India’

India’ss TTelecom
elecom Reform:
Reform:
A Chronological Account

Mahesh Uppal with S.K.N. Nair and C.S. Rao

Series Editors:
Aasha Kapur Mehta, Pradeep Sharma
Sujata Singh, R.K.Tiwari

2006
Economic Reforms in India: Pro-poor Dimensions
 Table of Contents

1 Introduction 1

2 Key Regulatory Issues 7

3 Conclusion 15

4 Epilogue 16

5 Appendices 19

References 35
Economic Reforms in India: Pro-poor Dimensions

LIST OF ACRONYMS

ADC Access Deficit Charge IP Telephony: Internet Protocol Telephony

BICP Bureau of Industrial Costs and Prices ISP Internet Service Provider

BSNL Bharat Sanchar Nigam Ltd IUC Interconnection Usage Charges

CA Certifying Authorities MOC Ministry of Communications

CCA Controller of Certification Authority MOCIT Ministry of Communication and Information

Technology
CDMA Code Division Multiple Access
MTNL Mahanagar Telephone Nigam Ltd
CdoT Centre for Development of Telematics
NFAP National Frequency Allocation Plan
COAI Cellular Operators Association 0f India
NLDS National Long Distance Service
CMSP Cellular Mobile Service Providers
NTP National Telecom Policy
CPP Calling Party Pays
PCO Public Call Office
DEL Direct Exchange Line
PSTN Pubic Switching Telecom Network
DoT Department of Telecommunications
RIO Reference Interconnect Offer
DTS Department of Telecommunication Services
SDCA Short Distance Charging Areas
FDI Foreign Direct Investment
SSA Secondary Switching Area
FICCI Federation of Indian Chambers of
Commerce and Industry TDSAT Telecom Dispute Settlement Appellate
Tribunal
GMPCS Global Mobile Personal Communication
by Satellite TRAI Telecom Regulatory Authority of India

GSM Global System for Mobile Communications UASL Unified Access Service Licence

GOT-IT Group on Telecom and IT Convergence USOF Universal Service Obligation Fund

HFCL Himachal Futuristic Commmunications VSNL Videsh Sanchar Nigam Ltd.

Limited WLL Wireless in Local Loop
ICICI Industrial Credit and Investment Corporation WLL(M) Wireless in Local Loop relating to “Limited
of India Mobility”
ICT Information and Communication Technology WPC Wireless Planning and Coordination
ILD International Long Distance WTO World Trade Organisation
 India’
India’ss TTelecom
elecom Refor m:
Reform:
A Chronological Account

Mahesh Uppal with S.K.N. Nair and C.S. Rao1

1
Introduction

The telecom sector occupies a special area of interest for scriber numbers is concentrated in the urban areas. The
students and analysts of India’s economic reforms, be- rural subscriber base has grown at a much slower rate as
cause of the lead role it played in drawing private invest- compared to the urban and seems virtually stagnant when
ment, the institutional changes that the process involved the two are compared. Thus, while the urban poor have
and the dramatic results achieved in terms of availability seen vast improvements – in availability as well as
and access. A chronological recording of India’s telecom affordability - the rural populations have seen little of the
reforms is invaluable for a complete understanding of the beneficial effects of competition
tortuous reforms process and the clash of interests among
The Universal Service Obligation Fund – into which tele-
existing and new participants and mid-course policy cor-
phony operators pay a universal service levy - was set up
rections.
in 2002 to address this urban-rural “digital divide” by pro-
By end 2003, positive trends resulting from the reforms, viding subsidies to operators for expanding access to phones
like accelerated growth in penetration levels and fall in tar- and Internet in rural areas. The Fund has had mixed suc-
iffs, were already in evidence (see Tables 1 to 6). The level cess and is largely unutilised, thus highlighting the com-
of telephone penetration, which was less than half of one plexity of running such subsidy schemes. A strong plea to
percent in 1991, had increased to about 4 per 100 of popu- review its approach has recently been made by the regula-
lation in terms of fixed line phones. (This growth index tor, who has argued that a more cost effective approach
has crossed 10, taking both fixed and mobile phone sub- for the USOF would be to move from its current focus
scribers into account). However, the sharp increase in sub- on fixed telephone lines to fund shared wireless infrastruc-
1
This study was conducted as part of the UNDP funded ‘economic reforms’ programme under which the NCAER Centre for Infrastructure and
Regulation has been set up. Dr. Mahesh Uppal authored the main body of the report. The chronology and statistical tables accompanying it were
compiled under his supervision. He was assisted by Ms. Ramneet Goswami, Research Associate, NCAER Centre for Infrastructure and Regulation.
The introductory and concluding sections of the Report are contributed by S.K.N. Nair, Adviser, NCAER. Ms. Nandini Acharya, Research Associate
assisted with data and verification. The note on ‘Information Communication Technology and Poverty Alleviation’ in Appendix II was written by Dr.
Ch. Sambasiva Rao, Associate Fellow, NCAER. The views expressed in this paper are those of the authors and do not necessarily reflect the views
of GOI, UNDP or IIPA.

1
India’s Telecom Reform: A Chronological Account
ture. Time will tell if the new approach will be followed
and if it can deliver to the rural poor the benefits that the
urban poor have begun to enjoy, thanks to policy reforms
undertaken in the sector.
There is also a renewed effort from players other than
telecommunications operators in rural telecommu-
nications space. A growing list of technology inno-
vators and entrepreneurs has been active in testing
new ICT services and business models to serve rural
populations. Many of these efforts now form a part
of Mission 2007, a vision of Professor M.S.
Swaminathan, to establish knowledge centres in all
villages by August 2007. Some of these efforts are
highlighted in the Appendix by Ch. Sambasiva Rao,
attached to this report. Many of these initiatives
would require policy and regulatory support, espe-
cially when the models are sought to be scaled up
from their “pilot phases”. It will be interesting to see
the degree to which such efforts succeed.
The TTelecom
elecom Policy Evolution: A
Background
India’s telecommunications reform programme has been
underway since the late 1980s when the government’s
monopoly in manufacturing telecom equipment was dis-
continued. However, the more substantive reform was the
progressive deregulation of the services sector, from a situ-
ation where the Government of India’s Department of
Telecommunications (DoT) was the policy maker, opera-
tor and regulator, all in one. DoT’s success in this role was
mixed. The network grew significantly, but in comparison
to most countries, India remained far behind with long
waiting lists and poor service quality.
Early attempts to reform the services were modest, with
the opening of some value-added services such as elec-
tronic mail, audio-text, etc., to private sector players. This
was followed by an attempt to allow private sector play-
ers to enter the mobile service sector. This exercise, and
the litigation that ensued, reflected the first signs of the
challenge that lay in ad hoc changes to telecom policy with-
2
out a clear regulatory framework.
In 1994, the Government of India announced the Na-
tional Telecom Policy (NTP), which defined certain im-
portant objectives, including availability of telephones on
demand, the provision of world-class services at reason-
able prices, ensuring India’s emergence as a major manu-
facturing/export base for telecom equipment and univer-
sal availability of basic telecom services to all villages. It
also announced a series of specific targets to be achieved
by 1997. Against the NTP 1994 target of the provision of
one PCO per 500 urban population and coverage of all
600,000 villages, DoT has achieved an urban PCO pen-
etration of one PCO per 522 persons, and has been able
to provide telephone coverage to only 310,000 villages. As
regards provision of total telephone lines in the country,
DoT has provided 8.73 million telephone lines against the
Eighth Plan target of 7.5 million lines.
NTP 1994 also recognised that the required resources for
achieving these targets would not be available only from
government sources and concluded that private investment
and private sector involvement were required to bridge
the resource gap. The government invited private sector
participation in a phased manner from the early nineties,
initially for value added services such as paging services
and Cellular Mobile Telephone Services (CMTS) and there-
after for Fixed Telephone Services (FTS). After a com-
petitive bidding process, licenses were awarded to eight
CMTS operators in the four metros, 14 CMTS operators
in 18 state Circles, six BTS operators in six state Circles
and paging operators in 27 cities and 18 state Circles. VSAT
services were liberalised for providing data services to closed
user groups. Licenses were issued to 14 operators in the
private sector, out of which only nine licensees are opera-
tional. The government has recently announced a policy
for Internet Service Provision (ISP) by private operators
and has commenced licensing of the same. The govern-
ment has also announced the opening up of Global Mo-
bile Personal Communications by Satellite (GMPCS) and
issued one provisional license. The issue of licenses to other
prospective GMPCS operators is under consideration.
 Introduction

The policy document set the stage for auctioning telecom ment the right to limit or “cap” the number of licenses. It
licenses in India. announced that no company would be allowed to retain
more than three licenses for the Type A Circles, which were
In an interesting twist, it was decided that government
considered to have the maximum commercial potential.
operators, or other entities owned by the government e.g.,
This meant HFCL would have to forgo all but three of its
public sector undertakings such as ITIs, would not be al-
A-Circle licenses. In effect, it also bailed HFCL out from
lowed to bid for telecom licenses. The then Minister for
having to pay the huge amounts it had bid and not having
Communications argued that government resources
to be bound by the bids, which to some, were beyond the
needed to be augmented by private investments and Pub-
company’s resources.
lic Sector Undertakings (PSUs) bidding for licenses would
defeat the goal. There were several allegations and counter-allegations re-
lating to the post-auction decision to cap the number of
However, since government operators already ran fixed
licenses a company would be awarded. It brought parlia-
line services, the bar on their bidding for licenses would
mentary proceedings to a standstill in December 1995.
essentially exclude them from providing mobile services.
Members demanded that the Minister for Communica-
The auctions for telecom licenses, both fixed and mobile, tions be sacked for his attempts to benefit a particular com-
were held in early January 1995. The bidding unit was the pany and for causing losses to the exchequer as a result of
telecom Circle. This is the unit in which DoT’s own opera- the forgoing of the license fees as a consequence of the his
tions are run and is typically the size of a federal state. actions.
Metro areas, for which the process of awarding mobile
The decision to limit A-Circle licenses was not the only post
licenses had already been completed weeks before, after
facto decision taken. The government also announced that
protracted litigation, were excluded. The use of the Glo-
some of the license fees bid by players were below its
bal System for Mobile Communications (GSM) standard
“reserve price” for them. This meant that most of the
was mandatory for all cellular licensees. (This was reiter-
other bids, including the very low ones by Reliance for
ated to some companies who had expressed an interest in
many C-Circles and many by others for A and B Circles,
using Code Division Multiple Access (CDMA) to provide
were unacceptable.
mobile services.)
In 1996 a total of six fixed line licenses were “won” after
Circles were of three types. Type A Circles were consid-
several rounds. However, for mobile licenses, most Circles
ered most attractive commercially and Type C the least
except Jammu and Kashmir, Andaman & Nicobar Islands
so2. Virtually all Indian companies, in partnership with an
and parts of West Bengal and Orissa could attract winning
array of blue chip as well as smaller international compa-
bids.
nies, participated in the auctions.
The earliest telecom services run by the private sector were
The winner in these auctions was the small equipment
mobile. Cellular services started in all four metros in Au-
manufacturer Himachal Futuristic Company Limited
gust 1995. The process of selecting operators for these
(HFCL), in partnership with Bezeq, an Israeli government
services was started in 1992 and was later challenged in the
controlled company. It won nine licenses for its bids total-
courts on the grounds of not being transparent. In a land-
ling Rs. 85,000 crores.
mark decision, the Supreme Court had ruled in late 1994,
Soon after the results of the bids were announced, the that the government was within its rights to employ hid-
government announced that it had decided to invoke the den criteria to evaluate applicants for licenses as long as the
provision in the tender documents that gave the govern- criteria themselves were fair.
2
see Appendix III for a listing of the Circles by these categories

3
India’s Telecom Reform: A Chronological Account
By early 1997, virtually all private cellular licensees had be-
gun operations. Basic services, with only six licensees, were
slow to begin and were able to start operations only in
1999, because of delays and uncertainties occasioned by
disputes on licensing terms.
The High Court directed the matter be moved to the Telecom
Regulatory Authority of India (TRAI), which had been set up
in early 1997. TRAI quashed the impugned order of the DoT.
In the proceedings before TRAI, the main argument offered
by DoT, which had only weeks ago helped set up TRAI, was
that the latter had overstepped its jurisdiction. This was to
become a pattern in its dealings with TRAI.
The situation was repeated a few months later. The Mahanagar
Telephone Nigam Ltd. (MTNL) announced its plans to start
mobile services in October of the same year and barely a
year after new private players had entered the mobile market,
following the auctions for cellular licenses, which forbade the
public sector to bid. MTNL and the government argued that
license documents had expressly retained the government’s
right to enter the mobile centre.
Cellular Operators Association of India (COAI) moved
TRAI to challenge MTNL’s right to provide cellular ser-
vices on the grounds that its members were promised
duopoly rights.
TRAI in its judgement in February 1998 agreed that it was
the government’s right to give licenses to operators, but
the body’s recommendations on need and timing were
required, before MTNL could be allowed to enter the
mobile market. MTNL’s license or its terms were unavail-
able. TRAI refused to allow MTNL to provide mobile
service. Again, the government argued that TRAI had no
jurisdiction on the matter and moved the High Court.
A new set of issues emerged after private sector opera-
tions began in full swing. The operators faced huge costs.
In particular, the investments required to set up infrastruc-
ture were huge, as were the license fees bid by operators.
The entry costs for customers to use the service were low,
but charges paid by users to make and receive calls, were
4
prohibitive. The operator estimates for minutes of usage
were wrong. The revenues from the services were nowhere
close to meeting license fee commitments that the pro-
spective operators had bid.
Defaults in license fee payments began soon after the initial
payments required for obtaining the licenses were made.
Virtually every company defaulted in its payments. In some
cases, the operators obtained permission from DoT to
delay pending payments.
Some failures of the government too compounded the
operators’ worries. There were frequent and long delays in
providing clearances and permissions for radio frequen-
cies and rights of way that are so critical for setting up
infrastructure. Operators claimed that these delays wrecked
their business plans.
The licenses for Internet Service Providers (ISP) seemed
to upset the basic operators. The license conditions envis-
aged a fee of one rupee for becoming an ISP and permit-
ted ISPs to set up infrastructure to provide last mile access
to the subscriber if none existed. Basic service operators
argued that the ISP license infringed their exclusive right to
set up fixed infrastructure.
The operators approached the government and courts for
relief.
The operators asked the government to compensate them
for losses that they said were the result of the government’s
decisions. The operators proposed moving from the license
fee regime (that in this case meant paying fees they had them-
selves bid) to a revenue sharing regime where an agreed share
of all revenues could be given to the government.
In the courts, private basic telecom operators sought to
persuade the courts that the breach of their rights by ISP
licenses had undermined their businesses and made them
unviable and led to default in license fee payments. Cellular
operators, on the other hand, argued that the delays by the
government had made their businesses unviable. Both sets
of service providers claimed substantive damages.

In 1998, there was bitter litigation between the govern-
ment and private operators. A veritable who’s who of In-
dian legal luminaries argued telecom cases in the Delhi High
Court . The government stand was upheld in the case of
MTNL’s entry as well as in the claims of damages lodged
by the private operators.
Meanwhile, the government had asked two agencies, in
quick succession, to report on industry issues. First, ICICI
was to examine the industry’s performance and report on
the need for a license extension for cellular services. Sec-
ond, the Bureau of Industrial Costs and Prices (BICP) was
asked to review the viability of private cellular operations.
Both accepted that the industry faced problems and gov-
ernment support was required. ICICI said a 10-year li-
cense was unattractive for operators and lenders; and rec-
ommended an extension of the license period to 15 years.
The BICP report was never made public, but is said to
have accepted the operators’ case about delays. However,
it is said that the report did not totally support the private
operators’ demands.
The new Minister of Communications took office in 1998.
He made no secret of his scepticism relating to the opera-
tors’ pleas for relief from pending license fee payments.
He sent letters to all license fee defaulters in January 1999
asking them to pay 20 percent of their outstanding license
fee payments and to securitise the balance 80 percent dues
by February 15, 1999 or face punitive action. This deadline
was later extended to February 28, 1999.
TRAI also faced familiar challenges in 1999, when it ruled
that cellular service rentals must rise by 200 percent, but
tariffs for mobile calls must fall to less than half of their
price of Rs. 16.80 per minute. This was necessary for the
viability and affordability of cellular services. In the same
tariff order, TRAI also announced the move to a system
of charging where the originator alone paid for the call
(the so called Calling Party Pays or CPP regime). In India
and a few other countries, the system in place required
both, originating and receiving parties to pay.
Introduction
The government, basic operators (whose subscribers would
now pay more to contact mobile users) and some consumer
agencies again challenged TRAI’s authority to deal with this
issue. They argued that CPP dealt with interconnection rev-
enue sharing that formed a part of the license agreement.
TRAI had no jurisdiction over this. TRAI lost again.
By late 1999, the courts’ decisions raised serious concerns
about the role and powers of TRAI. In particular its abil-
ity to ensure fair play in the market place was seriously in
question if it was not to be able to intervene in decisions
on who played in the field and by what rules. The success-
ful challenge to the CPP regime was also a sign that TRAI
lacked the powers to enforce technically adequate and fair
priced interconnection to all players in the telecom market,
arguably, the most important function regulators carry out.
In response to concerns of private operators and inves-
tors about the viability of their businesses, a high powered
government committee led by Deputy Chairman, Plan-
ning Commission was announced by the Prime Minister in
late 1998. The committee was asked to make recommen-
dations for a new telecom policy and for resolving issues
facing basic and cellular operators.
The government group prepared a draft National Telecom
Policy in early 1999. The policy draft sought to address
many of these concerns. In a move unprecedented for
government processes in the sector, more reminiscent of
TRAI consultative processes, the document was made avail-
able on the Internet for wider feedback on the proposals.
The Prime Minister took charge of the Ministry of Com-
munications in August 1999. A formal announcement of
the New National Telecom Policy (NTP-99) was made in
April 1999. The move to a revenue sharing regime from
the license fee commitments made by operators was now
official. Unlimited competition would be allowed in all
services except those, like mobiles, which were dependent
on spectrum availability. Technology restrictions were lifted.
The controversy over BSNL/MTNL’s entry in cellular ser-
vices ended by the document specifying that government
5
India’s Telecom Reform: A Chronological Account
operators would be the third mobile operators in their
areas of operation, which then could have only two pri-
vate players each. The regulator would be strengthened. In
addition, NTP-99 proposed the setting up of a USOF to
support services in rural and other remote areas.
Following the announcement of the NTP-99, the govern-
ment issued the so-called “migration package”, which laid
out the terms and conditions to be met by operators wishing
to move from the license fee regime to a revenue sharing
agreement with the government. The package envisaged
that any operator could move to the new regime on the
payment of an entry fee, which would be equal to the
dues that would have been payable by the operators until
31st July 1999. The percentage of revenues to be shared
with the government would be decided later. The opera-
tors would accept unlimited competition. Importantly, they
would need to unconditionally withdraw all pending liti-
gation against the government. All migrating operators
would need to lock in their existing share holdings for five
years. Migration to revenue sharing would not be permit-
ted to either operator if even one of the two private op-
erators providing a service in the Circle did not wish to
migrate. All operators signed up.
The promise in the NTP-99 to strengthen the TRAI was imple-
mented in a remarkable way. In early 2000 the government
issued an ordinance to amend the TRAI Act 1997. TRAI’s
powers relating to tariffs and interconnection, deemed by
courts to be limited, were restored in full. Even the govern-
ment would have no right to overrule TRAI in these two
areas. TRAI was reconstituted with new members. The man-
date to adjudicate disputes between the service providers as
6
well as between service providers and the government was
taken away from TRAI and handed over to the proposed
new body, the Telecom Dispute and Settlement and Appel-
late Tribunal (TDSAT). It would no longer be necessary for
the government to refer to the Chief Justice of the Supreme
Court of India, if the former wished to remove any TRAI
member as long as the member concerned was given an
opportunity to be heard. This last provision was a clear sign
that the government was not comfortable with what it felt
was an overly independent regulator.
NTP-99 had also referred to the government’s intention
to restructure the DoT. In September 1999, we saw the
division of DoT into two parts. DoT was responsible for
policy, planning, licensing etc. and the Department of Tele-
communications Services (DTS) for operations (fixed line
and mobile service providers in India excluding Delhi and
Mumbai). The government also announced a plan to
corporatise DTS so that it functioned as a company. The
Telecom Commission is co-ordinating the functions of
both DoT and DTS in accordance with the administrative
and financial powers vested with it.
Corporatisation came a step closer when DTS was briefly
converted into the Department of Telecommunications
Operations and then, in October 2000, the Bharat Sanchar
Nigam Limited was formed. The process, contentious for
years, was completed rather swiftly, in part, presumably,
because it was decided, that the powerful engineering staff
of DoT would continue to belong to the Indian Telecom
Service cadre and the government would continue to guar-
antee their pensions.
 2
Key Regulator
Regulatoryy Issues
Convergence
The NTP-99 also spoke of the convergence of commu-
nications technologies and the need to have a policy that
could exploit it advantageously.
On August 11, 2000, the government received the draft
report of Sub-Group on Convergence. The group pro-
posed a Convergence Law and suggested a common regu-
latory body for India for content and carriage, i.e., broad-
casting and telecommunications. The report received a
mixed response from sector players and experts. This was
in part, because it did not, as it was perhaps not mandated
to do so, deal with the large number of extremely conten-
tious licensing issues that would result during the move to
a converged policy environment in which carriage and
content would be treated in an integrated manner.
It was surprising to notice the relatively low profile man-
ner in which the Information Technology Act 2000 was
passed. The Act gave legal sanctity to electronic transac-
tions. It also created the office of Controller of Certifica-
tion Authority (CCA) to regulate Certifying Authorities (CA)
who would assign digital signatures and other instruments
of authentication. The retiring Director of DoT’s Centre
for Development of Telematics (C-DoT) was appointed
as the first CCA.
The Cabinet approved the Communications Convergence
Bill 2001 drafted by the committee. It also approved the
repeal of The Indian Telegraph Act 1885, The Indian Wire-
less Telegraphy Act 1933, Telegraph Wire Unlawful Pos-
session Act 1950, The Cable Television Networks (Regu-
lation) Act 1995 and the Telecom Regulatory Authority of
India Act 1997. The Bill, ambitious in intent, was unprec-
edented in leaving no role for the government in licensing.
However, experts criticised it for being too general and
not dealing with transition arrangements as also with issues
relating to economic regulation. (The Bill was introduced
in Parliament and was also reviewed by a Parliamentary
Committee, but lapsed with the dissolution of the 13th
Lok Sabha before it could be made into law).
Related, indirectly at least, to the same issue of conver-
gence, the government announced the merger of the Min-
istry of Information Technology (MoIT) and Ministry of
Communications (MoC) on December 22, 2001. The new
entity is now called the Ministry of Communications and
Information Technology (MoCIT). The merger, much
discussed and debated, brought together MoC and MoIT.
However, the Ministry of Information and Broadcasting
was left out of this attempt at dealing with the conver-
gence of communications technologies.
Licensing and Regulation Post
NTP-99
Within months of the new team of members of TRAI
taking office, a series of decisions were taken, many of
which seem to reflect the message, explicit or implicit, about
the events that led to the dissolution of the previous body
7
India’s Telecom Reform: A Chronological Account

and the replacement of all but one members of the erst-
while body.
The first instance of the new reality was a review by TRAI
of the previous body’s recommendation, in late 1999.
TRAI had then asked the government to allow open entry,
in the national and international long distance services on
payment of a fixed fee. The review by the new body agreed
with the government view and favoured a limited number
(3) of players and auction for these licenses. The new rec-
ommendations were made three months after their taking
office in February 2000 and reversed those made less than
six months earlier. This was ominous.
A major dent in the credibility of a body that had accom-
modated the government position was to come just three
months later. The government itself did a somersault on
long distance licensing. In mid July 2000, the Prime Minis-
ter announced a decision that implied that the government
had chosen to accept the dissolved TRAI’s recommenda-
tion on the subject, in toto.
More controversy followed and raised concerns about the
independence of the new TRAI. In November of its first
year, the body issued a consultation document laying the
grounds for the introduction of a limited mobility service
to be provided by basic operators in their Short Distance
Charging Areas (SDCAs) where local call rates apply. The
subject of limited mobility, provided using fixed line wire-
less infrastructure of basic service providers, had come up
about a year earlier. The government had told the regula-
tor then that it considered such mobile services using a
handset unacceptable, since they would overlap with ser-
vices of licensed cellular operators.
So there was widespread concern, especially among GSM
cellular operators, when TRAI, in November 2000, issued
a consultation paper on “Policy Issues Relating to Limited
Mobility by use of Wireless in Local Loop Techniques in
the Access Network by Basic Service Providers”. The con-
sultation paper had argued that the limited mobility ser-
vice using WLL (F) - WLL (M) for short-distances would
add value to fixed line services and provide cheap mobil-
ity to basic service users at fixed line prices. It argued that
the limited mobility services would have minimal impact
on the cellular mobile services since the products would
cater to different markets i.e., high and low end users.
The commercial opportunities and threats perceived by
basic and mobile operators were obvious. The division
between the two camps, which had fought aggressively
for migration to revenue sharing a few months earlier, was
sudden but bitter.
The TRAI consultation process in Delhi gave hints of a
new politicisation of the licensing and regulatory process.
The meeting attracted a diverse group that included pro-
moters, local politicians and lawyers and remained unruly
for most of its duration.
The cellular operators protested, as vigorously as basic op-
erators supported the TRAI thinking on the issue. To the
cellular camp, limited mobility services were unprecedented,
virtually unheard of elsewhere and a back-door entry into
their business and that too on the terms and conditions
specified for basic fixed phone services for which the li-
cense fees were a fraction of what they had paid. The
basic operators were allowed higher revenue shares from
their long distance calls, since their local call business was
not profitable. The cellular players were predominantly
dependent on airtime charges for their revenues.
To the basic operators’ camp it was an attempt to block a
technology that allowed them to do more i.e., provide mo-
bile services, than the fixed phone service they were licensed
to provide. They claimed that the cell players had managed to
block competition in a market that they had postured to keep
to themselves and extracted several concessions, such as the
option to set up mobile public phone services.
Nobody, including the government and TRAI, seemed to
have considered that virtually all basic operators, except
Hughes (which was eventually sold to Tatas) and possibly
HFCL (who had sold most of their interests in the Gujarat
mobile license earlier), were also running mobile cellular
businesses. It was a uniquely Indian phenomenon.
There were of course some pure mobile players such as
Hutch, BPL and a couple of smaller ones like RPG, Spice

8

who had much to lose from limited mobility. On the other
hand, private basic businesses had failed to take off in any
significant manner and mobility offered a major opportu-
nity to companies like Reliance who had acquired basic
licenses for almost the whole country post NTP-99. The
dispute was real.
TRAI issued recommendations on issues relating to “Lim-
ited Mobility” through Wireless in Local Loop (WLL). In
the “Access Network by Basic Service Providers” on 8th
January 2001, weeks after completing a hurried consulta-
tion, TRAI recommended that WLL (M) service by fixed
service providers be permitted and that no additional fee
be charged or tariffs changed.
The government was quick to act on the recommenda-
tions. The guidelines for fixed services, which included lim-
ited mobility services, were issued, complete with applica-
tion forms for prospective operators, in a record three
weeks, on 25th January 2001. Such speed was not com-
mon to the decisions generally taken by DoT on other issues.
These guidelines stated inter alia that “Basic Service Op-
erator shall be allowed to provide mobility to its subscrib-
ers with Wireless Access Systems limited within the local
area i.e., Short Distance Charging Area (SDCA) in which
the subscriber is registered. While deploying such systems,
the operator has to follow the numbering plan of that
SDCA and it should not be possible to authenticate and
work with the subscriber terminal equipment in SDCAs
other than in which it is registered. The system shall also be
engineered so as to ensure that hand over of subscriber
does not take place from one SDCA to another SDCA
while communicating.”
Cellular operators in particular complained bitterly and al-
leged foul play. In response to the controversy following
the TRAI recommendations, the government referred the
issue of “limited mobility” to the Group on Telecom and
IT Convergence (GOT-IT) for their recommendation in
April 2001. GOT- IT recommendations on WLL limited
mobility were sent to the Prime Minister later that month.
The group found WLL (M) came within the purview of
NTP-99 and recommended sharing of long distance rev-
Key Regulatory Issues
enues for WLL (M) to be brought at par with cellular mobile
services. It also recommended that SDCAs be divided into
three sub-categories – rural, semi-urban and urban - and
that each sub-category be covered in equal proportion for
each phase of the rollout prescribed, to qualify for alloca-
tion of spectrum for WLL (M) services. GOT-IT recom-
mended that allocation of the spectrum be inextricably
linked to performance and that the spectrum already allo-
cated be forfeited in case of failure to meet subsequent
rollout obligations. The group also proposed that existing
fixed operators applying for new licenses give undertak-
ings as well as performance guarantees to fulfil their obli-
gations within a defined time frame.
Cellular operators considered GOT-IT’s recommendations
far from acceptable since the group had not conceded
that the services were illegal as GSM mobile operators
insisted they were. However, the recommendations on rev-
enue sharing for long distance services and rural services in
effect, recognised their regulatory and commercial con-
cerns. This was something that TRAI had not done. The
GSM operators felt a victory of sorts.
The COAI approached TDSAT to challenge the licensing
of limited mobility services. After months of extended
hearings on 15th March 2002, TDSAT dismissed the COAI
petition seeking to prohibit fixed service providers from
offering any type of mobile services. It ruled that the in-
troduction of WLL (M) services was a policy decision of
the Government of India and was therefore not subject
to review by the Tribunal.
COAI challenged the TDSAT judgement on WLL (M) in
the Supreme Court less than a month later on 11th April
2002. The Supreme Court gave its judgement in Decem-
ber that year. While it did not stay the government deci-
sion, it was scathing in its criticism of the TDSAT’s failure
to deal with the issues before it. It was persuaded that the
Tribunal had full jurisdiction on the issues raised before it
and had failed to consider them. It accepted that cellular
players concerns about fairplay were real. The apex court
sent the matter back to TDSAT for review with particular
focus, on a level playing field i.e., fair competition aspects
of the move to allow limited mobility services.
9
India’s Telecom Reform: A Chronological Account
In August 2003, TDSAT gave its judgement on the legality
of WLL (M) services. Its majority decision, – that of two
of its administrative members - accepted that the WLL (M)
service was legal, but argued that the government’s decision
to allow it, was taken in unseemly haste. It said TRAI should
have levied additional fees. The minority judgement, that of
the chairperson of TDSAT (and its only judicial member),
said that the WLL (M) service is illegal and suggests impor-
tant relevant information was not disclosed to government
committees examining the legality of the service and that de-
cisions were taken for extraneous reasons. Both judgements
had serious concerns about the decision-making processes at
TRAI and by the government. TRAI was given four months
to enforce limited mobility and levy additional fees on players
providing the service.
After the completion of arguments and before the TDSAT
judgement of August 2003, TRAI floated its hurriedly put
together paper on the unification of fixed and mobile li-
censes. The unification of the two types of services is jus-
tified on the ground that the norm, internationally, is to
have convergence of all service licenses. On complaints
that TRAI’s approach of limiting unification to fixed and
mobile services only, TRAI issued a single page amend-
ment seeking views on the unification of all telecom services.
So, in September 2003, TRAI undertook two parallel, and
seemingly divergent, consultation processes. One open house
sought views on unifying the licenses of fixed and mobile
services. A second open house meeting - on the same day in
some cities - was held to seek views on what additional fees
were to be levied for limited mobility services being pro-
vided in the market as the TDSAT had directed TRAI to do.
In October 2003, TRAI gave its recommendations, propos-
ing an immediate merger of fixed and mobile licenses in the
area of operations of current cellular companies. It recom-
mended that the government be paid additional fees, equiva-
lent to the difference between those paid by fixed line and the
fourth cellular licensees awarded. Service areas were to be as
those for erstwhile cellular operators. It recommended that
Reliance must pay a penalty for offering de facto mobile ser-
vices through call forwarding arrangements. Full unification,
according to TRAI, is to be achieved in six months.
10
The government immediately accepted TRAI’s recommen-
dations and issued guidelines for a new unified access ser-
vice license (UASL) in November 2003. All fixed line op-
erators paid fees for unified licenses shortly thereafter. The
action to enforce the scope of licensed limited mobility
services to SDCAs was left in abeyance till the decision to
unify the licenses was taken in November 2003.
The sector seems to have arrived at a kind of “peace”
after the government finally offered concessions of a two
percent reduction in revenue share payments to the out-
witted cellular operators. The cellular operators have with-
drawn all litigation. The sector is poised for a new phase
of growth and possibly less litigation in the coming months.
The route to this stage though, has been controversial.
Universal Service Obligation Fund
NTP-99 had mooted the setting up of a Universal Service
Obligation Fund (USOF), to support rural services which,
in view of their high costs and perceived low revenue
potential had difficulty in attracting investments. The pro-
posal was to impose a levy on major telecom service pro-
viders and for the proceeds to go to a USOF.
TRAI’s consultation paper on the arrangements for setting up
and deploying the fund was released in July 2000. The TRAI
recommendations of 3rd October 2001 had proposed a
“proxy model” approach where the government or the regu-
lator would essentially compute costs. When DoT issued its
guidelines on Universal Service Obligation (USO) on 27th
March, 2002 and announced the creation of the USOF start-
ing 1st April 2002, this model was rejected. The Fund is imple-
menting an approach which determines service costs through
a “negative auction”; bids are invited for the minimum sub-
sidy and the selected operator would be required to provide
services in an area considered to be “net cost positive” i.e.,
commercially unviable.
It is useful to summarise the USO guidelines according to
which:
i) “The funds created by the Universal Service Levy shall
be spent in rural and remote areas on both the public

access telephones or community telephones meant for
public use and individual household telephones in net
high-cost rural/ remote areas.
ii) The support from USOF will be provided to meet
net cost (i.e., cost minus revenue) of providing the
universal service.”
Uncharacteristically, it was the government, and not the
economic regulator, TRAI, that chose the approach of
allowing the market to determine the most efficient cost
for delivering a service. Rakesh Mohan, a part-time mem-
ber of the then TRAI had written a dissenting note in TRAI’s
recommendations on the subject.
The retiring Secretary of the Department of Telecommu-
nications was appointed the USOF’s first administrator.
The resources of the fund come from a fixed levy, cur-
rently five percent, mainly from operators of fixed, mo-
bile communications services. The fund is now operative.
An amendment to the Indian Telegraph Act 1885 was
cleared by Parliament in December 2003, to allow funds
received under universal obligation to remain with the
USOF and not revert to the Consolidated Fund of India,
as unutilised budgeted funds would ordinarily do in gov-
ernmental organisations.
Interconnection
Interconnection is one of the most problematic areas in an
environment with multiple operators competing with each
other. There is broad consensus in international regulatory
circles that new operators must be provided interconnec-
tion to an existing network at a price, which is cost based
and is provided in a timely fashion. In India, interconnec-
tion was a part of the license agreement that specified ac-
tual amounts, if any, that each party could charge the other.
This was a blessing in disguise.
The license agreement route to setting interconnection terms
meant that newcomers were saved most, though not all,
of the interminable wait and negotiation to connect to the
3
The Authority faced immediate opposition from the Minister for Communications, who directed that the whole order be kept in
abeyance till further notice.
Key Regulatory Issues
incumbent’s network when they needed to get their ser-
vices off the ground. The disadvantage was, of course,
that the actual charges for interconnection in the license
agreements were in most cases without a known basis. In
addition, there was a tendency to confuse user tariffs and inter
operator tariffs, i.e., interconnection charges. Thus some rela-
tively technical decisions became the subject of often unin-
formed debate and speculation. A case in point was the way
in which TRAI was made to revise its stand on the CPP re-
gime for mobile services. The CPP regime was struck down
by the High Court when it was first instituted on the grounds
that TRAI had no right to revise provisions of a license agree-
ment between an operator and the government.
TRAI’s first intervention in this area was in November 1997
when a set of principles and methodologies to be fol-
lowed were posted for discussion.
TRAI’s first comprehensive tariff order in March 1999 stated:
“Through this Order, the Authority also wants to send a
signal to investors in this sector about the direction of
telecom pricing reform, the main elements of which will
be: service providers, and through them customers, will
be provided enhanced flexibility for pricing and giving al-
ternative tariff packages to customer.”
On the need for tariff rebalancing the document went on
to say:
“The Authority has considered the pros and cons of un-
dertaking tariff re-balancing now. It came to the conclu-
sion that tariff re-balancing cannot be achieved in one
step, and further that the first step in this regard cannot
be postponed if the policy of introducing private ser-
vice providers has to succeed. In fact, the Authority be-
lieves that this should have been undertaken even before
introducing competition in this sector. The growth and
development of this sector will not be sustainable with-
out this reform”.
By this formulation, the Authority had set a clear agenda
for the sector.
11
India’s Telecom Reform: A Chronological Account
TRAI was able to bring down leased line prices dramatically
to the tune of approximately 90 percent in some cases. This is
important since these prices are key determinants of inter-
connection costs, besides being of value to data service users.
The rate-rebalancing process was begun in a small way3.
On September 1999, TRAI issued Telecommunication
Interconnection (Charges and revenue Sharing - First
Amendment) Regulation 1999 and specified interim tariffs
and the introduction of CPP for cellular services. The new
tariffs entailed higher monthly rentals of Rs. 475 / Rs. 500
for metros/circles respectively, but lower call charges and
a terminating charge, of approximately Rs. 1.60 per minute,
for calls to mobile phones, which was till then levied for
calls terminating on fixed line phones.
In a far-reaching move, on 17th January, 2000, the Delhi
High Court quashed Clause 8 of the Telecommunication
Interconnection (Charges and Revenue Sharing) Regula-
tion of May 28, 1999. The Court ruled that TRAI is not
empowered to change the terms of interconnection
amongst service providers, since it is part of the license
agreement of cellular operators. This raised questions
about the relationship between new sector specific regu-
lators, consumer interest and judiciary as well as the roles
and capacities of different agencies struggling to adapt
themselves to an increasingly market driven economy.
On 12th July 2002 TRAI issued the Telecommunication
Interconnection (Reference Interconnect Offer) Regulation,
2002 (2 of 2002). The regulation mandates that service
providers with significant market power publish a Refer-
ence Interconnect Offer
(RIO) “stipulating the various technical and commercial
conditions including a basis for interconnect usage charges
for origination, transit and termination. Following these,
the new entrants can seek interconnection and agree upon
specific usage based charges.” All RIOs are to be approved
by the regulator.
The Telecommunication Interconnection Usage Charges (IUC)
Regulation of 29th January 2003 was a comprehensive re-
view of the interconnection charges. It provides estimates of
costs of network elements involved in interconnection.
12
According to this TRAI document:
“The cost based monthly rental (including license fee) is
estimated to be Rs. 424. Recent data from BSNL shows
that at present their recovery on account of monthly rental
is in the range of Rs. 165 to Rs. 175 per month. BSNL was
charging lower rentals for certain exchange capacity slabs.
On that basis, a balance amount of Rs. 249 to Rs 259 per
month per DEL needs to be recovered through Access
Deficit Charge (ADC).”
IUC regulations thus envisage the levy of an additional
charge, to recover from networks connecting to the fixed
line networks, an access deficit, the revenue shortfall in pro-
viding local calls at regulated prices. The amount of access
deficit is estimated to be Rs. 13,000 crores.
The amount of the deficit and the nature of the calcula-
tion are both contentious. The amount would seem to
detract from the fact that the incumbent with considerable
market power in the interconnection market is a hugely
profitable company with profits of Rs. 9,000 crores. The
calculations are based on the incumbent’s annual reports. A
major concern is the conflict of interest, since the source
of the data in question and the intended beneficiary of the
ADC payment are both BSNL. Another issue is that ADC
payments would be paid for all calls to basic operators,
irrespective of whether they terminate in urban or rural,
or profitable or unprofitable users.
These IUC regulations also envisage reciprocal payments
for terminating traffic on all networks including mobile.
This removes an anomaly of the earlier regime when calls
to cellular networks involved no payments of terminating
charges to the latter.
As a result of the new IUC ruling, outgoing calls to mo-
biles become expensive and incoming calls become free.
Anomalies continue to exist between calls to WLL (M)
and cellular services when they interconnect to the fixed
network, but parity is retained when the calls are between
the two types of mobile services.
The new leadership of TRAI responded to concerns in
the IUC regulations of January 2003 by issuing a new con-

sultation paper on IUC issues to seek further views on
modification of IUC, new estimates for ADC etc. This
culminated with the issue of the new IUC regulation (2 of
2003). On 29th October 2003 the access deficit, estimate
was reduced to roughly 40 percent from Rs. 13,000 crores
to Rs. 5,000 crores. However, the deficit will now be re-
covered from a wider range of service calls than those
involving calls to fixed line phones, as envisaged earlier.
This buffers some users from its impact, but mobile users
calling mobiles would need to pay more.
Spectrum Management
Spectrum availability in India is arguably a bigger issue these
days since mobile services that use wireless technologies had
little demand or indeed supply till 1995. Fixed line infrastruc-
ture was the more dominant mode of connectivity and the
need for spectrum was limited. The agency dealing with spec-
trum issues, i.e., Wireless Planning and Coordination (WPC)
has been criticised occasionally for its relatively outdated and
slow processes. However, its role has been less contentious
than that of DoT with which it has a looser connection.
WPC reports to the government through the member (Tech-
nology) Telecom Commission, but otherwise works relatively
independently of the DoT.
In the context of the telecom reform of the 1990s, the role
of the WPC started when mobile operators were first li-
censed. They each had 4.5 Hz of spectrum allotted to them.
In 1996, the Telecom Commission approved an increase
in frequency allocated in the 800/900 MHz band from 4.5
MHz to 6.2 MHz in the four metros, to accommodate the
rapid increase in cellular subscribers.
This was followed by a waiver by the government on
November 4, 1997 of an annual royalty charge of Rs. 1,200
per cellular subscriber with prospective effect. The waiver
was later (1999) applied with retrospective effect for the
period July 20, 1995 to August 27, 1997.
Mobile operators as well as some others have made sev-
eral representations to the government in recent times, about
the small amount of spectrum available for services. The
Key Regulatory Issues
delays in frequency allocation have come in for frequent
criticism. The government committee that conducted a
review of telecom policy set up a Spectrum Management
Committee on December 16, 1998, to give its recommen-
dations on the efficient and cost-effective management of
the available spectrum.
The committee submitted its report in December 1998.
Its recommendations included:
“It is noteworthy that the committee did not consider it
practical for the defence services to vacate any of the spec-
trum in use by them, in any appreciable manner. Clearly
the committee does not agree with many private sector
players that the release of the spectrum by defence is both
feasible and necessary.”
A major controversy erupted when the government took the
contentious move to introduce limited mobility services us-
ing the WLL network of basic service licensees. DoT’s guide-
lines for new fixed service licenses, announced in January 2001,
envisaged the allocation of spectrum on a first come, first
serve basis. This was in direct contrast to the pricing schemes
that extract a premium for spectrum use by commercial play-
ers. Cellular operators claimed to have paid orders of magni-
tude more than for their licenses, which they claimed, were
the de facto price of the spectrum. They accused the govern-
ment of favouring a rival service.
The bargain price of spectrum for fixed service to pro-
vide limited mobility was sought to be highlighted when
Sterling Infotech, the holder of the mobile license for Tamil
Nadu, offered to pay the government Rs. 2,500 crores for
5MHz spectrum in the 800/900 MHz band for all the
circles in India. This was several times more than the cor-
responding price that fixed service providers would pay
for the spectrum.
In January 2002, the Minister of Communications ap-
proved the publication of the National Frequency Alloca-
tion Plan (NFAP) so as to help optimal utilisation of the
frequency spectrum. Till this time, the NFAP has been seen
as a security related sensitive document that was unsuitable
for publication.
13
India’s Telecom Reform: A Chronological Account
Meeting a long pending demand for spectrum by cellu-
lar operators, WPC issued an order in February 2002 to
allocate additional spectrum to cellular operators. Rules
proposed for the additional allocation of spectrum in-
cluded:
• Allocation of additional spectrum of 1.8 MHz per
operator in the 1800 MHz band, taking the total allo-
cated spectrum up to 2x8 MHz per operator;
• Cellular operators may apply for additional spectrum
on reaching a subscriber base of four lakhs in the ser-
vice area, but frequency will be allocated after the sub-
scriber base has crossed five lakhs.
• Further additions to the spectrum are possible up to
2x10 MHz per operator after reaching such subscriber
base as may be prescribed.
14
Spectrum Usage Charges
Up to 2x4.4 MHz - 2% of Adjusted Gross Revenues (AGR)
Up to 2x6.2 MHz - 3% of AGR
Up to 2x10 Mhz - 4% of AGR
TRAI, which is indirectly involved with spectrum manage-
ment, but has been involved in the controversy relating to
license fees paid for mobile services, has raised the impor-
tant issue of the efficient use of spectrum. In late 2003,
TRAI castigated mobile operators for using the spectrum
inefficiently.
In the coming days, spectrum pricing is likely to become
an even more important consideration for mobile opera-
tors and as a consequence for the growing numbers of
users of their services.

3
Conclusion
The absence of a well thought-out initial plan and strategy
comes through clearly as the main reason for much of the
problems that arose in India’s telecom reforms. This in
turn was linked to confusion with regard to three distinct
objectives - promoting new investment, efficiency through
competition and fiscal concerns - which influenced deci-
sion-making at various stages of the process.
The relationship between the DoT and the regulatory agency
introduced through reforms was another area of weakness
that contributed to uncertainties and delays. It is noteworthy
that clarity on the basic issues was eventually brought about
only through the recommendations of task forces and groups
(reporting to the Prime Minister) culminating in NTP-99.
But further problems cropped up on account of the entry of
new wireless-based technologies, in particular, the way this
entry was handled. This led to disputes and eventually to rene-
gotiations of the terms of licenses already awarded for fixed
line and mobile services, a process that again turned out to be
messy. As a partial fall-out, moves towards consolidation
through mergers and acquisitions have also come about.
These developments notwithstanding, the process of reduc-
tion in tariffs was initiated by the regulator and was soon
A Theoretical Model of Subcontracting for High Quality
taken over by the forces of competition. This commenced in
the period covered in the report but only gained greater mo-
mentum subsequently. Inflows of investments into the sector
(including volumes of FDI) and resurgent economic growth
have combined with the fall in tariffs to generate an accelerat-
ing increase in subscriber numbers. The recent trends (De-
cember 2005/ January 2006) would take the country to the
first place in telecom sector growth, worldwide.
In spite of the many setbacks to the process and the obvi-
ous challenge of connecting the remaining largely rural
population, the success of the telecom reform exercise is
spectacular in many respects. It is most visible in the abun-
dance of services, the absence of long waiting times and a
vastly cheaper and improved service with operators vying
for consumer business, a contrast from the old days of
corrupt monopolies. Perhaps the most important and vis-
ible sign of this success is the growing number of urban
poor using mobile phones to enhance their livelihoods,
besides communicating with loved ones.
So much more could have been achieved, but what has
been achieved is extraordinary in comparison to the re-
form initiatives in other sectors in India.
15
India’s Telecom Reform: A Chronological Account
4
Epilogue
Between December 2003 and December 2005, several fur-
ther developments have taken place in the field of telecom
reforms, of which the important ones are dealt with below.
Unified Access Service Licenses
On 13th January 2005 TRAI came out with recommenda-
tions on a unified licensing system in the country in line
with the convergence of markets and technologies becom-
ing a reality and forcing a realignment of the industry. Ac-
cording to the recommendations, a service provider may
provide the service that was earlier provided by another
type of service provider. A single service provider can
now offer telecommunication, cable and broadcasting ser-
vices. The Unified Licensing Regime (ULR) is designed to
encourage the free growth of new applications and ser-
vices leveraging on the technological developments in In-
formation and Communication Technology (ICT). Un-
der ULR, operators would pay six percent of their ad-
justed gross revenue (contribution to USOF at five per-
cent plus administrative cost of one percent) as license fee.
The recommendations also include the proposal to allow
niche operators to serve rural areas with a phone density
of less than one percent. Niche operators would pay no
entry fees. The recommendations envisage the migration
of existing service providers to the ULR to be optional
for current operators. However, after a period of five years
it shall be mandatory for all telecom operators to migrate to
the ULR. It is important to mention that these recommenda-
tions are pending with the government and yet to be accepted.
16
Universal Service Obligation Fund
The USO Fund was constituted in 2002 and an adminis-
trator was appointed. The Fund envisages auctions of
subsidies to operators who will serve rural areas. The
guidelines issued by the USOF envisage subsidies to suc-
cessful bidders for providing a variety of rural lines e.g.,
village public phones, second phone lines, high speed
internet centres as well as replacement of VPTs based on
Mobile Access Rural Radios (MARR) technology. USOF
subsidies have been awarded for providing a second VPT,
termed rural community phone, in 46,253 villages of
population exceeding 2,000 and for private household
phones in 1,685 SDCAs (roughly equivalent to a revenue
taluka) that were identified by the administration as ‘unre-
munerative’ in terms of telephone usage and revenues.
However, TRAI has recently argued that the USOF ap-
proach, were it to be completely successful, would result
in a rural tele-density of only four percent. A comprehen-
sive rethink is required, especially to ensure that wireless tech-
nologies and infrastructure can be adequately supported, to
replicate the huge success of mobiles in urban areas.
Access Deficit Charge
The ADC regime came into effect from 1st May 2003 for
compensating the Fixed Service Providers (FSPs), but pre-
dominantly BSNL, the incumbent and main provider of
fixed lines in India, for meeting the revenue deficit arising
out of providing services below costs, i.e.,

(a) filling the gap between ‘affordable’ monthly rentals
and the cost based monthly rental,
(b) financing of free calls and
(c) local tariffs charged below the cost of their provision.
All long distance calls except those involving basic tele-
phone subscribers at both ends, (with minor excep-
tions) are subjected to ADC.
ADC was levied on a per minute basis. Revised reduced
rates of ADC were brought into effect on 1st February
2005. The ADC regime was controversial and raised many
questions about its methodology and fairness from affected
private operators. The total amount of compensation was
brought down to Rs. 5,341 crores. According to TRAI,
this revision was necessitated mainly due to
(a) an increase in the base for generating the ADC amount
due to the huge increase in mobile subscribers and the
consequent higher minutes of usage and
(b) falling per line capital cost resulting through new tech-
nologies. One more revision of ADC charges (23rd
February 2006) has brought down the amount of ADC
to Rs. 3,335 crores and changed the method of charg-
ing from the earlier per minute basis to one where
operators would pay a percentage of their revenues.
For long distance calls, however, the earlier per minute
payments would continue, but at a considerably lower rate.
TRAI envisages merging the ADC regime with the USO
levy by year 2008-09.
Long Distance TTarif
arif fs
ariffs
Domestic STD charges (rupees per minute for distances
beyond 200 kms) came down from Rs. 4.80 in March
2003 to Rs. 3.60 in March 2004 and later to Rs. 2.40 by
March 2005. International long distance calls during the
same period have fallen from Rs. 24 to Rs. 7.20. The effec-
tive charge for mobile users was reduced from Rs. 2.40 to
Rs. 1.20 during the same time. The reduced ADC, increased
competition, expectations of increase in the subscriber base
and in the minutes of average usage have been the main
factors contributing to falling tariffs.
Epilogue
Opening of Inter net TTelephony
Internet elephony
and Further Liberalisation of
National Long Distance Services
In December 2005, the government also announced a vir-
tually free entry, at a vastly reduced fee of Rs. 25 million, to
India’s long distance telephony services, both national and
international. Along with this came the removal of earlier
controls on Internet telephony, meeting a long-standing
demand. The removal of restrictions on Internet telephony
is likely to especially help future rural subscribers, since a
much larger proportion of their calls in long distance.
Pan India TTarif
arif fs
ariffs
On 14th June 2005, the Minister of Telecom and IT an-
nounced that the government operators would offer a
package in which a customer could make a one minute call
to anywhere in India or a three minute local call for one
rupee. This brought to fruition the minister’s often-stated
goal for customers to have access to a One India tariff,
irrespective of distance. The One India tariffs however,
do envisage additional monthly rentals and do not come
with ‘free calls’, which were included in the basic consumer
tariff package. Subscribers have the option to change over
to this One India tariff.
Subscriber Growth and
Penetration levels
At the commencement of economic reforms in 1991, the
country had a total of about five million telephones and a
waiting list of nearly two million and an overall telephone
penetration level of a little over half of one percent per
head of population. Access to telephony was confined al-
most entirely to the urban areas. Here also, the waiting list
did not correctly reflect the pending demand as potential
applicants were discouraged by the long waiting period,
the stipulated application fee that would remain locked in
and the poor quality of service. By 2003-04, the number
of fixed line phones had crossed 40 million and cellular
mobile phone subscriber numbers were rising so rapidly
that they overtook the fixed line subscribers in 2005. At
17
India’s Telecom Reform: A Chronological Account

the end of December 2005, the total subscriber base had mobile connections. Average penetration touched 11.43 per
grown to 124.85 million, made up of 48.93 million fixed hundred, with urban tele-density of 23 percent and rural
lines (including fixed WLL phones) and 75.91 million penetration of two percent.

18
Appendix I

Chr onology of Indian TTelecom

Chronology elecom Refor
Reformm

1990, December: A high level committee headed by Dr. M. cellular operators - Bharti, Essar, Hutchison Max, BPL,
B. Athreya was set up to recommend the most appropriate Modi Telstra, Usha Martin, Skycell and RPG win licences
organisational structure for the management of telecom ser- for cellular services in metros.
vices in the country. The committee recommended that the
1993, May: As part of the ongoing reform process, the
DoT be split into four corporate entities, value added ser-
Ministry of Communications requests ICICI to recom-
vices should be thrown open to competition by public or
mend terms and conditions for the private sector’s entry
private enterprises, co-operatives etc. Small entrepreneurs must
into India’s telecom services and to study the necessary
be encouraged in installation, cabling, closed user networks
changes required in the telecom sector and recommend
and subscriber premises work, for greater efficiency and
modalities for constituting an independent Telecom Regu-
employment generation. Importantly, policy and regulation
latory Authority.
should be separated from operations.
1993, October: The G.S.S. Murthy Committee submits its
1991-1993: The beginnings of private sector participation
report on the licensing of public switched telephone networks.
in telecom services. The sub-sector of ‘value added ser-
vices’ was opened up to private investment in July 1992. 1994, January: ICICI submits its report on the setting up
These included: of a Telecom Regulatory Body for India.

Cellular Mobile Radio Telephone
Radio Paging
Electronic Mail etc. services
1992, January 20: DoT invites technical bids for cellular
mobile telephone services in Delhi, Mumbai, Calcutta and
Madras.
1992, July: Value added services opened to private invest-
ment by DoT. These include e-mail, voice mail, 64 Kpbs
private data services, audio text and video text services,
radio trunking services, cellular mobile services, radio paging
services, and video-conferencing.
1992, October 12: The Minister of Telecommunications
announces the list of metro cellular licensees. The metro
1994, May 13: National Telecom Policy (NTP-94) was
announced.
1994, June 13: ICICI Telecom Working Group report on
entry conditions for basic telecom services suggests the
optimal level for entry of private players should be a Sec-
ondary Switching Area (SSA).
1994, November 10: ICICI Telecom Working Group
submits final report on the process for the selection of
new operators for basic services.
1994, November 29: On the basis of re-evaluation as per
the directions of the Supreme Court, on a petition by one
of the operators, DoT orders a change in the cellular op-
erator for Mumbai. Hutchison Max signs licence for
Bombay.

19
India’s Telecom Reform: A Chronological Account
1995: Working fixed lines cross 10 million, annual fixed
line growth crosses 20 percent.
1995, January 16: Tenders invited for cellular services in
the rest of India.
1995, March: Paging services debut in India.
1995, March 15: The Gupta Committee makes recom-
mendations regarding the restructuring of DoT.
1995, May 27: DoT issues clarifications and announces
several changes in the original tender conditions of the basic
services. Tender opening date extended to June 23, 1995.
1995, June 07: DoT receives 33 bids for mobile services
in 18 telecom circles. No bidders for Andaman & Nicobar
and Jammu and Kashmir circles.
1995, June 23: 81 bids received for fixed line (basic) ser-
vices in 20 Circles. No bids for Jammu and Kashmir.
1995. August 05: DoT opens financial bids for cellular
mobile services.
1995, August 15: VSNL begins public Internet access in
selected cities.
1995, August 23: Modi Telstra launches the first cellular
operation in the country in Calcutta.
1995, November 2: The government announces that no
company may retain more than three A and B Circle
licences.
1995, December 1: Second round of bidding for basic
services in 13 Circles.
1995, December 12: DoT issues 34 licenses to 14 compa-
nies for operating cellular services in the 18 telecom Circles.
1996, January 1: Bids for basic services opened. Only six
companies participate in the bidding. Only five Circles out
of 13 receive acceptable bids.
1996, March 12: Letter of Intent awarded to highest bid-
ders in the second round of bidding.
1996, March 15: Third round of bidding for basic ser-
vice licenses for nine Circles.
20
1996, May: Draft Interconnect Agreement released by
DoT. Discussions begin with mobile operators.
1996, July 23: TRAI Bill introduced in Lok Sabha.
1996, October: Mobile licenses issued to two operators
each in 20 Circles.
1996, November: DoT allows assignability of cellular li-
censes, meeting the demand of financial institutions.
1997, February: India signs Telecommunications Basic
Services agreement at World Trade Organisation (WTO)
allowing companies with up to 25 percent foreign equity
access to most parts of its telecom market. It signs up for
a regulatory reference paper that forms part of the agree-
ment, but its commitment does not include important com-
petitive safeguards relating to state owned and other in-
cumbents, independent regulators and issues such as inter-
connection and spectrum fees.
1997, March 18: TRAI Bill, 1997, a modification of the
previous Bill presented a year ago, passed by the Lok Sabha
and the Rajya Sabha.
1997, March 25: TRAI is set up with three members.
1997, March 26: COAI approaches TRAI against DoT’s
order that hikes the price of fixed to mobile calls.
1997, April: Mobile services commence in non-metro
Circles.
1997, April 25: TRAI quashes DoT’s PSTN to mobile
tariff order.
1997, September 12: DoT gives clearance for national
automatic roaming.
1997, October 10: MTNL indicates intention to enter into
cellular services in its GDR Prospectus.
1997, November 3: Cellular operators seek TRAI inter-
vention to stop MTNL’s plans to offer mobile services.
1997, November 19: Private operators permitted to make
their licenses assignable in favour of the lenders.
1997, December 4: Consultation paper on numbering plan.

1998: Mobile phones cross one million.
1998, January 9: DoT commissions the Bureau of Indus-
trial Costs and Prices (BICP) to assess the viability of the
Indian cellular industry .
1998, January 12: DoT gives clearance for national and
international roaming.
1998, January 15: DoT announces the policy for ISPs, no
limit on the number of licenses. Fee to be one rupee.
1998, February 17: TRAI rules that the government must
seek a recommendation from TRAI before issuing a li-
cense to a new service provider, even though the recom-
mendation would not be binding on the government.
1998, March 2: MTNL files a petition in the Delhi High
Court challenging the TRAI order restraining it from en-
tering cellular services in Delhi and Bombay.
1998, April: The ICICI Report concludes that on a 10-
year license, cellular telecom projects are not attractive for
either the lender or the promoter. Recommends extension
of the license period to 15 years while maintaining the same
NPV. The government rejects the report on the grounds
that ICICI is an interested party.
1998, June 4: Bharti launches India’s first private sector
operated basic services in the Madhya Pradesh Circle.
1998, July 16: The Delhi High Court, holds that the power
of the government to grant or amend a license is not sub-
ject to the recommendation of TRAI, nor are these rec-
ommendations mandatory in nature.
1998, October 8: DoT announces extension of the cellu-
lar license period from 10 to 15 years for Circle operators.
1998, October 24: The Prime Minister announces that “a
new Telecom Policy will be formulated within the next
three months”
1998, November 9: BICP submits report on the financial
viability of cellular phone services.
1998, November 20: A Group on Telecommunications
(GoT) is set up by the Prime Minister under the chairman-
Chronology of Indian Telecom Reform
ship of Shri Jaswant Singh to make recommendations on
the proposed New Telecom Policy and issues relating to
existing licensees of basic and cellular services and TRAI
1998, November 26: Apex Industry Associations consti-
tute the Group on Telecommunication (InGoT) to pro-
vide a co-ordinated response to the government’s GoT.
1998, December 21: TRAI floats a consultation paper on
the viability assessment for license fee determination.
1998, December 24: Report of the Spectrum Management
Committee under the Chairmanship of Lt. Gen. P Gokharn.
1999, January: TRAI expanded by adding two new
members.
1999, January 23: The government issues a Draft Discus-
sion Paper on the New National Telecom Policy.
1999, January 25: The Ministry of Communications, sends
letters to all license fee defaulters asking them to pay up 20
percent of their outstanding license fee or face punitive
action.
1999, March 9: The TRAI Telecommunications Tariff
Order increases the monthly rental for mobile services to
Rs. 600 (from Rs. 156) and lowers the peak ceiling tariff
rate to Rs. 6 (from Rs. 16.80) per minute. The Order also
proposes the implementation of CPP regime.
1999, March 26: New National Telecom Policy 1999
announced.
1999, May: TRAI says tariff rebalancing be phased in over
a three-year period.
1999, May 22: DoT issues disconnection notices to the
Koshika Telecom and Aircel Digilink, for failure to clear
license fee dues.
1999, July 6: Union Cabinet clears the migration of exist-
ing licensees to NTP-99.
1999, July 15: TRAI’s consultation paper on competition
in domestic long distance communications.
1999, July 29: Private operators formally accept DoT’s
migration package for transition to NTP-99 and agree to
21
India’s Telecom Reform: A Chronological Account
withdraw all litigation pending against the DoT / Gov-
ernment of India.
1999, July 30: The settlement is challenged through a Pu-
bic Interest Litigation.
1999, August: The Prime Minister takes over charge of
the Ministry of Communications and clears move to a
revenue sharing regime.
1999, August 10: Delhi High Court rules that the existing
licensees can migrate to the new policy as per the package
approved by DoT.
1999, August 31: TRAI releases a consultation paper on
Calling Party Pays for Mobile Services.
1999, September: Division of DoT (for policy, planning,
licensing etc.) and DTS (fixed line and mobile service pro-
vider in India excluding Delhi and Mumbai); the govern-
ment announces plan to corporatise DTS.
1999, September 15: Notification by the government
giving MTNL a provisional amendment to its CMTS
license.
1999, September 17: TRAI issues an order for the com-
mencement of CPP for cellular mobiles from
1st October’ 1999.
1999, October 13: Petition challenges TRAI’s jurisdiction
to propose CPP.
1999, December: The government sets up a Group of
Ministers on Telecom and Information Technology (GoT-
IT) headed by the Finance Minister.
1999, December: Private ISPs allowed to set up satellite
gateways.
1999, December 13: TRAI recommendations on “Intro-
duction of Competition in National Long Distance Com-
munication” proposing open entry on nominal fees.
2000, January 17: Delhi High Court rules that TRAI is
not empowered to change the terms of interconnection
amongst service providers, since it is part and parcel of
the license agreement of cellular operators.
22
2000, January 24: The TRAI Act is amended to include
the need for the body’s recommendations before new li-
cences are issued. TRAI is the sole authority to fix tariffs as
well as terms and conditions of interconnectivity between
service providers.
2000, February: TRAI (Amendment) Ordinance 2000
promulgated to bifurcate its role between two entities –
regulator (TRAI) and adjudicator (TDSAT).
2000, March 1: Birla AT & T and Tata merge cellular
operations.
2000, May: Reconstituted TRAI and separately carved
TDSAT start functioning.
2000, May 15: Newly reconstituted TRAI revises recom-
mendations on the opening up of national long distance
to private competition to suggest that the number of play-
ers be restricted to four in addition to the incumbent. Rec-
ommends bidding for licences.
2000, May 23: TRAI releases consultation paper on issues
relating to the introduction of CPP for cellular mobile
services.
2000, June: Department of Telecom Operations carved out
of Department of Telecom Services to operate the network.
DTS to manage state owned telecom companies.
2000, June 9: Information Technology Act 2000 passed.
2000, June 23: TRAI recommends that mobile service
providers pay 17 percent of adjusted gross revenues as
licence fees.
2000, July 15: Prime Minister announces the opening up
of national long distance operations to unrestricted com-
petition.
2000, August 9: DoT permits CMSPs to share infrastruc-
ture with other service providers and allows direct
interconnectivity between licensed CMSPs and any other
telecom service provider.
2000, August 11: Sub-group on convergence set up with
Fali Nariman as convenor, submits final draft report on
proposed Convergence Law. Suggests a common regula-

tory body for India for content and carriage i.e., broad-
casting and telecommunications.
2000, August 13: Guidelines for opening of NLD an-
nounced.
2000, August 31: TRAI issues recommendations on basic
service licenses and suggests open entry with fees ranging
between Rs 10 million to Rs one billion depending on type
of Circle, (ref: Appendix II for details of Circle types) “to
weed out non-serious players”. Recommends variable rev-
enue shares for FSPs.
2000, September 7: DoT recommends a three-tier rev-
enue share license fee structure for CMSPs as below:
20 percent p.a. for metros,
15 percent p.a. for Circle A & B service areas,
10 percent p.a. for other (Type C) Circle service areas
2000, October 1: Corporatisation of DoT by the forma-
tion of BSNL.
2000, October 24: Recommendations of TRAI on the
induction of a fourth mobile operator.
2000, November 3: TRAI issues consultation paper on
Policy Issues relating to Limited Mobility by use of Wire-
less in Local Loop Techniques in the Access Network by
Basic Service Providers.
2001: FDI almost doubles to over Rs 8000 crores post
NTP-99 and there is a move to revenue sharing from fixed
license fees.
2001, January 5: Fourth cellular operators license guide-
lines announced by DoT.
2001, January 8: TRAI recommends that FSPs be allowed
to offer, “limited mobility” within the SDCA.
2001, January 18: BSNL announces a concessional tariff
for its subscribers for calls up to a distance of 200
kilometres.
2001, January 23: COAI approaches the Telecom Dis-
pute Settlement and Appellate Tribunal (TDSAT) against
Chronology of Indian Telecom Reform
TRAI recommendations allowing limited mobility services
using WLL.
2001, January 25: DoT announces FSP guidelines, which
include the right to offer “limited mobility” services
through WLL.
2001, March 20: TRAI writes to DoT referring to the
stipulation in the TRAI recommendations on WLL (M)
that envisage that the Mobile Switching Centre (MSC)
should not be used for WLL based mobility.
2001, March 23: DoT issues guidelines for allocation of spec-
trum on a first come, first serve basis for FSP licensees.
2001, March 27: Letters of Intent issued by DoT to pri-
vate fixed operators Tata Teleservices, Reliance Commu-
nications and HFCL InfoTel to offer fixed and limited
mobile services.
2001, April 24: TDSAT sets aside TRAI order on
concessional tariffs saying TRAI had violated the principles
of natural justice since BSNL was not given a hearing prior
to issue of orders.
2001, June 29: Bidding begins for fourth cellular service
license slot in 21 Circles.
2001, July 19: DoT challenges jurisdiction of TDSAT on
matters relating to spectrum charges.
2001, July 31: The winners for the fourth cellular license
are announced.
2001, August: Opening of NLD service to competition.
2001, August 27: Communications Convergence Bill 2001
approved by Cabinet.
2001, September 25: DoT issues amended license agree-
ments for existing cellular operators to reflect their migra-
tion to NTP-99.
2001, November 11: Bharti Telesonic signs NLD Tele-
phony license.
2001, November 12: TRAI submits recommendations on
opening up of International long distance to private
participation.
23
India’s Telecom Reform: A Chronological Account
2001, November 23: TRAI Issues consultation paper on
Introduction of Internet Telephony.
2001, December 21: Bharti Telesonic, India’s first private
national long distance operator announces a steep decline
in the price of mobile-to-mobile long distance calls.
2001, December 22: Ministry of Information Technol-
ogy and Ministry of Communications merge to create
Ministry of Communications and Information Technol-
ogy. Ministry of Information and Broadcasting left out.
2001, December 28: BSNL responds to the STD tariff
cut announced by IndiaOne (Bharti Telesonic) and announces
an even sharper cut of up to 62.5 percent in STD tariffs.
2002: Internet subscriptions cross one million.
2002, January 5: Minister of Communications approves
National Frequency Allocation Plan (NFAP) for optimal
utilisation of frequency spectrum.
2002, February: Tata acquires management control of
VSNL after the government sells the major part of its
stake in VSNL.
2002, February 20: TRAI submits recommendations on
introduction of Internet Telephony (IT).
2002, March 15: TDSAT rules that the introduction of
WLL (M) services is a policy decision of the government
and consequently not subject to review by the Tribunal. It
dismisses COAI petition seeking to prohibit fixed service
providers from offering any type of mobile services.
2002, March 21: ISPs allowed to provide the service on
payment of additional license fees. However, incoming IP
calls may not be terminated on the phone network.
2002, March 27: DoT issues guidelines on Universal Service
Obligation (USO). Announces the creation of Universal Ser-
vice Obligation Fund (USOF) starting April 1, 2002.
2002, April 1: Opening of International Long Distance
service to competition; VSNL monopoly ends.
2002, April 5: TRAI issues consultation paper on Refer-
ence Interconnect Offer (RIO).
24
2002, April 11: COAI challenges TDSAT judgment on
WLL (M) in the Supreme Court.
2002, April 18: DoT issues notification for spectrum us-
age charges for microwave access and backbone.
2002, July 19: Bharti launches International long distance
service.
2002, October 7: BSNL appeals to TDSAT against TRAI’s
plan to forbear cellular tariffs.
2002, October 19: BSNL launches countrywide cellular
mobile services.
2002 December: Mobile phones cross 10 million.
2002, December 17: Supreme Court sets aside the TDSAT
judgement on WLL (M) and remits the matter to the Tri-
bunal for reconsideration, with special emphasis on the
question of a level playing field. The Supreme Court says
TDSAT had not exercised its full jurisdiction.
2002, December 28: Reliance lnfocomm launches WLL
(M) services.
2003: Internet subscribers cross three million.
2003, January 7: BSNL slashes STD rates for over 500
kilometres.
2003, February 10: COAI approaches TDSAT objecting
to the provision of WLL (M) services outside the SDCA
by Tata Teleservices and the advertisement of roaming
facilities by Reliance Infocomm.
2003, February 21: TRAI’s recommendations on the is-
sue of fresh licenses to cellular mobile service providers
(CMSPs) says more players are feasible only if additional
spectrum is available.
2003, February 24: Cellular operators approach TDSAT
against TRAI to protest what they regard are iniquitous
tariffs, in comparison to those for limited mobility.
2003, April 8: TDSAT rejects the government’s claim on
privilege of disclosing official documents relating to intro-
duction of WLL (M) services.

2003, May 15: Consultation paper on IUC issues seeks
further views on modification of IUC, new estimates for
ADC etc.
2003, July 16: TRAI’s consultation paper on Unified Li-
censing for Basic and Cellular Mobile Services.
2003, August 8: TDSAT pronounces split (2 – 1) judge-
ment on the legality of WLL (M). Majority decision of the
body’s two administrative members accepts WLL (M) ser-
vice is legal, but says government decision to allow it was
taken in unseemly haste and further that TRAI should have
levied additional fees. Dissenting minority judgement (that
of the Chairperson of TDSAT, its only judicial member)
says WLL (M) service is illegal and that decisions were
taken for extraneous reasons.
2003, October 27: TRAI recommendations on “WLL
(M) issues pertaining based on Hon’ble TDSAT’s order”
stipulate additional entry fees for WLL (M) players based
Chronology of Indian Telecom Reform
on difference in fees paid already and those bid for and
paid by the fourth cellular operator in the relevant operat-
ing area.
2003, October 27: TRAI’s recommendations on unified
licensing proposing immediate merger of fixed and mo-
bile licenses in area of operations of current cellular
licenses.
2003, October 29: TRAI reduces access deficit estimate
from Rs 135 billion to Rs 53 billion.
2003, November 11: DoT issues guidelines for Unified
Access Services licenses. All fixed line operators allowed
to migrate to a Unified Access Services License on pay-
ment of a fee.
2003, November 14: Unified licences granted to telecom
operators Reliance, Tata Teleservices, Shyam Telecom and
HFCL.
25
India’s Telecom Reform: A Chronological Account
Appendix II
Infor mation Communication TTechnology
Information echnology
and Poverty Alleviation
Expert studies attribute the high incidence of rural pov-
erty in India to:
(a) lack of proper income generating activities and op-
portunities in villages,
(b) Inadequate infrastructure facilities and
(c) Ineffectiveness of existing government agencies in the
fields of health, education, agriculture extension ser-
vices etc.
Information and Communication Technology is a tool that
lends itself to addressing all the three areas, so as to realise
the goal of speedy alleviation of poverty.
Government programmes aimed at addressing rural pov-
erty fall into three broad categories:
(a) Providing basic infrastructure in rural areas, e.g. setting
up new schools, health facilities, rural roads, drinking
water supply and electrification,
(b) Promoting rural industries, increasing agricultural pro-
ductivity and providing rural employment and
(c) Policies aimed at providing productive resources that
in turn help raise the incomes of the poor.
Problems of design, implementation and monitoring and
overall inadequacy of resources undermine the effective-
ness of these programmes.
On the design side, centralised planning leads to the same
policies being applied in different geographic areas with-
26
out taking into account variations in agro-climatic condi-
tions, skills of rural population, access to social infrastruc-
ture and literacy levels. On the other hand, decentralised
planning also lacks effectiveness where it is not supported
by regional databases and tools for spatial planning.
With regard to implementation, problems are posed by a
multiplicity of agencies involved in the process. Lack of
co-ordination among different government departments
implementing such programmes dilutes the benefits de-
rived at the grass root level. Lack of co-ordination is often
caused by want of reliable communication systems.
The other main hurdles of programme implementation are
the unwillingness of programme workers to stay in the field
and lack of proper supervision. The records maintained by
programme workers are suspect, because they are not up-
dated through actual contacts with the target population.
Manual reporting systems have also been ineffective due to
the enormity of data, adding up to difficulties in monitoring
large programmes. These problems compound the inherent
drawback posed by inadequacy of resources.
Effective poverty alleviation strategies, on the other hand,
are characterised by micro level planning, effective supply
of credit to the poor, improved management of govern-
ment run poverty alleviation programmes and building
networks of self-help groups amongst the rural poor with
the active involvement of local non-governmental
organisations. Grass root intervention is identified as a nec-
essary factor of poverty alleviation.

Information Communication
Technology (ICT) as a TTool
ool for
Poverty Alleviation
Telephony provides the basic infrastructure for applications
denoted by the term ‘Information Communication Technol-
ogy’ (ICT), in particular, the use of Internet-based
programmes. ICT is now identified as a key element of pov-
erty alleviation in rural areas. Five channels of ICT’s impact on
rural poverty have been identified and discussed. These are.
i. Access to Information and Knowledge: ICT enables the poor
to have access to information and knowledge regard-
ing government policies, which in turn results in the
voices of the poor being heard in decision-making
fora. Further, by providing infrastructure for network-
ing of the rural poor, it enables them to get connected
to the mainstream, participate in public affairs, organise
and mobilise. It improves the service delivery of edu-
cation, agricultural extension and other public services
and most importantly, health, through facilities like tele-
medicine that link hospitals to the rural poor, reducing
the incidence of referral cases in rural areas.
ii. Improves the Market Connectivity: ICT increases connec-
tivity to the market that would facilitate the realisation
of economic benefits in terms of getting suitable prices
for rural produce and also creating employment op-
portunities. Market information on prices of agricul-
tural outputs and inputs, as well as the consumer prod-
ucts required in rural areas, protects people from ex-
ploitation by middlemen. Industries located in rural
areas, or dependent on rural produce (such as sugar)
maintain the smooth, timely flow of inputs and in turn
meet market requirements of their output.
iii. Accountability and Good Governance: ICT facilitates better
monitoring of public administration, social services
and development programmes. Information has of-
ten been described as one of the most effective tools
in the hands of citizens. It not only helps them fight
corruption and arbitrary exercise of power in the struc-
tures of government, but also to participate in gover-
nance. Communication facilities help better governance
Information Communication Technology and Powerty Alleviation
by fostering better relations between the public ad-
ministration and citizens. Similarly cheaper governance
through replacement of paper by electronic means of
exchanging information can be achieved by commu-
nication facilities. Governance can also be made more
effective by reducing the response time of the gov-
ernment to local issues.
iv. Creation of New Income Generating Activities: ICT increases
productivity and extends the sphere of economic activity
in rural areas. Communication facilities, combined with
information technology, create new economic activities
and opportunities for the educated rural youth (e.g., as
tourist guides, ICT service centre operators, data pro-
cessing professionals and content developers etc.). It also
increases the efficiency in performing existing activities
by reducing the costs of transactions and processes. Thus
the efficiency, especially of small business units in rural
areas, is increased with the use of ICT.
v Empowerment of Women: A further crucial contribution
is that information technology benefits women by im-
proving access to information, which may lead to their
empowerment and participation in economic and
community activities.
Critical Success Factors and
Complementary Measures
A few critical success factors and complementary mea-
sures needed to ensure the optimal impact of ICT in pov-
erty alleviation require attention. As with other measures
towards this end, effective design and management of the
operational models of the ICT facilities themselves make
for one critical factor. Developing adequate technical in-
frastructure viz., electricity, widespread use of computers
and a legal framework that would support e-transactions
have also been identified as critical factors, dependent in
turn on providing sufficient funds for setting up and main-
taining the ICT facilities.
A set of complementary factors has also been identified in
literature (World Bank 1999) for an effective ICT
programme for alleviating rural poverty. These are .
27
India’s Telecom Reform: A Chronological Account
a. Basic Literacy and e-literacy: Basic education and knowl-
edge of information technology among the rural
population are keys to exploiting the benefits of ICT.
b. Role of NGOs: Given the present status of the rural
population in India, NGOs have a key role in educat-
ing and organising rural communities. They can also
contribute to the development and deployment of
locally relevant contents/services and making use of
these services.
c. Rural Access Roads: The information on market condi-
tions need to be supported by rural access roads, which
in turn help make use of the information accessed
through communications.
d. Availability of Energy: Energy, either conventional or
non-conventional, needs to be available in the villages
in order to provide reliable and uninterrupted com-
munication facilities in the villages.
e. Micro-credit schemes: Properly structured micro-credit
schemes are required in order to help the population
take up income generation activities with the help of
knowledge acquired through ICT.
f. Legal, Institutional and Regulatory Framework: Lack of this
framework could result in the lack of consumer confi-
dence that will undermine the usage of these facilities.
g. Content, applications: Information on livelihood or di-
rect earnings makes people flock to ICT facilities.
Therefore, applications of ICT that lead to income
generation are a must for inducing people to use ICT
facilities.
h. Process re-engineering: Various departments of the gov-
ernment need to undergo a considerable process
reengineering exercise to improve their own informa-
tion processing methods and quality of services to in-
troduce e-governance and citizen-centric services.
It can be observed that there is some overlap in the critical
success factors and complementary factors. Regardless of
classification, both sets of factors have a bearing on the
use of ICT facilities for poverty alleviation. It would also
28
be observed that basic telephony could contribute to the
provision of some of the complementary factors like lit-
eracy (by making village postings more attractive to quali-
fied teachers) and access roads (by facilitating better imple-
mentation and maintenance).
Finally, the shift of population away from agriculture is an
index of economic growth and poverty reduction. This shift
has been very slow in India and the share of population de-
pendent on agriculture was estimated at 52 percent in 2003. A
significant contribution that communications can make to-
wards the object of growth with poverty alleviation is in fa-
cilitating a speedier shift of agricultural population to pro-
ductive employment in small and medium towns.
Recent Initiatives in the Field
There are both private and public initiatives to use ICTs
for socio-economic purposes. Among the private initia-
tives, Indian Tobacco Company’s (ITC) ‘e-choupal’ project
has attracted wide notice. The main objective of this project
was to create a single point of contact for the farmers and
suppliers of both agricultural inputs and consumer prod-
ucts initially and eventually to turn them into e-commerce
hubs in rural areas. In accordance with these objectives, ‘e-
choupals’ were designed to work as a combination of an
Internet kiosk, village gathering place and e-commerce hub.
‘e-choupals’ are now functional in the states of Madhya
Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.
Further expansion is also taking place.
Also notable among non-government initiatives is the ‘n-
Logue’ scheme promoted by the Indian Institute of Tech-
nology, Madras. Internet centres set up under this project
in some southern states cater to village needs in areas of
medicine, education, animal husbandry and bank credit.
Among the public initiatives, the Gyandoot project was
commissioned in the Dhar district of Madhya Pradesh in
January 2000 by the district administration. Providing agri-
culture market information and interfacing the district ad-
ministration with ordinary people are the main objectives
of this project. The services offered by the village outlets
 Information Communication Technology and Powerty Alleviation
(‘Soochanalyas’) are applications for pensions, government
schemes and grievances of citizens. The content was pre-
pared in the local language. The experiment was not com-
pletely successful; bureaucratic problems eroded the
project’s impact in respect of the goals it set out to achieve.
However, similar experiments have been initiated in sev-
eral other states on a pilot basis. The schemes in
Maharashtra, Rajasthan and Kerala are well reported.
Another notable experiment done by the central govern-
ment is the Community Information Centre (CIC) Project
that was started in January 2000 as a measure to speed up
economic development in the north-east region. The main
objective of the project was to help the north-eastern states
to join the national socio-economic mainstream by pro-
viding internet connectivity and making the delivery of
citizen services efficient. In addition to Government to
Citizen services, CICs provide Internet access and e-mail,
printing, data entry and word processing and training fa-
cilities for the local population. An enlarged scheme that
would extend to the whole country has also been an-
nounced.
These facilities are bringing the remote and backward ar-
eas of the country closer to the national mainstream through
efficient and faster information flow. The issue of the
sustainability of these models in the long run has also been
experimentally tested.
29
India’s Telecom Reform: A Chronological Account

Appendix III

Type A, B, C Circles (For Award of Licenses)

Type A Circle Type B Circle Type C Circle
Andhra Pradesh Haryana Assam
Gujarat Kerala Bihar
Karnataka Madhya Pradesh Himachal Pradesh
Maharashtra Punjab Orissa
Tamil Nadu Rajasthan North East
Uttar Pradesh (East)
Uttar Pradesh (West)
West Bengal

30
 elecom Statistics
Select TTelecom
Table 1. Number of Direct Exchange Lines (DELs)
(As on 31st March)

Circle/
Metros DELs Including Junction

91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-2000 2000- 01 2001-02 2002-03
Andaman 0 0 0 0 3757 5077 6818 8272 15773 24463 30076 33034
& Nicobar
Andhra 340241 379892 443170 509027 647305 797326 1000423 1167419 1572399 2227487 2838418 3131544
Pradesh
Assam 40638 48742 60203 73653 86756 107051 139977 161531 211906 273068 338328 420942
Bihar 108756 131670 166059 203248 247316 280431 345711 399093 502221 627400 891796 756842
Chhattisgarh* 0 0 0 0 0 0 0 0 0 0 0 258196
Gujarat 450799 496762 576037 658224 780731 915563 1130647 1292440 1547828 1921850 2398691 2833880
Haryana 1113937 129884 153227 195020 242028 294514 357106 428395 524565 642001 794194 983896
Himachal 33636 40658 47688 58697 80046 110258 145505 181886 225103 285130 346891 435642
Pradesh
Jammu and 28803 31809 34378 41627 46610 52598 72964 89362 107863 130021 173533 222811
Kashmir
Jharkhand* 0 0 0 0 0 0 0 0 0 0 0 372533
Karnataka 332253 375043 434456 507995 527201 783697 1019176 1084019 1355084 1705139 2161583 2586724
Kerala 260261 305605 377805 436741 644003 681234 887572 1227683 1464685 1829400 2256555 2690584
Madhya 209860 278156 350693 452657 541276 622551 717844 1529555 1874903 2331793 2976906 1145511
Pradesh
Maharashtra 364662 431798 502692 610976 766734 984698 1290852 800784 941136 1095952 1263118 3643422
North East-I 26881 32384 41584 50271 58960 75393 100643 116479 151595 195396 244670 169437
North East-II* 0 0 0 0 0 0 0 0 0 0 0 119930
Orissa 67799 80659 95742 116763 135401 166415 209996 266098 334273 423309 526416 641226
Contd...

31
Select Telecom Statistics
32
Table 1 Contd...
Orissa 67799 80659 95742 116763 135401 166415 209996 266098 334273 423309 526416 641226
Punjab 208294 233827 267330 326338 427397 570966 745945 890495 1083964 1292252 1543449 1923014
Rajasthan 154887 183899 233980 309115 393738 494410 645138 755560 927005 1109400 1326286 1591284
Tamil Nadu 286632 312559 353875 417564 524308 671412 906317 1165806 1523415 1926967 2477366 2779709
Uttar Pradesh 329301 390383 482973 542303 658593 393284 520852 686212 872897 1106574 1400258 1674579
(East)
Uttar Pradesh* 0 0 0 0 0 416645 534811 654547 809464 994004 1220249 1147714
(West)
India’s Telecom Reform: A Chronological Account

Uttaranchal* 0 0 0 0 0 0 0 0 0 0 0 311753
West Bengal 64257 68806 78550 92049 113145 159181 236358 314426 415851 541131 742905 992849
Total 4421897 3952536 4700442 5602268 6925305 8582704 11014655 13220062 16461930 20682737 25951688 30867056

Metros
Chennai 174296 186473 208452 238879 282034 342382 468060 502616 625245 767863 919651 1024901
(BSNL)
Delhi 520562 605272 688830 813850 966940 1167010 1511130 1551111 1641503 1818236 1979856 2065803
(MTNL)
Kolkata 258882 274426 300634 335020 380407 445514 618385 672278 852598 1029121 1229637 1312532
(BSNL)
Mumbai 699097 791222 898390 1035569 1240618 1440785 1782181 1855629 2012410 2213388 2347302 2428183
(MTNL)
Total 1652837 1857393 2096306 2423318 2869999 3395691 4379756 4581634 5131756 5828608 6476446 6831419
All India 6074734 5809929 6796748 8025586 9795304 11978395 15394411 17801696 21593686 26511345 32428134 37698475
Source: DOT Annual Reports
* Figures shown from the creation of new States/separation of Circles
 Select Telecom Statistics

Table 2. Status of Public Telephone

(As on 31st March of each year)
Year Local PCOs Trunk PCOs 1
STD/ISD PCOs Highway PCOs Total2
1993 100,526 20,436 41,391 0 61,827
1994 117,416 21,384 57,119 1,781 80,284
1995 143,002 0 87,543 2,010 89,553
1996 161,424 0 116,532 2,694 119,226
1997 184,291 0 157,333 3,554 160,887
1998 210,495 0 213,385 4,060 217,445
1999 243,052 0 272,989 4,639 277,628
2000 287,994 0 355,390 5,567 360,957
2001 361,196 0 490,505 8,374 498,879
Trunk PCOs have been merged into Local PCOs after 1994
1.

2.
Totals of PCOs with STD facility
Source: Indian Telecommunication Statistics 2002

Table 3. Telephone Supply (Fixed Line Telephones – PSUs And Private)

Year No. of Annual Waiting List Total Demand Annual Growth

ended DELs (Supply) Growth (Million) (Supply + Total
31 March (Million) (Percent) Waiting List) Demand
(Million) (Percent)
1991 5.07 10.6 1.96 7.04 11.6
1992 5.81 14.5 2.29 8.1 15.1
1993 6.8 17 2.85 9.64 19
1994 8.03 18.1 2.5 10.52 9.1
1995 9.8 22.1 2.15 11.95 13.6
1996 11.98 22.3 2.28 14.26 19.3
1997 14.54 21.4 2.89 17.43 22.3
1998 17.8 22.4 2.71 20.51 17.7
1999 21.59 21.3 1.98 23.58 15
2000 26.51 22.8 3.68 30.19 28.1
2001 32.44 22.3 2.92 35.35 17.1
2002 37.70 16.2 1.69 39.39 11.4
2003 40.75 8.1 1.81 42.56 8.1
2004 43.23 6.1 1.79 45.02 5.7
Source: Indian Telecommunication Statistics 2002
Department of Telecom Annual Reports

33
India’s Telecom Reform: A Chronological Account

Table 4: FDI Inflow (Year-Wise) (Aug 1991 to December 2002 (Rs.in Millions)

Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Inflow 21 161 2,228 9,876 22,328 40,084 42,211 45,097 84,806 95,621
Source: DOT Annual Report 2002-03

Table 5: Villages Covered by Village Public Telephones

As on
31 March 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Number 185,136 216,632 267,832 310,687 340,640 374,605 408,922 468,862 514,287 521,468
Source: NCAER Centre for Infrastructure Data Base

Table 6: Status of Mobile Phones and Internet

Subscribers
Mobile Internet
Year
Phones Subscribers
1997-98 794,232 25,000
1998-99 1,070,603 150,000
1999-00 1,599,364 350,000
2000-01 3,107,449 650,000
2001-02 5,478,932 1,130,000
2002-03 10,480,430 1,699,000
2003-04 (Sept.) 18,306,142 2,942,000
1.
Source: www.coai.com,
2.
Source: www.exhange4media.com

34
 References
Asian Development Bank (2001) Information and
Communication Technology (ICT) Strategies for Developing
Countries, Executive Summary of Proceedings, 21-27 February,
Singapore.
Bhatnagar, S., and Schware, R. (eds.)(2000) Information and
Communication Technology in Development: Cases from
India, Sage Publications.
Department of Information Technology (2005) E-Governance:
Driving the Vision of the NCMP, Vision & Approach,
Presentation made at 8th National e-Governance Conference,
3rd-5th February, Bhubaneswar, India.
Hanna, Nangy K. (2003) Why National Strategies are Needed for
ICT-Enabled Development, ISG Staff Working Paper, No.3.
Heeks, Richard (2004) E-government for Development, Causes
of e-Transparency Success and Failure: Factor Model, University
of Manchester, UK
Telecom Regulatory Authority of India (2004), “Growth of
Telecom Services in Rural India: The Way Forward”,
Consultation Paper No.16/2004.
Website of Gyandoot http://gyandoot.nic.in/
Website of ITC E-Choupals, http://www.itcportal.com/sets/
echoupal_frameset.htm
World Bank (1999) Knowledge for Development, World
Development Report 1998/99, Oxford University Press
35
 About the Series Editors
Aasha Kapur Mehta is Professor of Economics at the Indian Institute of Public Administration, New Delhi and leads the
Chronic Poverty Research Centre’s work in India. She has a Masters from Delhi School of Economics, an M.Phil from
Jawaharlal Nehru University and a PhD from Iowa State University, USA. She has been teaching since 1975, initially at
a college of Delhi University and then at IIPA since 1986. She is a Fulbright scholar and a McNamara fellow. Her area
of research is now entirely focused on poverty reduction and equity related issues.

Pradeep Sharma is an Assistant Resident Representative and heads the Public Policy and Local Governance Unit in
the India Country Office of United Nations Development Programme (UNDP). A post-graduate from University of East
Anglia (UK) and Doctorate from Jawaharlal Nehru University, he has held several advisory positions in the Government
of India and has taught economic policy at LBS National Academy of Administration, Mussoorie. He has several
publications to his credit.

Sujata Singh is an Associate Professor at the Indian Institute of Public Administration. She completed her doctoral
studies in Public Administration and Public Policy at Auburn University, USA. Her primary research interests are in the
area of Comparative and Development Administration, Public Policy Analysis, Organizational Theory and Evaluation of
Rural Development Programmes.

R.K. Tiwari is Senior Consultant, Centre for Public Policy and Governance, Institute of Applied Manpower Research,
Delhi. He was formerly Professor of Public Administration at the Indian Institute of Public Administration (IIPA), New
Delhi. He received his education at Gwalior, Allahabad and Delhi. He has undertaken a number of research studies in
Development Administration, Rural Development, Personnel Administration, Tribal Development, Human Rights and
Public Policy. He has conducted consultancy assignments for the Department of Posts and in the Ministry of Rural
Development, Government of India; and for the Government of Orissa and the Narmada Planning Agency, Government
of Madhya Pradesh. He has published several books.