Telecom Revolution in India: A Brief History

During the last 25 years, the lives of the people of India have been greatly impacted by the revolution in the telecom sector. On the one hand it had bridged the gap between the rural and the urban by taking connectivity to the remotest corners of the country and on the other hand by making mobile telephony available at affordable rates, it had bridged the socioeconomic divide amongst the citizens and has contributed immensely towards the development of the country an in making our country one of the largest economies of the world. With the usher of the era of mobile internet and with the increasing affordability of mobile data telephony has today become a “catalyst for enrichment, and empowerment of commonIndians”. As a consequence, today the telecom has become the lifeline of India.

Evolution of policy and regulatory frameworks:

The journey of the telecom sector in India has witnessed considerable twists and turns over the last two and a half decades.

It all started in 1981, when attempts to liberalize the Indian telecommunication industry was initiated by the government. Before that the Indian Telecom sector was managed by thestate run agencies under the Ministry of Posts and Telegraphs, in compliance with the Nehruvian post-independent socialist policies, which “dedicated India to state – run, state owned monopolies “. The growth of the sector was therefore slow because of not only an “over staffed government machinery“   but also of the general impression amongst the common people, who viewed more s a “luxury item” and a “status symbol” rather than a necessity.

In 1981 the then Prime Minister (PM) of India, Mrs. Indira Gandhi signed contracts with French telecommunications company,Alcatel CIT, regarding merger of the state-owned Telecom company ITI (Indian Telephone Industries Limited). The objective was to make an attempt to set up 5 million telephone lines per year but the effort died down due political opposition.  After the death of Mrs. Gandhi, liberalization efforts continued under the Rajiv Gandhi led Government. It was largely due to the vision and effort of Mr. Gandhi’s and Mr. Sam Pitroda (who served as an advisor to Mr. Gandhi during his tenure as the PM of India) , which had led the foundation of the revolution in the field of the telecom sector in India, which had laid the ground for the usher of mobile telephony in India. Mr. Pitroda, who was a Non Residential Indian based in the US, and a former executive of Rockwell International (which was a major American manufacturing conglomerate), started Centre for Development of Telematics(C-DOT) ,after returning to India, in 1981 at the Behest of Mrs. Indira Gandhi. C-DOT was setup as an  autonomous telecom R&D organization, with the overarching objective of  develop telecommunication technology to meet the needs of the Indian telecommunication network. C-DOT manufactured the first telephone exchanges in India.

In the year 1985, a separate department by the name Department of Telecom(DoT) was carved out from Department of Telecom(DoT), to handle the telecom services across the entire country. In 1986 , two separate entities were carved out from the DoT, one of them, Mahanagar Telephone Nigam Limited (MTNL) , was given the charge of handling  the telecom services in metro cities, Delhi and Mumbai and the other, Videsh Sanchar Nigam Limited (VSNL), was in charge of  handling the overseas telecom services.

By the 1990’s the number of telephones had already surpassed, 2.15 million and the government (which was led by Mr. P.V. Narasimha Rao) was under increasing pressure open up the telecom sector for investment from the private  sector as a part of its Liberalisation-Privatisation-Globalisation (LPG) policies of 1991. As a consequence in the year 1992 private investments in the field of Value Added Services (VAS) were allowed. Finally in 1994, the government introduced the National Telecommunications policy (NTP) which brought changes in the telecom infrastructure of the country with respect to ownership, service and regulation of the infrastructure. The policy also introduced the conception of“telecommunication for all” and laid down specific and ambitious targets, for example, “making telephone service available on demand by 1997, coverage of all villages by 1997, provision of PCOs in urban areas for every 500 persons by 1997 and introducing all value added services available internationally, preferably by 1996” among many others. The policy also envisaged liberalization of the telecom sector and allowed joint ventures between state owned entities and international entities, wherein the foreign entities were eligible to a stake of upto 49% of the total stake. The foreign multinational entities were however restricted to technology transfer only and not allowed to undertake policy making.

The policy focused more on liberalizing the local telecom services and the long distances continued to be under the monopoly of VSNL and DoT.

Accordingly, The country was divided into 20 telecommunication circles for basic telephony and 18 circles for mobile services. The government invited bids from the private players to provide telecommunications services to the circles along with the DoT. This paved the way a regime of duopoly in the telecom sector wherein most of the nations telecom infrastructure was controlled by the state owned DoT and the private players only played a supplementary role, requiring heavy investments. The DoT also had the authority to fix the upper ceiling service charges even  for the private players. Thus under NTP 1994, the Department of Telecom became both the service provider and the policy maker . Because of these reasons the provisions of the policy failed to encourage large private investments into the telecom sector.

The government therefore created the Telecommunications Regulatory Authority of India (TRAI), in the year 1997, as an independent regulatory  authority via the TRAI Act 1997. The establishment was granted the requisite powers and authority to ensure “a level playing field, and promote and protect consumer interests”.

In the year 1999,  policy changes, were initiated by the newly formed Government led by Mr. Atal Bihari Vajpayee, which were more pro-reforms based and encouraged better liberalization. A new telecom policy, NTP, 1999 was announced with new objectives and landmark targets which included, “ Telephone on demand by the year 2002, Telecom coverage of all villages by 2002, Internet access to all villages by 2002” etc. among many others. To meet these targets the NTP,1999, made major policy changes  including provisions of multiple operators per circle, change of the licensing fee system to a one time fee and introduction of the provision of revenue sharing, permitting interconnection between service providers.

 The Government also amended the TRAI act 1997, and established the  Telecom Disputes Settlement and Appellate Tribunal (TDSAT), in the year 2000, to handle the adjudicatory and dispute settlement functions (which was handled by TRAI until then) and TRAI’s regulatory authority in areas such as Frequency Spectrum Management, powers regarding tariffs, inter-connection, quality standards, time-period for providing circuits between different service providers etc. In the same year it self the government took the next step towards distancing itself from being a telecom service provider by corporatizing the service arm of DoT, which was later renamed as  Bharat Sanchar Nigam Limited (BSNL).

Thus in effect a free entry of private players in to the telecom sector was permitted.

From 2002 onwards, the government further liberalized the sector by allowing select private players to provide both basic and cellular services, via the Unified Access Service licensing (UASL) regime. Under this regime both basic and cellular service operators were allowed to give both the services (i.e. basic and cellular), in their respective circles, under the same license. Also under this regime the government has no control over technical service charges, which were determined by the market forces.

VSNL was also privatized in 2008, with TATA communications attaining controlling stake in the year 2008.

 The Government once again reviewed its policies and goals for the telecom sector through the NTP, 2012.

This policy introduced the idea of one nation -one license, which  reflected on  the move towards a unified license regime

 The objective was to exploit the benefits of convergence, spectrum liberalization and to facilitate delinking of the licensing of networks from the delivery of services. Another key feature of the NTP, 2012 was to increase the availability of adequate spectrum and ensure its allocation in a transparent manner through market-related processes. The policy also spoke about provisioning on-demand broadband services; developing an ecosystem for design, research and development of telecom equipment; using renewable sources of energy for powering telecom networks; and strengthening the framework for protection of consumer interests.

Evolution of Mobile Telephony in India:

Indian Telecom entered the wireless age, in 1995, with the first wireless call made between Kolkata and new Delhi , over mobile telecom network set up by modi-Telstra. The first mobile telephone service in India was initiated in the same year itself in New Delhi, and this service was started on a non commercial basis. It is interesting to note that the mobile telephony service in India began with 2G (2nd generation) cellular network and rapidly transitioned into 3G or the 3rd generation mobile network (MTNL launched the first 3G telecom services in India, in the metro cities, Delhi and Mumbai in 2008). After 4 years, in 2012, India’s first 4G services was launched in Kolkata by Airtel. Steep fall of mobile tariffs over the years have led to mobile telephony boom with the number of mobile subscribers quickly overtaking the number of fixed line subscribers in 2004and by 2015 the number of mobile subscribers touched one billion mark.  Presently our country is working on policy and infrastructural modification to roll out 5G services, which is an improvement over the currently prevailing 4G network.

The wireless technology and its evolution:

The evolution of wireless technology over the years have changed the way people communicate over wireless cellular phones, with each generation providing improvements in terms of performance. For instance while the 2G technology  enabled digital phone calls and messaging, the 3G technology allowed internet data connectivity to allow mobile internet on  mobile along with phone calls and messaging. Subsequently the 4G technology allowed faster data speeds and lower latency rates, which allowed online video streamings to be possible in mobile. The latest technology, i.e. 5G will not only allow even faster mobile internet speeds and lower latency rates compared to 4G networks but will have applications in internet of things (IoT) and machine to machine areas.

All these mobile technologies work on different bands of radio wave frequencies (also known as radio-wave spectrum bands). These spectrum bands are put into auction from time to time by the government, which the telecom service providers purchase to offer their services to their consumers.

Spectrum Scams:

These Auctioning processes have over time suffered the heat of allegations of misappropriation on the part of government officials in charge of the auctioning processes. The most infamous amongst them are the 2G spectrum scam  and the S band spectrum scam. Let us have a brief insight into these two notorious scams.

The 2G spectrum misappropriation happened in 2008 and was rooted in the way in which 2G licenses were issued to telecom companies. The allegations were against the government officials and politicians of the erst while Mr. Manmohan Singh United Progressive Alliance (UPA)  regime wherein several several laws were flouted and bribes were paid to favour certain firms in granting the licenses. A report of the Comptroller and Auditor General of India (CAG)which came out in 2010 indicated a revenue loss of  nearly Rs. 1.7 lac crores because of the scam. The Honorable Supreme Court in a 2012 judgement cancelled the licenses issued during the 2008 allocation describing the method of allocation of the licenses as "unconstitutional and arbitrary".

The S-Band spectrum scam was rooted in an agreement between The Antrix Corporation (which the commercial arm of The Indian Space Research Organization (ISRO)) and Devas Multimedia ( a private company formed by former ISRO employees and venture capitalists from USA), to lease out 70 MHz of radiofrequency spectrum in the S-Band (which is  globally used for providing mobile broadband services using 4G technologies) at a throw away price of Just over 1000 crore rupees. The deal which was signed in early 2005 was alleged to have flouted the procedures laid down the government, whereby the lease was granted to Devas on an exclusive basis. The deal exposed in late 2009 by whistleblowers  and the subsequent investigative outcomes ultimately led to the annulment of the deal.

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