National Telecom Policy, 1994

by Snehashish Ghosh last modified Mar 15, 2013 05:51 AM
The National Telecom Policy, 1994 was formulated for the purpose of opening up the Indian markets for foreign direct investment as well as domestic investment in the telecom sector. The Policy also aimed at providing ‘world class’ quality telecom services and development of telecom services in India. One of the main goals of the 1994 Policy was to increase accessibility to telecom services.

Objectives of the National Telecom Policy, 1994

The main objectives of the 1994 Policy[1]were:

  • Telecommunication to be accessible to all (telephone on demand)

  • Universal service (access to basic telecom services for all at a reasonable and affordable price)

  • ‘world standard’ quality of service

  • Better customer services through efficient complaint redressal systems and dispute resolution mechanisms.

  • Growth in manufacturing and export of telecom equipment.

  • Protect the defence and security interest of India.

The target of the National Telecom Policy, 1994 was further revised due to rapid economic growth. The revised targets were:

  • Telephone to be available on demand by 1997.

  • All villages in India should have access to basic telephone services by 1997.

  • In urban area, a PCO should be provided for every 500 persons by 1997.

  • To make available value added services and to raise telecom services in India to international standard within the 8th Five year Plan (1992-1997), preferably by 1996.

The Status of Telecom Services Prior to Implementation of the National Telecom Policy, 1994

Before the implementation of the policy the telephone density in India was about 0.8 per hundred persons compared to world average of 10 per hundred persons. The telephone density in India was lower than that of other developing countries such as China, Pakistan and Malaysia.

Value Added Services

The sub-sector of value added services was opened for private investment in July, 1992 for the following services:

  • electronic mail,
  • voice mail,
  • data services,
  • audio text services,
  • video text services,
  • video conferencing,
  • radio paging and
  • cellular mobile telephone.

In case of services from (i) to (vi), companies registered in India were allowed to operate under a non-exclusive licence. Under the policy, limited number of companies may be granted licence for radio paging and cellular mobile telephone services. Selection of such companies shall be on the basis of a policy and a system of tendering. There were criteria which were applied for selection of companies for grant of licence. The criteria were:

  • Track record of the company.

  • Compatibility of the technology.

  • Usefulness of technology being offered for future development.

  • Protection of national security interests.

  • Ability to give best service to the customer at the most competitive cost.

  • Attractiveness of the commercial terms to the Department of Telecommunication.[2]

Hardware and Technological Aspects

India had already developed that capacity to manufacture necessary telecom equipment. For example, capacity for manufacture of switching equipment had exceeded 1.7 million lines per year in 1993 and was projected to exceed 3 million and the capacity was projected to exceed 3 million lines per year by 1997. The capacity to manufacture telephone instruments was claimed to be more than the requirement. Manufacturing units were also established to build capacity around production of wireless terminal equipment, Multi Access Radio Relay (MARR) for rural communication, optical fibre cables, underground cables, etc.

The Policy also advocated that there should be substantial investment in development of technology related to telecommunication.

Basic Services

The private companies registered in India may also assist the Department of Telecommunication in expanding the telecommunication by providing basic telephone services in rural areas. The Policy stated that such companies have to maintain a balance between urban and rural services and also confirm with the agreed revenue sharing and tariff arrangements.

Method of Implementation under the National Telecom Policy, 1994

The Policy laid down that it has to be implemented with keeping in mind interests of the consumers and there should be suitable arrangements to ensure fair competition.

Outcomes of the National Telecom Policy

In order to implement the NTP, 1994, licences were granted to eight Cellular Mobile Telephone Service (CMTS) operators. Two licences were granted in each of the metropolitan cities. In the second phase of implementation of the policy in December 1995 through a competitive bidding process and more than 14 CMTS licences were issued in 18 state circles and 6 Basic Telephone Service licences were issued in 27 cities and 18 state circles.

The Policy did not produce intended results because the revenue recovered by the cellular and basic operators was less than the expected return. Moreover, the operators were not able to arrange finance to fund their projects.


[1].National Telecom Policy, 1994, available at http://bit.ly/N4dlEk
[2].Para 9, National Telecom Policy, 1994 available at http://bit.ly/N4dlEk

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