Evolution of Telecom Industry in India and The

8/6/2019 Evolution of Telecom Industry in India and The

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Evolution of Telecom industry in

India and the 2G Spectrum scam

By Vinu V G


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SOME FACTS

India is the world's fastestgrowing Wireless market,with 752 Million mobilephone subscribers as of February, 2011

Number of land line connection is 34 million, less than5% of wireless connections

It is also the second largest telecommunicationnetwork in the world in terms of number of wirelessconnections after China.

The Indian Mobile subscriber base has increased in sizeby a factor of more than one hundred since 2001 whenthe number of subscribers in the country wasapproximately 5 million to 752 Million by Feb 2011.


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As the fastest growing telecommunications

industry in the world, it is projected thatIndia will have 1.159 billion mobile

subscribers by 2013.

Furthermore, projections by several leadingglobal consultancies indicate that the total

number of subscribers in India will exceed

the total subscriber count in the China by

2013.


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The industry is expected to reach a size

of 344,921 crore (US$74.85 billion) by 2012 at agrowth rate of over 26 per cent, and generateemployment opportunities for about 10 millionpeople during the same period.

According to analysts, the sector would createdirect employment for 2.8 million people and for7 million indirectly. In 2008-09 the overalltelecom equipments revenue in India stood

at 136,833 crore (US$29.69 billion) during thefiscal, as against 115,382 crore (US$25.04billion) a year before.


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History

Telecom in the real sense means the transfer

of information between two distant points in

space with the help ofelectrical signals.

Therefore, the history of Indian telecom can

be started with the introduction oftelegraph.


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Introduction of the telegraph

The Indian postal and telecom sectors saw a slow and uneasystart. In 1850, the first experimental electric telegraph linewas started between Kolkata and Diamond Harbor. In 1851, itwas opened for the use of the British East India Company.The Posts and Telegraphs department occupied a smallcorner of the Public Works Department, at that time.

Subsequently, the construction of 4,000 miles (6,400 km) oftelegraph lines connecting Kolkata, Agra, Mumbai andChennai in the south, as well as Ootacamund and Bangalorewas started in November 1853. Dr.William O'Shaughnessy,who pioneered the telegraph and telephone in India,

belonged to the Public Works Department, and workedtowards the development of telecom throughout this period.

A separate department was opened in 1854 when telegraphfacilities were opened to the public.


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Introduction of the telephone

In 1880, two telephone companies namely The OrientalTelephone Company Ltd. and The Anglo-Indian TelephoneCompany Ltd. approached the Government of India toestablish telephone exchanges in India.

License was granted to the Oriental Telephone CompanyLimited ofEngland for opening telephone exchanges atCalcutta, Bombay, Madras and Ahmedabad and the firstformal telephone service was established in the country.

In January 1882, the exchange in Calcutta named the"Central Exchange", was opened at third floor of thebuilding at 7, Council House Street, with a total of 93

subscribers. Later that year, Bombay, Madrass andAhammadabad also witnessed the opening of a telephoneexchange.


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Further milestones and developments

1902 - First wireless telegraph stationestablished between Sagar Islands andSandheads.

1907 - First Central Battery of telephones

introduced in Kanpur. 1913-1914 - First Automatic Exchange installed

in Shimla.

1927 - Radio-telegraph system between the UKand India, with Imperial Wireless Chain beamstations at Khadki and Daund. Inaugurated byLord Irwin on 23 July by exchanging greetings

with King George V.


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1933 - Radiotelephone system inaugurated

between the UK and India. 1960 - First subscriber trunk dialing route

commissioned between Lucknow and Kanpur.

1979 - First optical fibre system for local junction

commissioned at Pune. 1984 - C-DOT established for indigenous

development and production ofdigitalexchanges.

1995 - First mobile telephone service started onnon-commercial basis on 15 August 1995 inDelhi.


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Emergence as a major player

In 1975, theD

epartment of Telecom (DoT) wasseparated from Indian Post & Telecommunication

Accounts and Finance Service.

DoT was responsible for telecom services in entire

country until 1985 when Mahanagar Telephone

Nigam Limited (MTNL) was carved out of DoT to

run the telecom services ofDelhi and Mumbai.


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Privatization of telcom in India

Different ideologies Resisted privatisation move Prime Minister Indira Gandhi signed contracts with Alcatel CIT

in an effort to set up 5,000,000 lines per year.

But soon the policy was let down because of political

opposition. She invited Sam Pitroda of US to set up Center forDevelopment of Telematics(C-DOT), however the plan faileddue to political reasons.

Then under the leadership ofRajiv Gandhi, many public

sector organizations were set up like the Department ofTelecommunications (DoT) , VSNL and MTNL.

Many technological developments took place in this regimebut still foreign players were not allowed to participate in thetelecommunications business.[16]


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The government threw open the bids to one

private company per circle along withgovernment owned DoT per circle.

For cellular service two service providers were

allowed per circle and a 15 years license wasgiven to each provider.

During all these improvements, the government

did face oppositions from ITI, DoT, MTNL, VSNL

and other labor unions, but they managed to

keep away from all the hurdles.[16]


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After 1995 the government set up TRAI (TelecomRegulatory Authority of India) which reduced theinterference of Government in deciding tariffs andpolicy making.

The DoT opposed this. The political powers changed in1999 and the new government under the leadership ofAtal Bihari Vajpayee was more pro-reforms and

introduced better liberalization policies. They split DoT in two- one policy maker and the other

service provider (DTS) which was later renamed asBSNL.

Finally in April 2002, the government decided to cut itsstake of 53% to 26% in VSNL and to throw it open forsale to private enterprises. TATA finally took 25% stakein VSNL.[16]


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This was a gateway to many foreign investors to get

entry into the Indian Telecom Markets. After March

2000, the government became more liberal in makingpolicies and issuing licenses to private operators.

The government further reduced license fees for

cellular service providers and increased the allowable

stake to 74% for foreign companies.

Because of all these factors, the service fees finally

reduced and the call costs were cut greatly enabling

every common middle class family in India to afford acell phone.

The mobile tariffs in India have also become lowest in

the world.


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2G Spectrum Scam

2G means Second Generation

Technology for wireless digital communication

Limited Bandwidth: Number of connectionspossible are limited


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The government had in 2007 recommended

an 'open licence regime for 2G. 'Applications for telecom licences were invited

setting Oct 1, 2007, as the deadline.

An artificial cut-off date, Sep 25, 2007, wascreated and applications received between

Sep 25 and Oct 1 were summarily rejected.

Rules of the game were changed after the

game had begun,


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The BJP alleged that 'all friendly applicants,had been advised to put in their applications

before Sep 25'. The licences and the spectrum allocation were

then allotted to nine operators at a price of Rs1,650 crore (Rs 16.50 billion) per operator.

This price was not taken on the basis of the2007 market value but on the basis of anauction held in 2001.

The value of the licence and spectrum in 2007could not be the same as in 2001 as thetelecom market has grown phenomenallyduring this period.


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Allegation: UPA government had given awayscarce spectrum at a fraction of the market priceleading to heavy revenue losses to the nation.

The Central Bureau of Investigation (CBI) whichraided the Department of Telecom premises saidthe licences were given at dirt cheap prices at2001 market rates.

Further, the telecom ministry did not go in forcompetitive bidding and adopted a 'first come,

first served' approach to spectrum seekers. The ministry restricted the number of entrants by

announcing a cutoff date in September, 2007.


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After bagging the licences Swan Telecom sold

45 per cent stake to the United Arab Emirates-based Etisalat group for Rs 4,195 crore

Unitech Wireless sold 67 per cent to Norway-

based Telenor group for Rs 6,120 crore . Chennai-based STel group allegedly sold 49

per cent to Betel for nearly $225 million, while

Shyam Teleservices sold 70 per cent to the

Russian firm Sistema.


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How is the Telecom Minister Raja involved?

It is alleged that the decision to follow the

'first-come-first-served' principle and not

auction spectrum but give it at 2001 prices

was taken by A Raja.

He is also alleged to have arbitrarily shifted

the cut-off date for applications to suit some

operators.


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What is Raja's stance?

Licenses and spectrum had been allocated in

conformity with the government's telecom

policy.

He said auctioning was not followed because

he wanted to keep the cost of telecom

services low for consumers.


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What would have been the best way

to allocate spectrum?

Auctioning is the best way to allocate

spectrum as it is an invaluable natural

resource.

Auctioning would have ensured a clean and

fair allocation process bringing in huge

revenues for the public exchequer, which

could have been utilized for furtherdevelopment of the telecom sector.

Evolution of Telecom Industry in India and The

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