Telecom Policy Reforms in India

Abstract

The telecom sector has witnessed rapid changes in the last five years. There have been far-reaching developments in Information Technology (IT), consumer electronics and media industries across the globe. Convergence of both markets and technologies is a reality that is forcing realignment of the industry. At one level, telephone and broadcasting industries are entering each other's markets, while at another level, technology is blurring the difference between different conduit systems such as wireline and wireless. In the New Telecom Policy of 1999, the government recognized that provision of world class telecommunications infrastructure and information is the key to rapid economic and social development of the country. This will not only help in the development of the IT industry, but also provide for widespread spillover benefits to other sectors of the economy.

A significant development in the telecom sector that will influence both market structure and technology is convergence. Convergence implies a need not only to consider the appropriate method of licensing and charging licence fee, but also forces the policy maker to review a number of other aspects, including whether to regulate and the nature and extent of regulation. The attempt of all the policy initiatives should be to promote the flexibility of technology choice and service provision. Thus, neutrality of policies towards technology/platform is seen as a desirable attribute, not only because this enhances opportunities but also because the policy maker is not in a position to anticipate the likely developments and fine-tune policy.

Telecom policy reform was initiated in India in 1994. Although the reform process has been underway for more than five years with little to show by way of introduction of competition in the sector, there is awareness of the crucial issues that need to be addressed. Given the acknowledged importance of telecommunications to overall national interests, governments tend to get involved in the management of the sector's progress. Unfortunately in terms of development, the interests of the government and the private sector do not always reconcile easily—which has resulted in telecom stagnation in many countries, including India. Evidence shows that governments which most 'competently' foster private sector advancement of their telecommunications industries are best placed to gain world class telecommunications services and the attendant benefits. Arguably, early liberalization could give any country a first mover advantage in attaining high telecommunications performance. However, hasty adoption by developing economies of liberal franteworks adopted by developed economies could easily fail and in the process discredit the idea of liberalization. Enthusiasm for liberalization and its possibilities needs to be juxtaposed with a realistic transformation programme that takes into account the country's economic and political dynamics.