Evolution of Telecommunication Industry Until the 1980s, the Department of Posts and Telegraphs (under the Ministry of the

same name) had the mandate of regulating and offering telecommunications services. It was governed by the Indian Telegraph Act 1885 and the Wireless Act of 1933. In 1985, the Department of Posts and Telegraph was split up into the Department of Telecommunications (DoT) and the Department of Posts. The DoT was established as the state operator, regulator and licensor. It was only in October 1999 that the activities of the operator and licensor were somewhat separated, by the creation of the Department of Telecommunications Services (DTS). This separation, however, was a largely artificial one. Although the DoT had been charged with operating telecommunications services, its efforts were seen as insufficient. Initial steps towards corporatisation saw the creation of Mahanagar Telephone Nigam Limited (MTNL), which started offering basic fixed services in Mumbai and Delhi in1987. MTNL still holds a monopoly in those cities, where DoT/DTS is not present at the local level. MTNL is wholly owned by the Government of India and the DoT. Videsh Sanchar Nigam Limited (VSNL) was set up in 1986 as the monopoly operator for international gateway services. In 1986, the Telecom Commission was setup with the mandate to accelerate the deployment of telecommunications services and to implement new telecommunication policy. On May 13, 1994, the government opened local basic and value-added telecommunications services to competition. Mobile services were introduced on a commercial basis in November 1994. India was thus divided into 21 "Telecom Circles". Circles correspond approximately to 7 states and are categorized as either "A", "B" or "C" according to size and importance. Category A includes the heaviest volume areas such as Delhi, Uttar Pradesh, Maharashtra, Gujarat, Andhra, Karnataka and Tamil Nadu. Licenses for mobile services were also issued for the four metros (Delhi, Mumbai, Chennai, and Calcutta). As part of the license conditions, traffic could be routed to VSNL's international gateway only by passing through DoT/DTS's network. A bill passed in 1995 envisaged the creation of an independent and autonomous agency for the regulation of telecommunications, the Telecommunications Regulatory Authority of India (TRAI). Set up in 1997,

the TRAI is responsible facilitating interconnection and technical interconnectivity between operators, regulating revenue sharing,ensuring compliance with

license conditions, facilitating competition and settling disputes between service

providers. The TRAI cannot grant or renew licenses and this remains the DoT's responsibility. The TRAI may also set the rates for telecommunications services. Its decisions can only be challenged by the High Courts or Supreme Courts of India.

The Department of Posts and Telegraphs till mid 1980s was responsible for regulating and offering telecommunication services. The department was mainly regulated by the Indian Telegraph Act, 1885 and the Wireless Act, 1933. It was in 1985 that the

Department of Post and Telegraph was separated into two departments- Department of Telecommunications (DoT) and the Department of Posts. The DoT was established with the main of functioning as the State operator, regulator, and licensor. In October 1999, the DoTs operation and activities of operator and licensor was separated somewhat by the creation of the Department of Telecommunications Services (DTS). However, this division of functions has mainly been an artificial one. Also, the DoTs endeavours have been held to be inadequate, especially regarding the operations of telecommunications services. Initial efforts by the DoT towards commercialization of the Telecom industry saw the conception of the Mahanagar Telephone Nigam Limited (MTNL). MTNL was conceptualized specifically for Mumbai and Delhi, and is wholly owned by the DoT/ Government of India. It started its operations from 1987; it offered telecom servicesboth wireless and wire-line. As DoT/DTS is not present at the local level in Delhi and Mumbai, MTNL is has monopoly in both of these metros. The Videsh Sanchar Nigam Limited (VSNL) was created as the monopoly of international gateway services. Additionally in 1986, the Government set up the Telecom Commission with the aim of accelerating the operations of telecom services and to implement the incoming new telecom policies. The Union Government on May 13th 1994 opened basic, local and value-added telecom services to private communications. November 1994 marked the introduction of mobile services on a commercial basis. Initially, the country was divided into 21 telecom circles (now I think it is 22- please check the intro). In most cases, the telecom circles correspond to approximately the State borders and they are categorized as A, B or C according to the size and importance. Separate licences for mobile telecommunication services were provided for the four metro cities- Delhi, Bombay, Calcutta and Chennai. As a condition precedent for licensing, all traffics were routed to

VSNLs

international

gateway

only

after

passing

through

the

DTS/

DoT

network/server. The Telecom Regulatory Authority of India Act, 1997 set up the Telecom Regulatory Authority of India (TRAI). This move by the Government of India was long awaited as the need for an independent and autonomous agency for regulating and the whole of the telecom sector. The TRAI is responsible for assisting various telecom operators in forming interconnections and technical interconnectivity. Apart from this, the TRAI also regulates the sharing of revenue and settle disputes between the service providers and can also set rates for various telecom services provided. A limitation to TRAIs power includes its inability to either re-new or issue telecom licences. This particular function is still done by the DoT. The Telecom Regulatory Authority of India Act, 1997 also provides for remedy if certain parties are aggrieved by the decision of TRAI. The Telecom Disputes Settlement and Appellate Tribunal, set up by Sec.14 of the said act provides that the tribunal has powers to adjudicate matters related to dispute between operators, or between operator and group of consumers, or between a licensor and licensee. Sec. 18 provides that if the parties are aggrieved by the decision of the honourable tribunal, they can approach the honourable Supreme Court of India 90 days of the order or decision passed by the tribunal. Market Size, Players & Trends India boasts of 300 million telephone subscribers today and has become the second largest telecom network in the world, after China. Also, the number of new mobile subscribers is growing by 8.5 to 10 million world. every In 2006-

month, making it one of the fastest growing telecom markets of the 07, the telecom industry also saw an estimated $8.5 bn in

investment flow, out of which 6% or $550 million was in the form of foreign

direct

investment (FDI). According to a report by RNCOS, a market research consulting Services Company, mobile phones account for 80.2%of the subscriber base in India, at the end of March 2007. The growth of telecom in India can be attributed to liberalization, reforms and competition. The telecom policy of 1999 envisaged a tele-density of 15 percent by the year 2010. The overall tele-density of the country is already over 26 percent now.

Out of 300 million

telephone subscribers

today, 13% are wire-line subscribers. These

developments in telecomsector have resulted in massive investments and explosion in supply, which are signs of a vigorous, competitive and fast-growing sector. The major players in the Indian telecom industry, excluding Reliance and Tata Teleservices, are operating in the GSM market. After the release

of TRAI recommendations in September 2007, there was a flood of applications for UASL (Unified Access License Seekers). This was probablybecause of the hope of pan-India startup GSM allocation at a veryeconomical price (US$240m). The armed forces are expected to vacate20MHz of GSM spectrum. This would be around 70% of average GSM allocation currently. India currently has about 300 million telephone subscribers today and the number of subscribers increases on an average of 8.5 to 10 million customers a month. It boasts of being the second largest telecom sector after China and it is considered as the fastest growing telecom market in the world. In FY 2006-2007, the telecom industry saw the flow of $8.5 billion from which foreign direct investments (FDI) accounted for 6% of it i.e. $550 million. As per the survey by RNCOS, 80.2% of the total telecom customer base is accounted for mobile phone connections. Of all the customers today, only 13% are wire-line subscribers. The developments in the telecom sector due to the economic liberalization of the country and various reforms introduced by the Government has resulted in many developments in the telecom industry which in turn has resulted in massive investments and explosion in both demand and supply, all which are signs of a competitive, vigorous and highly-competitive industry. Except Tata Teleservices and Reliance, all major telecom operators are present in the GSM market. It is almost irrelevant to mention that all the operators are present and operate in the CDMA market segment. After the release of the recommendation of TRAI in September 2007, the DoT faced a flood of applications for Unified Access Licence Seekers (UALS) after the armed forces announced that they would leave or vacate 20 MHz of GSM Spectrum. This move by the armed forces would account for approximately 70% of the average GSM allocation. One major factor for this phenomenon could be because there was hope that the panIndia GSM allocation would be at a very economical price which would allow companies to make larger profits in the huge run (companies had expected prices to be in the range of $240 million).