An Assessment of Indian Telecommunications Reform

Indian telecommunications reform began in the early 1980s. The performance of the industry at that time was poor. The Government of India eventually developed and implemented effective reforms that caused dramatic improvements in the quality and quantity of service. In early 2010 India passed an important milestone when the number of subscriber lines passed 600 million and telephone penetration rose above 50 percent of the population. Notwithstanding the recent success, the Indian telecommunications industry still has a few significant inefficiencies, and some unsolved policy problems must be solved if the industry is to achieve its potential, especially in the area of data services and internet use. This paper assesses the state of the Indian telecommunications industry and the policies that have shaped the improvement of its performance during the past three decades. We briefly set forth the underlying economics of telecommunications and the conclusions of the policy-research literature concerning “best practice” policies for telecommunications. We then review the recent performance of the main components of telecommunications service in India, and compare the existing policy environment with best practices. Followed by a review of the most troubling feature of the current regulatory system, which is the approach to increasing Internet usage. We then provide some conclusions about future policy actions.