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Telecom Reforms in India – Story of a Mini-Revolution


In my previous post, I have given list of institutional reforms in India brought in by our much criticized Indian politicians.  Here I am going to visit one particular sector reform from that list. This reform not only had a huge impact on telecommunication sector in India but it also propelled India as an outsourcing powerhouse on world stage. It is the Telecom sector reform.

Contrary to the popular belief, postal service in India existed even before arrival of British.  This Wikipedia article describes it briefly. It went major change under British rule. Under East India company, there were several postal services functioning in different parts of India. After the 1857 mutiny, British rulers consolidated power and created one department to oversee administration of postal activities. Around the same time telegraphs were becoming popular. Telegraph was considered a means to long distance communication, just like mailed letter, and was clubbed in the same department, now named “Post and Telegraph department”.

Around the turn of nineteenth century, another invention started becoming popular, use of radio waves for communication. Since that also fit the description of “tool for long distance communication”, it was piled in the same heap by passing a new act in 1899. When telephone came into picture, soon the P&T found itself in charge of taking care of this new baby.

All long distance communications including post, telegraph, radio, and telephone under one umbrella was something very convenient for British rule.

After independence the structure was left mostly untouched. One more burden was thrown on the shoulder of this department, television. After all, it was purely an visual extension to radio, right?

So there was a department, with its age old organization structure, firmly in control of central government, taking care of postal services, telegraph, telephone, TV, and radio. The population was expanding and the new age was putting rigorous demands on each one of these service areas. But the operation was mired in ridiculous amounts of red tape. Whether a purchase of new machinery required at radio station in Mumbai, or a new staff member to be added in Kolkata, or a new telephone exchange required in a new suburb of Chennai, it went through the same people in Delhi, who had no idea how badly local people needed it. Everything required hundreds of permits and approvals. That increased workload of everyone and created many opportunities for corruption.

Private or foreign sector investment or involvement was prohibited, keeping things in firm government control. So if a new telephone exchange was required, no matter how strong demand was in the area for telephone, it only happened when the government moved. The people who worked in ministry were not necessarily actively stopping the work, just that they did not have any incentive to move it faster. So they didn’t. The central government control also meant the new proposed telephone exchange was now competing for the same money that was used to build roads, build hospitals, and buy guns for army. It created a lot of conflict of interest situations, again requiring lengthy and flawed process of approvals.

Common people found it extremely difficult to get telephone connection. The waiting lists were long and took years to clear. If you needed a connection for your business, you had to bribe someone. There were only a handful radio stations, handful TV stations. The quality of programs was not good. Everything was unnecessarily complicated, rigid, slow and completely out of touch with reality.

Then came the wave of change. In late 1980s, early 1990s, during the period of major transformation in India, telecom reforms were launched. Politicians realized that may be all this does not need to be under so strict control, and may be all this does not need to be together. So old post and telegraph department was overhauled. Telephone , television and radio all were separated into individual units. Government control on these units was reduced. Those units were made operationally fairly independent of each other and of government. A course was set to transition some of  these units from government to semi-government to private entities. They were allowed to run on their own.

Private sector was allowed to offer all these services. Government sold unused spectrum of radio waves to people and companies. Government got money, companies got business, people got entertainment and jobs. Suddenly there was more competition. These services became more efficient and their quality improved. Direct foreign investments were allowed with some conditions. So more capital was available for infrastructure building. The number of required permits were reduced.

What happened was miracle!!

The same people in telephone sector, that were previously mocked for being inefficient were able to cut down the waiting list to zero. Today in most of the major cities, you can get telephone connection within a couple of days. If you want cell phone, you can get within an hour. India boasts being second largest country for the number of mobile phone connections and fastest growing cell phone markets in the world.

The number of TV stations, the number of radio stations has gone through the sky. They offer wide variety of programs in many languages. Thousands of new job opportunities are created. Billions of rupees of ad revenue was generated, thus creating many more indirect job opportunities.

This happened at very right time for Internet, otherwise even Internet would have been clubbed as “long distance communication tool” and would be thrown on the same wagon as telegraph, telephone, television. But Internet was handled by an organization far more modern than the old archaic central P&T department, thus it spread like wildfire, creating a computer literate workforce and thousands of outsourcing opportunities.

There is a lesson for all of us here who like to complain about corruption. The exact same people who could not clean the telephone waiting lists for years before 1990, were able to hand out telephone connections much faster after the reforms. Why? None of this happened because some people changed from bad people to good people and stopped taking bribes. None of this happened because of rants about corruption were being thrown around at every corner and alley.

This happened because someone in the power figured out that it does not make sense to keep post, telephone, telegraph, television, radio together and to keep it under government control. Someone said that “Wait a sec. These laws might have worked in 1899, but they are so out of date. They need to be changed.”

We cannot change people. But we can change systems. If a system stops people from doing what they want, they will do it by bypassing the system. It’s the system that needs examination and change. Not people. We can make systems easy, more transparent, more accountable. And then we can achieve great results with the same people.

This reform was indeed a mini-revolution. These bloodless mini-revolutions are possible only in democratic framework. That’s the real beauty of democracy.

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