This is a short summary of the Implementation Completion Report (ICR) of a recently-closed World Bank project. The full text of the ICR is available on the Bank’s website. To access this document, go to www.worldbank.org/reference/ and then opt for the Documents & Reports section.

Telecommunications Sector Reform Technical Assistance Project
Context:

When this project was initiated in the year 2000, the performance of the telecom sector was not up to its potential. Although the sector had attained a growth rate of around 20 percent per annum, it was nowhere near meeting the rising demand for services. There was a high level of unmet demand for basic telephone service and inadequate availability of services in rural areas.

A reform process started with the issuance of the National Telecom Policy (NTP) 1994, which called for issuing operator licenses to the private sector and setting up an independent regulator. Subsequently, the Telecom Regulatory Authority of India (TRAI) was set up in 1997. A revised NTP, issued in 1999, set out an ambitious and very progressive program for the sector.

Project Development Objectives:

The project’s main objective was to strengthen elements of the policy and the regulatory environment to promote private investment and competition in India’s telecommunications sector.

Project Components:

I. Department of Telecommunications (DOT)

• Assist DOT for financing equipment, consultants’ services and training;
• Assist the Wireless Planning and Coordination Wing (WPC) for equipment and technical assistance to WPC in the field of spectrum management to enable WPC to meet the increased demand for spectrum use in India;
• Assist the Telecommunications Engineering Center (TEC) to enhance its capacity.

II. Telecom Regulatory Authority of India (TRAI)/Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

• Assistance to TRAI included technical assistance to strengthen TRAI’s ability to regulate the sector. It included support for consultative studies and training. The consultative studies were to cover priority regulatory issues in regulatory infrastructure, sector liberalization, licensing and interconnection issues, development network and services, quality of service and customer satisfaction, and fostering fair competition;
• Assistance to TDSAT supported implementation of a program for strengthening the institutional capabilities of TDSAT in the areas of adjudication and dispute resolution.

Achievements:

Most of the objectives and performance targets of the project were met or surpassed. The success in sector reform cannot be solely attributed to the project. Nevertheless, TRAI does recognize that the project played an important role in working towards implementation of NTP99, specifically the support for regulatory policies that helped achieve outstanding performance improvements in the telecommunications sector.

As a result of the implementation of reform measures, the structure and performance of India’s telecommunications sector has been transformed and it has become one of the most competitive in the developing world. Large-scale private investment was made and there was a rapid increase in telephone lines, especially in mobile services, during the life of the project. For example, the number of mobile subscribers had increased 34-fold. Teledensity increased between 2003 and 2004 by about 2 percent, i.e., it increased in one year by more than all the teledensity increase that occurred between 1948 and 1998.

Some of the other key sector reforms that were implemented during the project include:

• Multiple basic operators were permitted in place of the duopoly in each of the 21 “circles”;
• Both national and international long-distance service was opened to competition;
• The number of cellular operators in each circle increased from two to four in each of the 21 “circles”;
• DOT’s service provision functions were corporatized into the new Bharat Sanchar Nigam Limited;
• Increase in private vs. government investment occurred as a result of both competition and privatization;
• Competition has opened the sector to the new channels of investment while at the same time reduced the market shares of the incumbent operators, Manhangar Telephone Nigam Limited, Bharat Sanchar Nigam Limited, and Videsh Sanchar Nigam Limited. Furthermore, as a result of privatization, government ownership in Videsh Sanchar Nigam Limited was reduced to 28 percent;
• The original license fee scheme which hindered investment was replaced by a combination of one-time license fees and revenue-sharing arrangements;
• Legislative amendments were enacted to clarify TRAI’s powers.

Other significant achievements:

Increase in foreign direct investment (FDI): The total FDI during 2001 to 2004 was over five times that of 1993 to 1996.

Pro-competitive interconnection regime: TRAI issued several regulations and directives during 1999 to 2003 to establish a pro-competitive interconnection regime.

Inter-circle long distance competition: National long-distance (NLD) licenses for new entrants were awarded.

Despite its many achievements the physical implementation of the project was rated “modest” because of the persistent delays in procurement and implementation of the National Radio Spectrum Management and Monitoring System (NRSMMS).

There was significant and positive progress in the TRAI and TDSAT components.

Sustainability Quotient:

Technical assistance and capacity building in all agencies, particularly with regard to
TRAI and TDSAT (which had been established close to the time of project negotiations) have contributed to institutional build-up and ability of these agencies is evident from the significant improvements in their performance over the last five years. These agencies (as previously mentioned) are now well-established and well-regarded, both within government, industry, and at the international level.