Telecommunications in India can be traced back to the 19th century when the British East India Company introduced telegraph services in India. The past two decades have been considered as the golden period for the telecommunications industry in India with exponential growth and development in terms of technology, penetration, as well as policy. All this has paralleled with the liberalization in this sector and huge investment by both domestic and foreign investors.
Like in other countries, telecommunications in India started as a state monopoly. In the 1980s, telephone services and postal services came under the Department of Posts and Telegraphs. In 1985, the Government separated the Department of Post and created the Department of Telecommunications ("DoT").
In the early 1990s the Indian telecom sector, which was owned and controlled by the Government, was liberalized and private sector participation was permitted through a gradual process.
- Telecom equipment manufacturing sector was completely deregulated.
- The Government then allowed private players to provide value added services such as paging services.
- The Government has been introducing its strategy on telecommunications vide various telecom policies introduced in 1994 (i.e. the NTP 1994) and in 1999 (i.e. the NTP 1999) and most recently in 2011 (i.e. the NTP 2011).
- NTP 1994 and NTP 1999 were instrumental in paving the way for private investments to be made into the telecom sector.
- NTP 2011 aims to develop a robust, secure state-of-the-art telecommunication network providing seamless coverage with a special focus on rural and remote areas and bridging digital divide
Albeit there have been significant improvements in liberalizing the telecommunications sector, the law as it currently stands still bestows an exclusive privilege on the Government to provide telecommunications services. The Government has statutory power to grant licenses to private companies in India to enable them to provide telecommunication services.
Some of the major trends that can be seen in the telecom sector in India are as follows:
- Tariffs: India has the second largest wireless network in the world. With the price of cellular handset as well as mobile (wireless) tariff reducing, there was an increasing adoption of wireless communications. Today the Indian telecom industry is already witnessing the lowest telecom tariff globally.
- Broadband: Broadband services and subscribers have grown in leaps and bounds over the past years. However broadband penetration is still very low particularly in the rural areas. Broadband connectivity directly correlates with the growth of economy, as it helps improve the flow of information across various elements of the economy. It is expected that there will be a major expansion of broadband usage. Further, with the improvements in broadband capacity it is expected that various network bottlenecks would be reduced.
- Unified Licensing Regime: The Indian telecom regulator (Telecom Regulatory Authority of India or TRAI) has recommended that the Government allow all communication services under one license with an entry fee; such a license shall not come bundled with spectrum and companies would have to purchase such spectrum by participating in auctions as may be declared by the Government. The TRAI believes that such a regime would not only leverage technological developments but also simplify existing procedures of licensing, ensure flexibility and efficient utilization of resources.
- Value Added Services: India has one of the lowest average revenue per user (ARPU). This coupled with lower voice tariffs and the emergence of new technologies and advancements towards technology will motivate operators to shift their focus on VAS.
- Manufacturing: The telecom equipment sector is completely deregulated. The Government has been trying very hard to ensure that India becomes a hub of telecom manufacturing. With its proven track record in the skill-intensive industries and the global trend to manufacture and source products in low cost countries, India is well placed to emerge as one of the leading hubs for manufactured exports.
Regulatory Framework governing the telecom industry in India
The important departments that regulate the telecom industry in India are as follows:
- Department of Telecommunications: As per the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 the Central Government has the exclusive privilege of establishing, maintaining and working telegraph and wireless telegraphy equipment and has the authority to grant licenses for such activities. The Central Government acts through the DoT.
- TRAI: TRAI is an autonomous statutory body established under Telecom Regulatory Authority of India Act, 1997. TRAI is the sole authority empowered to take binding decisions on the fixation of tariffs for provision of telecommunication services.
- Emphasis needs to be placed on the interplay between the recommendatory powers of TRAI and the policy making powers of DoT. While the DoT is the sole authority for licensing of all telecommunications services in India, it is mandatory for the DoT to have TRAI's recommendations, beforehand, with regard to matters over which TRAI has recommendatory powers (mentioned above). Having done so, the DoT has the discretion to either accept or reject the recommendations of TRAI.
- TDSAT: The TDSAT was established in 2000 under an amendment to the Telecom Regulatory Authority of India Act, 1997 (discussed In Chapter 0 of this paper). The TDSAT has been vested with exclusive powers to adjudicate any dispute between:
- the DoT and a licensee;
- various service providers; and
- service providers and groups of customers
The jurisdiction of civil courts has been expressly barred in cases where the TDSAT has jurisdiction.
- Wireless Planning Commission (WPC): The WPC was created in 1952 and is a wing of the DoT which is responsible for Frequency Spectrum Management, including licensing of wireless stations and caters to the needs of all wireless users (Government and Private) in India.
- Standing Advisory Committee on Frequency Application ('SACFA"): SACFA is a wing of the DoT which gives approval for radio frequency (spectrum) used by telecom service providers. Obtaining a telecom license is not enough for the operator to begin rolling out the services; a no objection from SACFA is required.
There are various laws and regulations that govern the telecom industry in India. Some of the important ones are as follows:
- The Indian Telegraph Act, 1885: This Act is one of the oldest legislations still in effect in India and it inter alia authorizes the Government of India to grant telecom licenses on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain, work a telegraph within any part of India.
- The Indian Wireless Telegraphy Act, 1933: This Act was enacted to regulate the possession of wireless telegraphy apparatus. According to this Act, the possession of wireless telegraphy apparatus by any person can only be allowed in accordance with a license issued by the telecom authority. Further, the Act also levies penalties if any wireless telegraphy apparatus is held without a valid license.
- The Telecom Regulatory Authority of India Act, 1997: This Act enabled the establishment of the TRAI. Interestingly, the 1997 Act empowered the TRAI with quasi-judicial authority to adjudicate upon and settle telecom disputes. Later this Act was amended by the Telecom Regulatory Authority of India (Amendment) Act, 2000 to bring in better clarity and distinction between the regulatory and recommendatory functions of TRAI. Further, the 2000 amendment served a very important purpose in completely differentiating the judicial functions of TRAI by setting up of the TDSAT.
There are various other laws which have an impact on the telecom industry in India such as the Information Technology Act, 2000 and the rules framed thereunder which inter alia sets out rules under which an intermediary (which by definition now includes telecom service providers such as internet service providers) may be exempt for liability in relation to third party links and content. The Government also notifies various regulations from time to time which have an impact on this sector such as the Anti Spamming Regulations which prohibit unsolicited commercial communications sent via SMS and require all telemarketers to register under the said regulations.
For a more detailed analysis of the legal and regulatory framework governing the Indian telecom sector, please refer to our detailed research paper.
The Indian Telecom Sector