Telecom Evolution and Role of Regulatory Body:

Indian Perspective

The telegraph was the first form of communication that could be sent from a great distance and

was a landmark in human history. The invention of Electric Telegraph in 1837 and Telephone by

Alexander Graham Bell in 1876. It was a start of a new industry which will broadcast voice and

music and then it also became a platform for data services worldwide. Bell Systems introduction

of PSTN led to the start of commercial business to provide services to the public through the

networks. PSTN relied on circuit switching which became the core concept to provide voice

services till date.

Telecom Industry plays a key role in development of any nation and contributes a

significant part to GDP growth. As per the TRAI press releases, Indian telecom sector has come

a long way from around 0.6 teledensity in 1990 to an impressive figure of 73.07 during January,

2013. Urban teledensity of 142 and rural teledensity of 39 as on January 2013, suggests that

Indian market has a lot to offer for the telecom operators in terms of growth prospects. It is

interesting to know the journey of Indian telecom sector and look the milestones which enabled

such a phenomenal growth rate. In this unit we shall view the telecom evolution from the point

of liberalisation till NTP2012.

Indian telecom industry growth can be analysed in two time frames, pre 1994 and post 1994

1. The Pre-National Telecom Policy ’94 era :

Indian telecom industry has seen a limited number of players providing fixed telephony services

until 1994. DOT, MTNL and VSNL were the only three operators providing basic telephony

services with DOT having a near monopoly throughout Indian Subcontinent. In the year 1986,

MTNL was setup under DOT to provide the telephony services in Bombay & Delhi circles

where as VSNL provided international calling services.

In the need for faster roll out of services to the public and to promote competition in the

market place, Government liberalised telecom industry in 1994 for telecom services, which

allowed new players to enter the market place. This liberalization was a result of the deep fiscal

crisis India has faced during 1990‘s and opening up the sector for other players is viewed as a

means to reduce this fiscal deficit and to improve the overall growth rate of telecom sector. Pager

services were introduced by the entry of Radio Paging operators in 1992 and industry was, for

the very first time opened up for the private sector. Elaborate and ambitious plans were laid

down in the 1994 Telecom Policy (NTP‘94) with the aim of connecting the entire rural areas.

2. National Telecom Policy 1994 (NTP ’94) :

2.1 Objectives :

NTP‘94 facilitated the entry of private players to bridge the resource gap and opened

opportunities for the players to provide telecom services on demand to everyone in the nation.

Key objectives were providing telecom services to everyone at affordable rates, maximum

coverage of telephony services to the rural areas, establishing India as a manufacturing base and

major exporter for telecom equipment and protecting the defense and security interests of the

country. Due to the technologies changes that were taking place at that point of time, making

India a technologically capable country was very essential to reduce the telecom infrastructure

costs and facilitate faster network roll outs. Till the end of 1997 we should be capable of PCO for

every 500 persons and availability of all international VAS in India also.

2.2 Impact :

NTP‘94 has been a big step taken by the ministry to enable and sustain growth in telecom sector.

NTP‘94 facilitated the entry of private players to bridge the resource gap and opened

opportunities for the players to provide telecom services on demand to everyone in the nation.

India has been divided into 23 service areas which consist of 19 telecom circles and four metros.

Licenses were awarded to 8 CMTS operators in the four metros, 14 CMTS operators in 18 state

circles, 6 BTS operators in 6 state circles and to paging operators in 27 cities and 18 state circles

(DOT)

NTP‘94 had greatly enhanced the growth of the telecom industry. Industry became capable to

design their own network equipment. 1PCO/522 persons was achieved and 3.1 lac villages out of

5.76 lac villages were covered by 8.37 million Telephone lines which was huge milestone at that

point of time.

3. Establishment Of Telecom Regulatory Authority of India (TRAI)

Telecom Regulatory Authority of India (TRAI) was establishing in 1997 by the parliament act.

The entry of private payers and the demand for independent regulation by these players led to the

establishment of TRAI as an independent legal authority. It regulates the telecommunications

and services. The following diagram gives us some of the challenges faced by the telecom sector

which led to the formation of the regulator.

3.1 Mandatory Functions

Mandatory/ Direct functions of TRAI include the following:-

a) Interconnectivity terms and conditions between operators

b) Compliance of terms and conditions of license by the operators

c) Tariff & revenue sharing among operators

d) Quality of service

e) Ensure Compliance of license conditions

Fig3.1: Functions of TRAI3

Source: http://www.trai.gov.in/WriteReadData/UserFiles/Aboutus/History/achievment.pdf

3.2 Recommendatory Functions

Some of the key recommendatory functions of TRAI include the following:-

a) Licensing related issues such as terms and conditions of license to service providers

b) Measures to facilitate competition and growth

c) Issues related to use of technology

d) Issues related to spectrum efficiency

e) Any other matter related to telecom industry in general, e.g. USO fund.

It can be seen from the above figure that consumer protection is the top most priority of TRAI

and therefore TRAI issues directions, recommendations and consultations in 11 key areas of the

telecom sector as depicted by the following table:-

Fig 3.2: TRAI key focus areas in the telecom sector

With the establishment of TDSAT, TRAI was free from handling disputes which was one of its

earlier responsibilities. TRAI issued regulations in number portability, quality of service, tariff

orders, regulatory enforcements, commercial communication, mobile number portability,

accounting & separation and in many other areas. These regulations become the part of

mandatory roles of TRAI. More information about the TRAI‘s contribution to the telecom sector

can be found in its website ―www.trai.gov.in.‖

4. Post NTP ’94 era

There were few shortcomings in the NTP 1994.

First privatization of the telecom industry & service rollout remained slow because the telecom

providers spent excessive amount for the spectrum & had the financial crunches to provide the

faster services2

Out of the 14 CMTS operators only 9 were operational and the rolls out of

services was not completed fully. From 6 BTS operators in 6 state circles only 2 were got

success to achieve the roll out. Basic telecom services by private operators have only just

commenced in a limited way in two of the six circles where licenses were awarded.

Second the Non-winners bidders had complained for the lack of transparency in the

auction Process. Hence, plans were laid out for the new telecom policy to overcome these

shortcomings, to meet the technical challenges and facilitate the industry players to achieve a

faster and better growth. With this slow growth rate and only 50% of rural coverage being

achieved, government recognised the need for a new telecom policy.

.

5. National Telecom Policy 1999 (NTP’99) :

After the sluggish growth of telecomm in india after ntp‘94 The Government recognises that the

result of the privatisation has so far not been entirely satisfactory. The main reason, according to

the cellular operators perspective , has been the fact that the actual revenues realised by these

projects have been far short of the projections and the operators are unable to arrange financing

for their projects.there were very less developments in the recent past in the telecom, IT,

consumer electronics and media industries world-wide. NTP‘99 has become a major & key

policy reform for the telecom sector. The new telecom policy framework is also required to

facilitate India's vision of becoming an IT superpower and develop a world class telecom

infrastructure in the country.

5.1 Objectives and targets of the National Telecom Policy 1999 :

Key points in NTP‘99 can be summarised4 as below:-

a) Strengthen the objectives of NTP‘94 by providing affordable services, telephony on

demand for everyone, achieving entire rural coverage and teledensity of 7 by the year

2005 and 15 by the year 2010.

b) Create a modern and efficient telecommunications infrastructure in IT, media, telecom

and consumer electronics and thereby becoming India an IT superpower

c) Provide high speed data and multimedia capability using technologies including ISDN to

all towns with a population greater than 2 lakh by the year 2002.

d) To introduce greater competition in the telecommunications sector.

e) To provide equal opportunities and level playing field for all players.

f) To provide internet access to all the district headquarters by the year 2000.

5.2 NTP 1999 recommendations

Some important steps were taken after NTP‘99 as follows :-

a) Operator was given the choice of connecting and sharing their infrastructure with any

other operator within their service area and in consultation with TRAI for different

service areas.

b) Operators can provide the last mile access by themselves without the intervention of

DOT.

c) Operators were allowed to move out from the license fee payment regime to a revenue

sharing regime. This provision is given for all telecom service providers including basic,

cellular, paging and other value added services.

d) The license period for CMSP (Cellular Mobile Service Providers) has been increased to

20 years which would be extendable for another 10 years

5.3 Impact of NTP 1999

NTP‘99 improved the telecom growth and promoted privatization and deregulation of the

telecom sector to realise the benefits for the nation. Some of the objectives that were laid in

NTP‘99 have been achieved with huge success where as other objectives were attained with

limited success rate. Key outcomes of this policy are:-

a) Teledensity has increased by more than 60% by 2010 .

b) Implementation of calling party pays (CPP) regime and decreasing the tariff costs made

telecom services more affordable for the subscribers.

c) Rural teledensity has crossed more than 30% in 2011 with around 5.9Lakh villages being

connected.

d) Internet access to all district headquarters by 2000 was not achieved.

6. Establishment of TDSAT (Year 2000)

The Telecom Regulatory Authority of India Act, 1997 was amended by the Telecom

Regulatory Authority of India (Amendment) Act, 2000. This amendments were donew for some

functional clarity regulating the frame work , and dispute settlement and for for bringing clear

distinction in recommendatory and regulatory bodies of Telecom Regulatory Authority of India

(TRAI) by making a separate dispute settlementing body .

By the Amendment Act an Appellate Tribunal known as the ―Telecom Disputes

Settlement & Appellate Tribunal‖ has been set up under Section 14 of the Telecom Regulatory

Authority of India Act, 1997 by TRAI (Amendment) Act, 2000. The Appellate Tribunal came

into existence on 29th May, 2000 and started hearing cases from January 2001.

TDSAT adjudicate any dispute between:- a) licensor and licensee, b) service providers

and c) service providers and group of consumers5. TDSAT can appeal against directions,

decisions and orders of TRAI. Establishment of TDSAT led to the smooth functioning of

telecom sector and protected the interest of the consumers & telecom players at large.

7. Wireless in Local loop (WLL)

Last mile access has be the limiting factor for providing telephony services effectively to the

rural areas. The costs involved in laying and maintaining copper lines was a costly process for

providing services in a low demand regions. WLL offered cost effective alternative the copper

and ensured faster rollout of services.

Initially WLL made use of license free spectrum bands worldwide, but due to the

increasing number of interference problems and costly maintenance operations, service providers

started using licensed bands by taking the license from the ministry. In India landscape, last mile

access was the serious issue and WLL was the answer to this problem. In consultation with

TRAI and as per TRAI recommendations DOT allowed limited mobility services for WLL.

Since technological advancements like WLL can benefit people by providing cost effective and

near maintenance free solutions to last mile access issues, DOT allowed WLL but only with

limited mobility so as to maintain the boundary between the basic and wireless services and

maintain the interests of the mobile operators.

Figure 7.1 : Advantages of Wireless in Local Loop network

CDMA technology was launched for the first time and big firms like Reliance entering the

market for providing basic telephony service by WLL technology raised many criticisms among

existing players of that time and provoked a war with GMS operators. It is realised by the

government that technological advancements worldwide should not be restricted because of the

licensing conditions. DOT opined the boundaries between the way the landline and fixed

telephony services being provided are becoming vague and the time has come to free license

from this categorizations. DOT as per the recommendations of TRAI mandated the issue of

Unified licenses in the year 2003.

8. Unified Licensing Regime

Improved technological capabilities in telecom sector and the need for technological neutral

licenses for the telecom sector removed the boundaries between fixed line and wireless services

being offered. WLL has the technological capability to provide both the local and the long

distance calls at almost the same cost. The result was geographic boundaries in terms of circles

created in NTP‘94 have started falling apart in terms of tariff with the fixed and mobile

telephony provided at a similar tariff structure. In early 2003, tariffs dropped by more than 50%

with the entry of WLL(M) players6. This has become true in the year 2006 when Reliance

Infocomm launched IndiaOne tariff plan. The following factors shown in the figure below led to

the launch of Unified Licensing Regime by DOT:-

Figure 8.1 : Factors that favoured for Unified License Regime in Indian Telecom

Since telecom sector is capital intensive and operators invest huge amount of capital in roll out of

networks, it is important for the industry not to get limited in technology use. TRAI

recommended that industry has to get full advantages of new technology advancements and be

technically capable with global standards.

The industry was at a rapid growth stage and hence there was a need to promote market

growth and ensure faster roll out of services. There was a need to improve quality of services and

better last mile access. Moreover, TRAI was clear on the point that end users have the right to

get benefitted from the global technological advancements.

By an addendum to NTP 99, Ministry of Communications and Information Technology

established two categories of licenses6:-

a) Unified Licence for Telecommunication Services permitting Licensee to provide all

telecommunication/ telegraph services covering various geographical areas using any

technology;

b) Licence for Unified Access (Basic and Cellular) Services permitting Licensee to provide

Basic and /or Cellular Services using any technology in a defined service area.

Unified License has enabled the operator right to launch service throughout the nation subjected

to spectrum availability. Unified licensing has eradicated the segmentation for operator by region

and type of service provided. This licensing has removed the limitation of NTP‘94 that ensured a

single operator not to have more than three circles in category ‗A‘ and ‗B‘ to provide telephone

services.

8.1 Framework for Unified Licensing

TRAI recommendations on Unified Licensing including the following key points6:-

a) Four categories of Unified Licensing namely Unified License, Class License, Licensing

through Authorisation and Standalone Broadcasting and Cable TV licenses.

b) No restriction on usage of IP related services and allowing Niche operators to provide

internet and multimedia services in rural areas where fixed rural telephone density is less

than 1%.

c) License fee of 6% the adjusted gross revenue is levied for unified license, class license

and niche operators.

d) Interconnection has been made mandatory for all the service providers with Unified

licenses.

e) According to TRAI press release dated 27.10.2003, migration to Unified licensee is a

voluntary process and has to be achieved in a two stage process with the Unified Access

Regime for Basic and Cellular Services in the first phase, to be followed up with a

process to define the guidelines and rules for fully Unified License/ Authorisation

Regime.

f) No additional spectrum will be given for the existing operators who are migrating to the

unified License and no extra entry fee is charged for existing CMSPs for migration.

This unified licensing regime is followed by a new set of recommendation by TRAI in the year

2010. TRAI in its recommendation on ―Spectrum Management and Licensing Framework‖ dated

11th

May 2010 recommended that all future license should be Unified Licenses and highlighted

the need of delinking the spectrum from the license.

Due to the technology and policy advancements in telecom sector, the teledensity has

improved to 7 and subscriber base crossed 70 million by the year 2003. Many categories such as

‗A‘, ‗B‘, ‗C‘ circles have witnessed more than 100% growth rate during 2003-04. The figures on

broadband internet are low with penetration of broadband and internet being 0.02% & 0.4%

respectively by December, 2003. Lower penetration and lack of standards led to the formulation

of Broadband Policy in the year 2004.

9. Broadband status at International level :

The importance of broadband has been recognized worldwide. According to ITU, for

Governments, broadband is a way of promoting economic development and social benefits; for

telecommunication companies, broadband offers a route to offset the current slowdown in the

industry; for businesses, in particular small and medium-sized enterprises, broadband brings the

advantages of access to high-speed communications, and the ability to reach a worldwide

audience that were previously only available to larger companies.

9.1 Korea:

Korea is the leading example of a country rising from a low level of ICT access to one of the

highest in the world.which was just 1% penetrationin year 2000 to world‘s most advanced

broadband markets – standing well ahead of either the US or Canada,

9.2 European Union:

January 2010, there were 123.7 million fixed broadband lines, up 9 % since January 2009, and

the average fixed broadband penetration rate in the EU reached 24.8 %, While 83.4 % of fixed

broadband lines in the EU offer speeds above 2 Mbps, only 23.2 % are above 10 Mbps. Growth

in mobile broadband was significant in a number of EU countries in 2009. The estimated number

of dedicated mobile broadband cards (25.1 million) corresponds to about 20 % of all fixed

broadband connections, up from 10 % in 2008.

To promote the broad band growth and penetration in India the broadband policy 2004

was formulated by the Government.

10. Broadband Policy 2004

To promote internet growth, the Government opened up the sector for ISPs in November, 1998.

Broadband policy helped in identifying the service characteristics and established target

of 3million, 9million and 20 million broadband connections to be achieved by the year 2005,

2007 & 2010 respectively. Policy laid out various technological options and pointed out

limitation of broadband services through copper loop. DOT (BSNL) & MTNL had an extensive

copper network but due to the technical reasons 7 million lines can be leveraged for broadband

services. Various access technologies that were identified by this policy is shown in the diagram

below

Fig 10.1 : Access Technologies for Broadband provide7

BSNL and MTNL decided to provide 1.5 million connections by the end of 2005. DSL

technology was used to fulfil the targets set by the policy. With the broadband growth in the

country various applications can be provided in the field of education, governance, medicine and

entertainment. A provision for quarterly review of the performance of the private players and

PSUs was put into place.

During the first year of the policy implementation 0.61 million broadband connections

were achieved which was less than the 3 million target7. TRAI once again recommended the

ministry regarding unbundling of the local loop so as to make full utilization of the network.

TRAI fixed the price ceiling for IPCL (International Private Leased Circuits) & Domestic Leased

Line and promoted competition to bring down the international connectivity charges and bring

down the costs of broadband services for the end users. In an effort to improve broadband

services for mobility, TRAI recommended allocation of permanent IP addresses for broadband

and migration to IPv6 from IPv4 protocols.

A look at the statistics of Broadband growth rate for the year 2007 suggest that

broadband growth rate was not very encouraging with only 2.67 million connections as on

September, 20078. Technological trends suggest that DSL was the most sought after, by

operators to provide broadband connections.

Fig 10.2 : Broadband technological Trends8

Source: TRAI (2008)

Ministry of Telecom & IT could foresee that for the 2nd

time the target set by Broadband

policy was not going to be achieved. China added more than 40 times the number of broadband

connections which India could add in quarter during 2007. Government was also drafting out the

National E-governance plan and establishment of State wide area networks for greater

information access to the public. Hence the urgency to improve the broadband penetration and

usage led to the declaration of the year 2007 as ―Year of Broadband‖. To make efficient use of

the local loop, TRAI recommended Franchisee model as an alternative to unbundling the local

loop which also can provide solution to the shortage of customer premises equipments (CPEs).

Recommendations for release of spectrum for 3G & WiMAX services were also suggested by

this policy in order to improve the broadband growth rate in the nation.

11. Broadband status after BB policy ’04 :

There were 0.18 million broadband connections at the end of March 2005. These broadband

connections have grown to 10.30 million by the end of September 2010. the Cumulative Annual

Growth Rate (CAGR) was about 117%.. the figure below shows the growth rate of broadband vs

internet usage.

Fig11.1 : Internet & Broadband Connections in Millions

Source: TRAI annual report (2010)

The broadband growth has not only been slow but also biased in favour of urban areas. More

than 60% broadband subscribers are in the top ten metros and tier-I cities and more than 75%

connections are in top 30 cities. Just 5% of the broadband connections are in rural areas which is

meagre compared to about 31% of total mobile telephone connections in rural areas. In

comparison, Internet services through non-broadband connections have penetrated well in

smaller cities & towns (with population less than 0.5 million). In these cities, Internet usage has

grown from 5% in year 2000 to 36% in year 200921. Smaller towns have overtaken top 8 metros

in terms of Internet usage.Figure below shows the growth of internet usage spread across the

cities. Thus all of the statistics led to formation of National Broadband plan 2010.

Fig11.2 : Internet Spread across the Cities

Source: TRAI annual report (2010)

12. National Broadband Policy 2010

As per study, 10% increase in broadband penetration accounts for 1.38 percentage increase in the

per capita GDP growth in developing economies. Currently in India, the penetration of

broadband is0.8% as against the teledensity of 60.99 as of Sep‘2010. The number of broadband

connections was only 10.3 million with Chennai, Bangalore, Delhi and Mumbai being the top 4

cities in terms of broadband subscribers and BSNL accounted for more than 50% of the

subscribers. While it was targeted to be 20 million by the year 2010.Therefore, there was an

urgent need to facilitate rapid growth of broadband.

National Broadband Plan recommended establishment of a broadband network which

will be an open access optical fibre network connecting all habitation with population of 500 and

above. This Network will be established in two phases.

The phase I was covering all cities, urban areas and Gram Panchayats will be completed by the

year 2012.

Phase II will see the extension of the network to all the habitations having a population of more

than 500, to be completed by the year 2013.

To oversee this National Optical Fibre Agency (NOFA) owned by central govt. and a

State Optical Fibre Agency (SOFA) owned by state govt. would be set up which would establish

the networks and backhaul in the rural areas and in the urban areas other than those cities

covered under Jawahar Lal Nehru Urban Renewal Mission (JNURM).

The objectives of this plan was to provide 75 million broadband connections (17 million DSL,

30 Million cable and 28 million wireless broadband) by the year 2012 and 160 million

broadband connections (22 million DSL, 78 million cable and 60 million wireless broadband) by

the year 2014. This plan also aims at providing fibre to home in 63 cities covered under JNURM

and Fibre to kerb in all other cities9

with following specifications.

The optical fibre network would support following bandwidths:

10 Mbps download speed per household in 63 Metro and large cities (covered under

JNURM) or very wireline connection by the year 2014.

4 Mbps download speed per household in 352 cities for every wireline connection by the

year 2014.

2 Mbps download speed per household in towns and villages for every wireline

connection by the year 2014.

Upload speed would be half of the download speed.

As per the previous recommendations of TRAI, 3G & BWA spectrum auctioning is completed in

2010 thereby providing operators with plethora of opportunities to improve broadband

penetration and provide value added services.

13. Mobile Number Portability

In an ongoing process of developing the telecom sector both for the customers and industry

players, TRAI & DoT has implemented several policies and initiated key changes in the telecom

sector.

Mobile Number Portability (MNP) is one such development for mobile telephony

subscribers who wanted to change the operator while retaining their mobile number. MNP has

been implemented by most of the telecom regions worldwide. MNP was first implemented in

Singapore in 1997 and several other regions like UK, Hong Kong, Netherlands has implement

MNP in 1999. Introduction of MNP is expected to increase competition between the service

providers, ensuring each offers quality services to woo the subscribers be it network coverage or

introduction of innovative products and services.

MNP is considered a winning proposition for all key stakeholders — regulators,

operators and subscribers, in the long run10

. The Government has announced the guidelines for

Mobile Number Portability (MNP) Service Licence in the country on 1st August 2008 and has

issued a separate Licence for MNP service w.e.f. 20.03.2009.

13.1 Key aspects for MNP construction

As per TRAI MNP regulations11

issued in September 2009, the key aspects that construct the

MNP framework are:-

a. Clear unambiguous eligibility conditions for porting of mobile numbers

b. Definition of rights and obligations of all stake holders – the Donor Operator, the

Recipient Operator and the MNP Service provider;

c. Procedure to be followed by each player in the chain in processing porting request

d. Specification of time limits for completion of steps by each player in the chain.

e. Envisaging least disruption of service to the consumer

13.2 Imperatives for MNP adoption

For MNP implementation to be successful in India, following 4 points have been considered.

a. Simplicity: The cost structure for both operators and end-subscribers.

b. Subscriber-friendly: Subscription fees has been kept extremely low (maximum of INR

19) to ensure negligible barrier to porting.

c. Equitable: Fees has been kept equitable. Charges applied in different ways to all

participants in the of the ecosystem

d. Stability : The MNP system has been into place with the goal of maximizing the success

of the MNP implementation

The DoT guidelines have made a geographical division of the country into two Number

Portability Zones (zone 1 & zone 2), each consisting of 11 licensed service areas. MNP can be

implemented in 2 different ways – Donor led Porting or Recipient Led Porting. India, like the

International and European standards has adopted the 'Recipient-Led' porting. Internationally in

most of the regions MNP service is free of charge for the subscriber and the costs are paid by the

operator.

13.3 Impact on MNP on india

Indian Telecom market comprises of ~ more than 91% prepaid subscribers and already this

segment is having annual churn rate from 50 ‐ 70%. Hence, there will not be any big move in

this segment. Though, the post paid segment which is ~ 9% or less of total subscriber‘s base in

India and contributes around 20% of overall subscriber‘s revenue would be expected to have

higher churning rate as compared to present rate of 12 ‐ 24%. With this point of view small

players or new entrants would try to shift these high end customers from large players towards

their arena by providing special facilities and low tariff plans for them. Hence, this may lead to

further tariff war in terms of voice and data usage. Though the High end users segment will not

be attracted much by low tariffs because their mobile usag e expense is much lower as compared

to disposable income and that is why they would like to remain stick with their present operators.

In case of CDMA subscribers MNP is going to hit more due to boundaries of limited number

of mobile handset (i.e. Limited featured phone) s compared to those available for GSM mode

and in CD MA there are only 3 operators in India s compared to those are in GSM (i.e. 15

service providers). Hence, wide variety of services available for subscribers in GSM from tariff

to VAS etc.

The 3G launch will also play an important role in churning, as all those players who have not

received 3G spectrum (i.e. New entrants) will face bshifting of their subscribers towards the

operators providing 3G services (i.e. Large players). Since, 3G services provides better voice

quality, lower dropped calls and improved network along with enriched VAS experience which

will be enough to attract highend subscribers. With launch of 3G by most number of private

operators PSU operators like MTNL and BSNL observed substantial shift of subscribers mainly

because of its poor quality service experience

14. National Telecom Policy 2012

With increasing presence of India on global front as an emerging economy provided vast

potential for telecom players in terms of growth. To tap this potential and emerge as global

leader India needs to work really hard to create basic infrastructure for growth.

Telecommunication sector is one such sector which can be the key driver of growth and that's

why Telecom Policy of 2012 stresses on the need to provide affordable and quality

telecommunication services in rural and remote areas. Following are the major objectives12

of

Telecom Policy 2012:-

To provide secure, affordable and high quality telecommunication services to all citizens.

To aim at empowering citizens through the use and implementation of telecom services

by enabling them to participate into e-governance in key sectors such as health, banking,

education, governance, employment, etc. and by repositioning mobile phone as an

empowerment device that combines communication with proof of identity, financial

transactions and other related facilities.

To achieve One Nation -Free Roaming and will strive to create One Nation- One License

across services and service areas.

To provide high quality and affordable broadband services to all villages and habitations

thus taking it to every nook and corner of the country. NTP2012 also talks about issues

such as protection of consumer interests and adoption of green policy in telecom.

Encouraged by the success of Telecom Policy 1999 which resulted in an increased teledensity

from 2.3 to 74.0 and a very low tariff rate, Telecom Policy 2012 went a step ahead by taking

forward the ideology of inclusive growth and thus it focuses on making internet and mobile a

tool that is not only used for communication but is also a tool that empowers a common man. It

tried to focus on decreasing the gap between rural and urban teledensity and other telecom

services with a special focus on addressing the needs of rural India. While Telecom Policy 1999

focused on creating a basic infrastructure, telecom Policy of 2012 talked about issues which

need to be addressed in the current scenario such as consumer awareness, sustainability and

health concerns which came into force in recent years. It also talks about creating an investor

friendly environment and promoting indigenous R&D.

15. Timeline of Major events in Indian Telecom Sector

Indian telecom sector became the third largest in terms of network and 2nn largest in terms of

subscriptions. During its 18-19 years of post liberalization period, Indian telecom sector

transitioned through many changes in terms of technology, policy architectures, number of

players in the market and type of services offered to the subscribers. We can look at the entire

evolutionary process in telecom industry in four major time intervals as shown in picture below:-

Fig 15.1 : Telecom Evolution time frames

During each of these time frames several technical and policy level changes took place in the

sector with the aim of improving teledensity, rural coverage, quality of services and broadband in

the country. The key event according to the time frames which established the present telecom

industry is depicted below:-

Telecom Evolution

Pre 1994 1994 - 2000

2001-2010 Post 2010

Fig 15.2 : Major events in Indian Telecom History

16. Mobile Virtual Network Operator (MVNO)

MVNO13

model has gained popularity in the last few years. There are currently about 360

planned or operational MVNOs worldwide. Countries including Netherland, France, Denmark,

U.K., Germany, Finland, Norway, Ireland, Hongkong, Australia and U.S. have the most

MVNOs.

The introduction of Mobile Virtual Network Operator (MVNO) is seen as a natural

progression towards enhancing free market principles and contributing to the efficient use of

existing telecommunication infrastructure. The mobile value added services are still evolving.

While the potential of mobile technologies is undeniable, new value added services are

constantly emerging widening the range and types of service offerings and pricing plans, the

likely applications and usage. Correspondingly, the possible types of services a MVNO might

offer and the role they would play in the emerging market would also expand. entry of MVNO in

the mobile market raises the level of competition by providing consumers with a wider choice of

service providers, a wider range of innovative value added services and more competitive pricing

plans

As the review of the recommendations given by TRAI on MVNO :

MVNO was to be introduced as a distinct service provider with its own licensing and

regulatory framework

MVNO is free to choose its business model (Full or Intermediate or Thin)

Arrangement/ agreement between MNO and MVNO to be driven by market forces

The license service area of MVNO to be same as that of parent MNO

Agreement with MNO is to be submitted before issue of license to MVNO

No limit on number of MVNOs attached to a MNO

MNO is to pay the spectrum charges for utilisation of spectrum by MVNO

16.1 Factors affecting growth of MVNO :

Maturity of the telecom market in respective country (based on teledensity)

Existence of Mobile Number Portability (MNP)

Existence of 3G services

Incumbent working as partner with MVNO rather than as a wholesale supplier

Consolidation of the telecom market

Current charges of services for the end-user

Concluding Remarks

Today‘s telecom industry is able to provide world class services for the subscribers with latest

technological standards. Remarkable improvements were seen in terms of subscriber growth due

to the favourable policies that promoted competition and fair practises in the sector. The new

paradigm of the industry is greater access to information, growth of broadband and

empowerment of the individual. Privatisation and liberalization has enabled faster rollout and

improved quality of services. With NTP 1999 put in place, sector has performed more than the

expectations in terms of mobile subscriber growth which has driven the industry to become the

2nd

largest region in terms of mobile subscriptions. Establishment of independent bodies such as

TRAI & TDSAT enabled the adoption of fair practise by all industry players and also helped in

building confidence in doing business in this sector.

With industry forecasts of future growth driven by data services, many operators started

providing internet on mobile devices. Government introduced Broadband Policy in 2004 and

Broadband Plan in 2010 with the aim of connecting the entire nation through broadband. NTP

2012 focuses on empowering the citizen and making mobile the one stop portal for all the needs.

With mobile becoming an important part of citizen life and the launch of 4G services in India, it

becomes extremely important to ensure the full utilization of spectrum for mobile services.

With the introduction of MNP and MVNO by the government the Indian telecom Market

has become highly competitive , But whether MVNO story will be successful , there is no clear

‘yes‘ or ‗no‘ answer. MVNO is successful in European countries because MNP existed before

the introduction of MVNO in these markets. There is clearly a direct link of MVNO success

stories with MNP. In Latin America where MNP is largely unavailable, MVNO is a failure.

We have seen that 3G services are largely unsuccessful in various countries but despite this, by

using 3G only, a MVNO can launch its value-added services and get a better profit margin than

from a voice or text offering. These offerings will definitely differentiate MVNO operators from

incumbents.

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