Contemporary Development in Business and Management - Essay Example

The telecom network in India were historically owned and managed by the Government of India as they considered that natural monopoly and strategic service were best controlled under the states supervision. The Department of Telecommunication (DoT), which is now known as Bharat Sanchar Nigam Ltd. (BSNL), was the single largest provider of telecom services. However, the examples of privatization in other economies in the 1990's, which resulted in better quality of service and lower tariffs, led Indian policy makers to initiate a change process.

This finally resulted in unlocking the sector for the private operators. Unwrapping the sector was although greeted with a lot of optimism counting the potential and the kind of services the operators could offer, however the sky-scraping license fees, high investment requirements were not matched by a corresponding increase in revenues. With the subscriber base not matching up the expectation and airtime usage remaining sluggish, business plans made by the service providers began to falter that resulted in small companies winding up their businesses early.

One of the first steps towards introducing reforms in the sector by the government was with the setting up of Centre for Development of Telematics (C-DOT) in 1984. It was made with an objective of managing research in the switching and transmission segments. Thereupon, the government separated the Department of Post and Telegraph in 1985 by setting up the Department of Post and the Department of Telecommunications. In the year government instituted two public corporations viz. The Mahanagar Telephone Nigam Limited (MTNL) and the Videsh Sanchar Nigam Limited (VSNL).

These were set up under supervision of Department of Telecommunications (DoT). The VSNL worked out an exclusive arrangement for access to undersea wideband cable capacity with Fibre Optic Link around the Globe (FLAG), an international telecom carrier in which it had invested US$37 million. However, the prime minister's office (PMO) intervened to make the VSNL review these exclusive rights. Ultimately, other private operators were given the right to work with FLAG and other similar carriers to have access to undersea bandwidth for providing ILD services.

The VSNL's monopoly status was to be reviewed in the year 2004. Over a period of time the government diluted its stake in the VSNL by issuing global depository receipts (GDRs). Till the year 2000, the government still held nearly 53 per cent of the equity. The VSNL's incoming international traffic grew at an average rate of 24 per cent per annum between 1990 to 2000, and over the same period incoming calls grew by 12 per cent per annum. The VSNL's revenue could easily compare with the leading telecom companies of smaller countries like Chile, Pakistan, and Malaysia.

In the year 1997, the government instituted a body called Telecom Regulatory Authority of India or TRAI. The authority was helpful in getting the private cellular operators approach them before contesting their case before DoT. The telecom Policies In 1994 the government issued the first ever Telecommunications Policy. The policy was issued to provide universal access to basic telecommunications services by 1997 and offered guidelines for entry of the private sector into basic telecommu