India's Telecom Reform - Indian Institute of Public Administration

India’s s Telecom Reform:
m:
A Chronological Account
Mahesh Uppal with S.K.N. Nair and C.S. Rao 1
1
Introduction
The telecom sector occupies a special area of interest for
students and analysts of India’s economic reforms, because
of the lead role it played in drawing private investment,
the institutional changes that the process involved
and the dramatic results achieved in terms of availability
and access. A chronological recording of India’s telecom
reforms is invaluable for a complete understanding of the
tortuous reforms process and the clash of interests among
existing and new participants and mid-course policy corrections.
By end 2003, positive trends resulting from the reforms,
like accelerated growth in penetration levels and fall in tariffs,
were already in evidence (see Tables 1 to 6). The level
of telephone penetration, which was less than half of one
percent in 1991, had increased to about 4 per 100 of population
in terms of fixed line phones. (This growth index
has crossed 10, taking both fixed and mobile phone subscribers
into account). However, the sharp increase in subscriber
numbers is concentrated in the urban areas. The
rural subscriber base has grown at a much slower rate as
compared to the urban and seems virtually stagnant when
the two are compared. Thus, while the urban poor have
seen vast improvements – in availability as well as
affordability - the rural populations have seen little of the
beneficial effects of competition
The Universal Service Obligation Fund – into which telephony
operators pay a universal service levy - was set up
in 2002 to address this urban-rural “digital divide” by providing
subsidies to operators for expanding access to phones
and Internet in rural areas. The Fund has had mixed success
and is largely unutilised, thus highlighting the complexity
of running such subsidy schemes. A strong plea to
review its approach has recently been made by the regulator,
who has argued that a more cost effective approach
for the USOF would be to move from its current focus
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