India has come a long way from the defining moment two decades ago when the first ever mobile call in the country was made by then West Bengal chief minister Jyoti Basu to then communications minister Sukh Ram. Today, with over a billion telecom subscribers—the most in the world after China—of which 976 million are mobile and 213 million have internet facilities, the mobile phone is the most ubiquitous symbol of modern India. The private telecom industry has created global companies that employ close to 100,000 people directly and have secured FDI of $17.4 billion accounting for 7% of the total FDI inflows since 2000. The macro impact is significant. According to two studies by ICRIER, every 10 percentage point hike in mobile phone penetration causes GDP to rise 1.2 percentage points and, in the case of the internet, the GDP impact is 1.08 percentage points.
But more than that, telecom is the best example of how governance structures in India have evolved. When private telecom started, there were 2 PSUs that controlled everything. Had access to their networks not been guaranteed by law, who would buy a mobile phone since the idea was to converse with MTNL/BSNL customers? The very first regulator laid out rules, and managed to enforce them, on fair interconnection with well-defined charges. This interconnection regime was later to be used by other regulators, in power and oil/gas, as a standard model to ensure a level playing field for new players. While telecom tariffs were regulated by the Trai in the initial days, as Trai brought in new players—in the initial days, there were just 2 players in each circle—it began freeing up tariffs. In other sectors too, this model of checking the concentration of ownership via the Herfindahl-Hirschman index, and freeing tariffs once there is enough competition has become de rigueur.
When the sector first opened, telcos bid exorbitantly since they over-estimated the market. Along with the bureaucracy not delivering on its promises—the policies of keeping tariffs high so as to protect MTNL and BSNL made things worse—this ensured it took just a few years for the industry to get into serious trouble. At which point, the government showed sagacity in moving the industry to a sustainable revenue-share arrangement and, in return for this, it got industry to agree to bring in more players which further lowered tariffs—according to the original licences, just 2 firms were to operate in each circle. None of this is to say that the path of private telecom has been smooth or without scandal, or that a lot more doesn’t need to be done—the industry is bleeding, thanks to several bad decisions—but it says a lot that the industry is at the level it is right now.