The Indian telecom industry has undergone significant structural transformation since its liberalisation in the 1990s.
During the last decade, the Indian telecom industry has evolved into a multi-segment, competitive market from a small supplier-dominated market having public sector monopoly. Coherent Government policies have played a crucial role in shaping the structure of the Indian telecom sector. Structural Evolution of the Indian Telecom Industry: Telecom Sector in the Pre-liberalisation Era (1980-1990): Before liberalisation, the public sector held a monopoly in provision of telecom services. The entire telecom services operation in the country was carried out by the Department of Telecommunication (DoT), a public sector entity established in 1985. It managed the planning, engineering, installation, maintenance, management, and operations of telecom services for the whole of India. In order to ease out its operations, two new public sector corporations viz. MTNL and VSNL were set up under the DoT in 1986. Thus, before the entry of the private players, the telecom services were provided by three public entities viz. DoT, MTNL and VSNL. While MTNL primarily looked after the operation of basic telephony services in Delhi and Mumbai, VSNL provided international telecom services in India. DoT looked after basic telephony operations in regions other than Delhi and Mumbai. Prior to liberalisation the telecom services were broadly classified as domestic basic (which included basic telephony, telex and fax), domestic value-added services (VAS) which covered all other services such as paging, cellular, data services, VSAT and international basic and VAS. Telecom Sector in the Post-liberalisation Era: Private sector participation in the Indian telecom sector has been a gradual process, wherein the government initially permitted players from the private sector to provide Value Added Services (VAS) such as Paging Services and Cellular Mobile Telephone Services (CMTS), followed by the Fixed Telephony Services (FTS) or Basic services. Eventually the private sector has been allowed to provide almost all telecom services. Liberalisation process in the telecom services market began in 1992, with the unbundling of the domestic basic services and the domestic VAS and entry of private players for providing the VAS such as cellular and paging services. During this period, the government provided licenses to private players according to the services that were to be provided in the specified areas of service provision. The country was divided into circles (or categories) on the basis of economic potential. Thus, primarily these divisions were mostly adjoining the states of India. Such demarcations were primarily responsible for existence of various regional players in provision of telecom services. During 1994, through a competitive bidding process, licenses were granted to 8 CMTS operators in four metros, 14 CMTS operators in 18 state circles, paging operators in 27 cities and 18 state circles. After the domestic VAS, the basic services were opened up to private players. The National Telecom Policy (NTP) 1994, which endeavoured to build world-class telephone services in India and aimed at providing telephones on demand, enabled the entry of private players in the provision of basic services. Given the need for resources in addition to government sources for achieving the targets of NTP-94, private investments and involvement of the private sector was considered inevitable to bridge the resource gap. Thus, the private operators were allowed to render basic services in the local loop. Initially, the provision of basic services had been deliberated as a duopoly between a selected service provider and the DoT. In line with this, policy licences were awarded to 6 BTS operators in 6 state circles. The need for independent regulation had risen with the entry of private players. Also, to fulfil the commitments made when India joined the World Trade Organisation (WTO) in 1995, the Telecom
Regulatory Authority of India (TRAI) was established in 19971 to regulate telecom services including fixation/revision of tariffs. The establishment of TRAI was a positive step in terms of separation of regulations from policy making and operations, which continued to be under the purview of the DoT2.
