less populated areas.
Indian Telegraph Act is utterly outdated and needs wholesale revision, in tune with the present policies. Advances in technology and present and future requirements of industry must also be taken into consideration while enacting a new legislation. Though some steps have been taken for rationalization of procedures by the Telecommunication Regulatory Authority of India, yet tariff structure is still unbalanced, with cross subsidization of local calls with the long distance calls. The connectivity issues and the operational problems being faced by the cellular operators and the basic service providers must also be taken. Attention must be paid to ensure that Indian emerges as a major manufacturing base and major exporter of Telecom equipment. Encouraging multinationals and joint ventures in this field would go a long way in ensuring this.
India is perceived to have comparative advantage in the field of Information Technology and Information Technology- enabled services depend largely on high quality telecommunication infrastructure. A real challenge in this field is rapid technological changes, which lead to major changes in the structure of telecom industry all over the world. Tenth Plan Document aims at convergence of voice and image transmission facilities. Use of wider bandwidth and high speed internet connectivity would add new dimensions to InfoTech and entertainment. Such convergence with telecommunication is possible only after an integrated convergence bill is passed by the government.
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