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The Evolution Of The Telecom Industry Economics Essay

Indian Telecom industry came into being in 1851 with the first operational lines laid by the authorities near Calcutta. In 1883, telephone services and postal system were merged together. In 1947, the state had about 82,000 telephone connexions, which rose up to 3.05 million by the twelvemonth 1984.

Telecommunication was considered as a strategic service and, therefore, the authorities retained control of the sector. In 1980s, the private sector entered into telecommunications equipment fabrication. Department of Telecommunications ( DOT ) was established in 1985. It was the sole supplier of domestic and long distance service that would be its ain regulator.

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Two government-owned companies were created in 1985:

Videsh Sanchar Nigam Limited ( VSNL ) , for international telecommunications

Mahanagar Telephone Nigam Limited ( MTNL ) , for service in metropolitan countries.

With the “ LPG reforms ” of 1991, telecom sector benefited due to the opening up of the economic system. Some cardinal developments in the sector include:

National Telecom Policy ( NTP ) , 1994- first effort to give a comprehensive roadmap for the telecom sector.

Telecom Regulatory Authority of India ( TRAI ) was created in 1997 to move as a regulator for sustained growing of the telecom sector.

New National Telecom Policy adopted in 1999. In the same twelvemonth, cellular services were besides established.


The Indian Telecommunications, in footings of size and range, is the 3rd largest in the universe and the 2nd largest among the Asiatic states. Harmonizing to the informations provided by Telecom Regulatory Authority of India ( TRAI ) , entire figure of telecom endorsers in India ( GSM + CDMA + Wire-line ) at the terminal of August, 2012 rose to 960.9 million as compared to 926.53 million in December, 2011.

A major transmutation in the Indian telecom sector can be observed through important policy reforms, originating with the debut of NTP ( National Telecom Policy, 1994 ) and was emphasized and continued under NTP ( New Telecom Policy, 1999 ) . The telegraphic and telephonic systems of the nineteenth century have now evolved advanced engineerings like GSM, CDMA, and WLL to the great 3G Technology in nomadic phones. It has achieved great growing during the last few old ages and is maintained to take a large spring in the hereafter besides.


Department of Telecommunications ( DOT ) , established in 1985 as the sole supplier of domestic and long-distance service and would be its ain regulator.

The Telecom Regulatory Authority of India ( TRAI ) , established on 20th February 1997 by an Act of Parliament known as the Telecom Regulatory Authority of India Act, 1997, to modulate and fixation/revision of duties.

The Telecom Regulatory AuthorityA of India Act, 1997 was amended in the twelvemonth 2000.A The amendments were brought in order to take the constrictions that had arisen in execution of the Act.A There was a clear differentiation established between the recommendatory and regulative maps ofA TRAI by doing it compulsory for the Government to seek recommendations of TRAI for specified affairs and by the puting up a separate difference colony mechanism.

Role of TRAI

The chief aim of TRAI is to supply a transparent policy and an environment that facilitates just competition. For this, TRAI has issued a big figure of orders, ordinances and directives to cover with issues coming before it, covering topics including duty, interconnectedness and every bit good as administration of the Authority.

The mission of TRAI is to guarantee that the involvements of the consumers are protected and besides guarantee conditions for the growing of telecommunications, overseas telegram and broadcast medium services in a speedy mode enabling India to play a prima function in the planetary information society.

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The maps of TRAI can be loosely divided into two parts

Compulsory maps

Arrested development of Duty policies

Arrested development of Interconnection policies

Guaranting Quality of Service

Guaranting execution of footings and conditions for licensing

Recommendatory maps

New licence policies

Spectrum policies

Opening of telecommunication sector to do it more competitory

Role of the Government

The authorities has taken many enterprises to ease the rapid growing of the Indian telecom industry.

FDI has been allowed up to 74 % .

Introduction of “ incorporate entree licensing ” across India.

An effort to link 66,822 exposed small towns under “ Bharat Nirman Abhiyan ” is being implemented by authorities.

DoT has permitted the foreign telecom companies to offer for 3G spectrum without partnering with Indian companies. They had to use for incorporate entree service license ( UASL ) after winning the command, and so spouse with an Indian company in conformity with the FDI ordinances.

New Technologies

1. 3G ( Third coevals engineering )

The Indian authorities auctioned the spectrum for 3G services by ask foring commands from foreign every bit good as domestic participants. Therefore, the 3G spectrum became one of the major growing drivers and investing chance in the telecom industry.

The potency for 3G market is reflected by the 30-40 % one-year growing in Value- Added Services ( VAS ) .

Cell phone makers have launched 3G enabled French telephones in the Indian market priced every bit low as USD 100.

2. WiMAX ( World-wide Interoperability for micro-wave Access )

It is one of the most critical developments in wireless communicating in the recent yesteryear. This gives web entree even in unaccessible locations at a velocity of up to 4 Mbps. It will besides take to an increased usage for telecom services, value-added services, and cyberspace

aˆ? India has 13 million WiMAX endorsers till 2012.

aˆ? In India, Aircel is the innovator in WiMAX engineering.

aˆ? BSNL strives to link 74,000 small towns through WiMAX.

3. Mobile figure portability

It is a installation where a client want to port his figure can reach the Donor sphere to obtain a Port Authorisation Code ( PAC ) which he so has to give to the Recipient sphere in order to finish the portability procedure.

4. Infrastructure sharing

Many service suppliers are looking into substructure sharing so as to cut down their web deployment costs. It offers the undermentioned benefits:

aˆ? Improved service quality

aˆ? Affordability for clients

aˆ? Faster axial rotation out of services in rural and other distant countries

aˆ? Significant lessening in initial set up costs

aˆ? Reduced operating costs for service suppliers

5. Value Added Services ( VAS )

In 2011-12, the VAS industry is deserving USD 4 billion. The industry is estimated to spread out at a rate of around 50 % for the following twelvemonth. VAS services in India presently focus on the amusement and athletics sector. However, there is range for growing in utility-based services like nomadic minutess and location information.



Huge client base in the radio section: Following informations about the Telecom subscription was obtained as on 31st August 2012, :

Entire endorsers increased from 861.48 Million in July, 2011 to 951.34 Million at the terminal of August, 2012.

A sum of 91.02 Million new add-ons in the radio section

Growth rate is 1.04 %

Decline in Duties: A significant diminution in duties recorded over the old ages ( a comparing between monetary values in 1999 and present monetary values ) :

Local call duty ( nomadic ) @ Rs 15.00 in 1999, is now less than Re 1.00 ( most instances 1p/sec )

A minute of STD call between Delhi and Mumbai @ Rs.37.00 in 1999, now costs merely Re 1.00 ( or even every bit low as 1.2/sec with particular duties )

ISD call to American continent @ Rs. 75.00, in 1999 can now be made @ Rs 5.00 or even lesser.

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The acceptance of new engineering has been a major ground for how service suppliers have been able to cut down duties well.

Considerable take downing down of the costs and easiness for the clients in the nomadic figure portability engineering.


Weak Infrastructure – Huge initial fixed costs to put up the needed substructure.

Limited spectrum handiness: The spectrum demand has increased with the addition in figure of private enterprises in telecom and broadcast services.

Indian companies seem to miss the expertness in running the multi-country operations


Emerging Technologies like 3G, WiMax present a immense range for betterment and investing.

Rural telephone: Harmonizing to TRAI, among the following 250 million expected to subscribe to mobile services ; at least 100 million are forecasted to come from rural countries. Mobile incursion among rural countries is highest for Punjab with 20.6 % , followed by Himachal Pradesh at 17.09 % , Kerala ( 10.63 % ) and so Haryana ( 10.20 % ) .

Largest untapped nomadic market: Inspite of its rapid growing, from a world-wide position India is seen as the largest untapped Mobile market.

New participants and services bring in competition and, therefore, benefits for the clients.

Tier-2, tier-3 metropoliss have the possible to suit more participants.


1. Lack of clear differentiation between DoT and TRAI in duties for determinations sing policy, operations and ordinance has led to several holds and therefore, take downing the credibleness of both the governments. TRAI had antecedently told DoT that 3G auction would be restricted to bing operators because new participants could happen it hard to set up their services rapidly but finally opened it to new every bit good as foreign participants.

Wire line endorser base declined by 1.16 million ( 31.01 m in July2009 – 32.17 m August,2012 )

Unhealthy Competition: MTNL refused to let other participants to utilize its spectrum for about 2-3 old ages. Finally a via media was reached upon in 2001.

Plague Analysis

Political Factors

The authorities intervenes in the anti-trust ordinances, Environmental factors, revenue enhancement policy, revenue enhancement Torahs, protection Torahs as it has regulators like DOT, TRAI and TDSAT.

The authorities besides regulates the foreign trade ordinances, particular inducements, attitudes towards foreign companies. Stability of authorities is found in telecom industry.

Political Resistance to engagement by the private participants

Govt support to advance FDI in Telecom sector

Banning of Phone Use in Certain Fortunes

Economic Factors

Cost of calls Bing Driven Down

Worldwide Recession- Both Boon & A ; Bane

Middle category consumer base turning due to accelerated economic growing

Untapped markets in emerging Economies ( a new chance )

Social Cultural Factors

High End Telephones going position symbol

Due to Intimate household adhering in Indian Culture, there is demand to stay affiliated

Tech Savvy Generation

Technological Factors

Equipped with New Technology

Rapid Industrial growing rate induced by emerging engineerings.

Strong Fibre Optic Network

Utiilization of E- Commerce installations

Efficient Customer Care Services


Porters_five_forcesThreats of new entrants: Low

There is diminution in mean Revenue Per User.

Brand pull exists to some extent for trade names like Airtel / Idea/ Vodafone.

Highly high substructure apparatus costs

The Spectrum License cost is high as it is done in signifier of auctions.

Established trade name image, Reliability of web

Menaces of replacements: Moderate

Some of the Substitutes are VOIP like Skype, Viber, Watsapp, Email and Satellite phones.

None of the above a major menace in current scenario, but a possible menace for close hereafter.

Power of purchasers: Moderate to high

Large figure of service suppliers, hence, increasing the figure of available picks.

Customer is monetary value medium.

Low shift costs ( figure portability )

Rivalry among bing houses within an industry: High

High Exit Barriers

High Fixed Cost

6-7 participants in each part

Monetary value wars

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The Evolution Of The Telecom Industry Economics Essay
Indian Telecom industry came into being in 1851 with the first operational lines laid by the authorities near Calcutta. In 1883, telephone services and postal system were merged together. In 1947, the state had about 82,000 telephone connexions, which rose up to 3.05 million by the twelvemonth 1984.Telecommunication was considered as a strategic service and, therefore, the authorities retained control of the sector. In 1980s, the private sector entered into telecommunications equi
2018-10-23 18:47:22
The Evolution Of The Telecom Industry Economics Essay
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