The telecom industry is one of the fastest growing industries in India. India has nearly 200 million telephone lines making it the third largest network in the world after China and USA. With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world.
History of Indian Telecommunications started in 1851 when the first
operational land lines were laid by the government near Calcutta (seat
of British power). Telephone services were introduced in India in 1881.
In 1883 telephone services were merged with the postal system. Indian
Radio Telegraph Company (IRT) was formed in 1923. After independence in
1947, all the foreign telecommunication companies were nationalized to
form the Posts, Telephone and Telegraph (PTT), a monopoly run by the
government's Ministry of Communications. Telecom sector was considered
as a strategic service and the government considered it best to bring
under state's control.
The first wind of reforms in telecommunications sector began to flow in
1980s when the private sector was allowed in telecommunications
equipment manufacturing. In 1985, Department of Telecommunications (DOT)
was established. It was an exclusive provider of domestic and
long-distance service that would be its own regulator (separate from the
postal system). In 1986, two wholly government-owned companies were
created: the Videsh Sanchar Nigam Limited (VSNL) for international
telecommunications and Mahanagar Telephone Nigam Limited (MTNL) for
service in metropolitan areas.
In 1990s, telecommunications sector benefited from the general opening
up of the economy. Also, examples of telecom revolution in many other
countries, which resulted in better quality of service and lower
tariffs, led Indian policy makers to initiate a change process finally
resulting in opening up of telecom services sector for the private
sector. National Telecom Policy (NTP) 1994 was the first attempt to give
a comprehensive roadmap for the Indian telecommunications sector. In
1997, Telecom Regulatory Authority of India (TRAI) was created. TRAI was
formed to act as a regulator to facilitate the growth of the telecom
sector. New National Telecom Policy was adopted in 1999 and cellular
services were also launched in the same year.
Telecommunication sector in India can be divided into two segments:
Fixed Service Provider (FSPs), and Cellular Services. Fixed line
services consist of basic services, national or domestic long distance
and international long distance services. The state operators (BSNL and
MTNL), account for almost 90 per cent of revenues from basic services.
Private sector services are presently available in selective urban
areas, and collectively account for less than 5 per cent of
subscriptions. However, private services focus on the business/corporate
sector, and offer reliable, high- end services, such as leased lines,
ISDN, closed user group and videoconferencing.
Cellular services can be further divided into two categories: Global
System for Mobile Communications (GSM) and Code Division Multiple Access
(CDMA). The GSM sector is dominated by Airtel, Vodfone-Hutch, and Idea
Cellular, while the CDMA sector is dominated by Reliance and Tata
Indicom. Opening up of international and domestic long distance
telephony services are the major growth drivers for cellular industry.
Cellular operators get substantial revenue from these services, and
compensate them for reduction in tariffs on airtime, which along with
rental was the main source of revenue. The reduction in tariffs for
airtime, national long distance, international long distance, and
handset prices has driven demand.
The telecom sector is also afflicted by a number of restraints. These