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Telecom

The telecom industry in India has grown rapidly to become the third largest network in the world, with nearly 200 million telephone lines and a 45% growth rate, the highest in the world. The industry began with government monopolies but has since been liberalized, allowing private companies to enter, leading to improved quality, lower prices, and rapid expansion of both fixed and cellular services. However, challenges remain around infrastructure gaps, limited spectrum availability, and a slow reform pace.

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130 views2 pages

Telecom

The telecom industry in India has grown rapidly to become the third largest network in the world, with nearly 200 million telephone lines and a 45% growth rate, the highest in the world. The industry began with government monopolies but has since been liberalized, allowing private companies to enter, leading to improved quality, lower prices, and rapid expansion of both fixed and cellular services. However, challenges remain around infrastructure gaps, limited spectrum availability, and a slow reform pace.

Uploaded by

avichaljain12
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Telecom Industry in India

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 include:

 Sluggish pace of reform process.


 Lack of infrastructure in semi-rural and rural areas, which makes it difficult to make
inroads into this market segment as service providers have to incur a huge initial fixed
cost.
 Limited spectrum availability.

But notwithstanding these constraints, telecom sector has undergone a revolution in the past
decade and has played a major part in bridging the rural-urban divide.

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