In March 1995, India installed its 10 millionth telephone line, crossing an important threshold of providing one line for every 100 people. Against this, the current world average penetration for the developing world is 6 lines per 100 people and the average for the world as a whole is 10 lines per 100 people. Accordingly, to increase the spread of the telcom network, India is deregulating its telecommunications (telecom) sector.
Foreign companies are allowed to hold stakes upto 49% in the private sector telecom joint ventures. The government has divided the country into 21 service circles, each roughly corresponding to a State and held tenders in which Indian and foreign joint ventures bid for cellular and basic telephone services. The government plans to grant two private cellular licenses and one basic license per territory. In May 1994, the government announced the National Telecom Policy (NTP) to usher in reforms in this sector in India.
In August 1995, the Lok Sabha passed a bill amending the Indian Telegraph act 1885, paving the way for setting up a Telecom Regulatory Authority of India. The TRAI will have well defined functions, responsibilities and powers to function as the watchdog of the telecom sector. The terms of reference inter alia include standard setting, price regulation, ensuring technical compatibility among different service providers, facilitating revenue sharing arrangement between the DOT and private operators and fixation of access charges. TRAI would be a non-statutory body to begin with and report directly to the Ministry of Communications. TRAI will, thus, promote orderly and healthy growth of the telcom infrastructure in the presence of multiple telcom operators, arising out of the opening of basic and value-added services in which private parties will be competing with Government operators.
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