Telecom Reforms Provided Groundwork

Unsurprisingly, it took decades after India achieved independence from the British in 1947 for the country to gain its political and economic footing.

Early leaders ran a closed society and enacted tight government restrictions on the ownership of foreign investments — an understandable impulse given the country’s history. But the current telecom boom has its roots in regulatory reform.

Before 1984, telecom service and manufacturing were government-controlled. To meet rising demand, political leaders allowed Ericsson, Siemens and others to license phone and network infrastructure technology to local firms.

“As procurement was to be made from the indigenous companies … all these companies had set up their manufacturing bases in India either directly or through technology tie-up with Indian companies,” a recent report from India’s Department of Telecommunications said.

Deregulation was expanded in 1994 to include cellular gear, and restrictions against buying directly from foreign companies were beginning to be phased out.

Foreign companies, flush with cash from a booming stock market in the late 1990s, had plenty of capital to produce new fiber-optics and wireless technologies — keys to modernizing India’s networks.

India also joined the World Trade Organization at this time. To meet WTO requirements the average tariff was cut from nearly 130 percent to less than 30 percent. This is high to most emerging markets, but a significant improvement, said researchers at the financial services firm UBS in a report on India’s emerging economy. This made advanced gear more affordable for Indian carriers and corporations.

Government leaders show no signs of backsliding and appear to recognize the importance of telecom advancement.

“The telecom services have been recognized the world over as an important tool for socio-economic development for a nation, and hence telecom infrastructure is treated as a crucial factor to realize the socio-economic objectives in India,” Nripendra Misra, chairman of India’s Department of Telecommunications, recently wrote.

However, some say the reforms haven’t gone far enough. There are calls for raising the allowable foreign ownership percentage in carriers as well as lobbying to streamline the spectrum licensing process.