Technological Progress, Industry Dynamics, and Telecommunications Policy: The Need for Further Reforms in India

Abstract

In this paper, we argue that much of the policy of the Indian government directed at the telecommunications sector does not pay sufficient attention to technological progress in the sector, or to the global changes in industry structure. We examine the 1994 National Telecom Policy (NTP) and have pointed out a number of problems with it including the license fees, interconnect agreements, and the regulation of financing of the projects. The myopic policy of allowing DOT to be the dominant player in all of the circles will encourage the private sector telecom companies to game the system in a number of ways, and the government will also find itself unable to reach the objectives of having significant rural coverage, and the use of domestic technology. We have outlined policy reforms for changing these problems. We also examine the areas of enterprise networking (including the Internet) and satellite communications where one needs uigent reform to take advantage of inherent industry dynamics which would give a boost to the Indian economy. By trying to regulate a modem fast paced technology sector with without being sensitive to the current state-of-art, the Indian government will always put itself in the role of an ineffectual policeman. The Telecom Regulatory Authority of India (TRAI) will be more effective if it plays the role of (1) encouraging competition and universal access including extensive rural penetration (as opposed to coverage), and (2) safeguarding consumer rights including prices, service quality, and privacy.