Telecommunications policy in India: The political underpinnings of reform

Telecommunications Policy

Volumn 20, Issue 1, 1996, Pages 39-51

  Petrazzini, Ben A ^a  

^a HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY   (Hong Kong)

Author keywords

[No Author keywords available]

Indexed keywords

COMPETITION; DEVELOPING COUNTRIES; MODIFICATION; PUBLIC POLICY; SOCIETIES AND INSTITUTIONS; TELECOMMUNICATION SERVICES;

INDIA; LIBERALIZATION; PRIVATIZATION; TELECOMMUNICATION POLICY; TELECOMMUNICATION SECTOR;

TELECOMMUNICATION SYSTEMS;

EID: 0029735357     PISSN: 03085961     EISSN: None     Source Type: Journal    
DOI: 10.1016/0308-5961(95)00046-1     Document Type: Article

References (38)

1. By serving the metropolitan areas of New Dehli and Bombay, MTNL controls more than 20% of the nation's installed lines.
2. The following section relies heavily on previous work by the author. For an extended analysis of how institutional and political factors have affected reform in the developing world see, Petrazzini, B The Political Economy of Telecommunications Reform in Developing Countries: Privatization and Liberalization in Comparative Perspective Greenwood Press, Westport, CT (1995).
3. Aharoni, Y 'On measuring the success of privatization' in Ramamurti, R and Vernon, R (eds) Privatization and Control of State-Owned Enterprises World Bank, Washington, DC (1991) 78; and Cowan, G Privatization in the Developing World Greenwood Press, New York (1990) 12
4. Aharoni, Y 'On measuring the success of privatization' in Ramamurti, R and Vernon, R (eds) Privatization and Control of State- Owned Enterprises World Bank, Washington, DC (1991) 78; and Cowan, G Privatization in the Developing World Greenwood Press, New York (1990) 12
5. See, for example, Hamilton, N The Limits of State Autonomy Princeton University Press, Princeton, NJ (1982).
6. An elaborate analysis of how the Indian state is attempting to reassert itself through the current reform process can be found in Mody, B 'State consolidation through liberalization of telecommunications services in India' Journal of Communication 1995 45 (1).
7. See, for example, Haggard, S and Kaufman, R 'Democratic transitions and economic reform' Paper delivered at the Southern California Workshop on Economic and Political Liberalization, University of Southern California, Los Angeles, May 1993; and Haggard, S Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries Cornell University Press, Ithaca, NY (1990).
8. See, for example, Haggard, S and Kaufman, R 'Democratic transitions and economic reform' Paper delivered at the Southern California Workshop on Economic and Political Liberalization, University of Southern California, Los Angeles, May 1993; and Haggard, S Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries Cornell University Press, Ithaca, NY (1990).
9. These reform programs have been dominated by the introduction of various forms of private participation - mostly through the corporatization or total or partial privatization of the state-owned carriers.
10. See Skocpol, T 'Strategies of analysis in current research' in Evans, P, Skocpol, T and Rueschemeyer, D (eds) Bringing the State Back In Cambridge University Press, Cambridge, UK (1985).
11. See Neher, C Southeast Asia: In the New International Era Westview Press, Boulder, CO (1991).
12. Events elsewhere have shown that it is not privatization but competition that brings about considerable layoffs in telecommunications companies. The irony is that by opposing privatization, telecommunications workers have bargained in favor of a liberalized competitive market, ie the market configuration that is more likely to lead to massive retrenchment.
13. This strategy has turned India into the first developing country to license private competition against its state-owned national carrier.
14. Bodhisatva G 'Open sesame' Business India 5 June 1995, 55
15. For more details, see McDonald, H 'Don't mention it' Far Eastern Economic Review 30 March 1995.
16. Asia-Pacific Telecom Analyst 22 May 1995
17. His initial economic reform plan was opposed by the Congress Party rank and file. The finally approved plan was considerably different from its predecessor and recommited Rajiv and his administration to socialist economic strategies. For more details, see Kohli A Democracy and Discontent: India's Growing Crisis of Governability Cambridge University Press, Cambridge, UK (1990) 319.
18. Business South Asia February 1995
19. On the matter, see Gourevitch, P Politics in Hard Times: Comparative Responses to International Economic Crisis Cornell University Press, Ithaca, NY (1986); and Torre, J 'Building democracies in hard times: the current Latin American experience' Unpublished MS, Buenos Aires (1992).
20. On the matter, see Gourevitch, P Politics in Hard Times: Comparative Responses to International Economic Crisis Cornell University Press, Ithaca, NY (1986); and Torre, J 'Building democracies in hard times: the current Latin American experience' Unpublished MS, Buenos Aires (1992).
21. Other factors that have enhanced the implementation of reforms in recent years are related to: (a) growing demand for better infrastructure from domestic and foreign corporations; (b) pressures from international agencies and foreign governments (mainly the USA) in favor of economic liberalization; (c) the shift from centrally planned to market economies elsewhere in the world; and (d) the direct and personal involvement of the Prime Minister in the reform process.
22. For further details on the segments of the market open to competition and the players in each of them, see Petrazzini, B and Krishnaswamy, G 'The socioeconomic impact of telecommunications reform in developing countries: India in the international context' Paper delivered at the PICT International Conference on the Social and Economic Implications of Information and Communication Technologies, London, 10-12 May 1995.
23. State-owned firms were banned from entering the bidding process.
24. Bidders for basic fixed services must have, by January 1995, experience as a service provider or as a network operator of a public switched telephone network of at least 500 000 lines. In cellular services bidders must have experience operating a cellular network of at least 100000 subscribers. To comply with this requirement a foreign company can draw on the experience of its parent company, one of its subsidiaries or one of the parent company's subsidiaries. For the carrier's experience to be considered the foreign firm must have at least a 10% equity stake in the consortium. This stake must remain in place for five years for basic service operators and three years for mobile operators. Bidders for fixed basic services must also have a combined net worth of Rs 3 billion (circles A), Rs 2 billion (circles B) and Rs 500 million (circles C). For mobile service bids Rs 1 billion (circles A), Rs 500 million (circles B), and Rs 300 million (circles C) were required.
25. Circles have been divided into three categories (A, B and C) based on their market value.
26. There are no restrictions on the number of circles for which each consortium can bid. However, the DoT retains discretion over the number of circles granted to any bidder to avoid the risk of monopolies.
27. There are penalties for successful bidders that do not comply in time with the license fee or do not meet the proposed target on the other three criteria.
28. The Indian Telegraph Act (Section 3[6]) needed to be changed to remove existing legal impediments to the existence of TRAI.
29. The well-publicized official and public attacks on the Enron power plant deal in the state of Maharashtra is a good example of such a sensitive issue in Indian political life. For a discussion of the Enron project cancellation and its implications see Economist 12 August 1995.
30. The active opposition of labor has dismantled privatization initiatives in several other LDCs, and there were no reasons to believe that this was not going to be the case in India.
31. Total demand rose by 50% between April 1992 and April 1994 and was expected to rise even further in the following three years.
32. The idea of private participation in the sector was - and still is - controversial. However, if there was need of evidence in support of private entry into the sector the DoT itself provided it. By March 1995, at the close of the 1994/95 fiscal year, the Department was far from meeting the network expansion targets for the year. Out of the original 1.6 million lines, the DoT had installed only 915 000 - that is, 57% of the annual target. Similarly deficient performance was evident in the installation of public telephones in rural areas and trunk lines, tasks in which the DoT had achieved only 41 % and 64% of its planned target: Asia-Pacific Telecom Analyst 13 March 1995.
33. The position of Minister Ram on the issue changed as events evolved. While in the early stages he favored no preset limit on the equity participation of foreign companies, he later became a strong advocate of the minority share ownership option for foreign companies. See Telenews 2 June and 14 July 1994.
34. Although restrictions are placed on the extent of equity share ownership, there is nothing that bans foreign firms from gaining control of the venture through public shareholding or other forms of corporate restructuring. In fact, several foreign firms - such as Bell Atlantic, France Telecom and Singapore Telecom - demanded control over the consortium as a precondition for any substantial investment: Business South Asia November 1994
35. Mexico liberalized its local loop before it allowed competition into its long-distance services market, but Telmex - the incumbent - had no obligation to interconnect, making unviable any potential competitor's business. The regulation has changed, and the local company lusacell is planning to offer local basic services in a joint venture with foreign partners.
36. Pressure for clarifications came from both foreign bidders and local industry associations such as the Federation of Indian Chambers of Commerce, the Confederation of Indian Industries and the Telecom Services Industries Association.
37. After the results of the bidding presentations were announced domestic pressures on the government grew to avoid a concentration of licenses in the hands of the Reliance-Nynex group.
38. The MoC also wanted to insert a legal requirement by which TRAI would have to coordinate its regulatory decisions with those of the Telecom Commission, which would remain the policy advisory arm of the MoC.