1 India
1.1 A profile of Economic Development
With a land area of about 3 million sq km, India has a population of 1.027 billion, accounting for 16.7% of the world total. The current per capita income is rs 10,027 (about US$ 234). Both investment in and development of IT in India has attracted worldwide attention. Although the overall foundation of the new economy is very weak, there is still a massive and outstanding team of software engineers. The IT industry in India has developed rapidly over the recent years, with the average annual growth rate in the IT industry reaching 42.2% during the period of 1995-2000. The output value in the IT industry in India reached Rs 554 billion (about UUS$ 12.2 billion) for the 2000 fiscal year, up 49.4% over the preceding year. The IT industry currently accounts for 1.68% of the GDP in India. Netizens totals 2.1 million and the proportion of household computers is 2.5% of all households.
India is a great developing power. Since the 1980s, telecommunication reform has been carried out mainly involving institutional readjustment, corresponding legislation and privatization of carriers. Fore-cast and planning have been made for the near and medium term development of the communication industry in India. India has taken some proactive moves and employed proactive policies in mobile communication, the Internet, the software industry and e-Commerce, thus enabling these industries to maintain a tendency of rapid development. India has one special advantage for developing the telecommunication industry, i.e., the telecommunication related software industry has developed strikingly, with strong capacity of research and development. In the past six years the software industry in India has grown at an average annual rate above 50%. Presently the export of Indian software if mainly to the US, with the rest to more than 100 countries and regions. The software industry has so given impetus to the frog-leaping of the economy of India as to make India ambitious to become a strong power in Asia. The main economic indexes in India for 1996-1999 are shown in the following table.

Table Main economic indexes in India for 1996-2000 unit:%
Item 1996 1997 1998 1999 2000
Growth rate of GDPConsumer price indexGrowth rate of industrial production 7.57.45.6 5.07.06.6 5.011.34.3 5.29.95.3 4.05.75
Source: China Industrial Electronics Yearbook 2000, p.460, Electronic Industry Press.

The growth rate of agriculture for the 2000-2001 fiscal year is 0.9%, and that of the services, manufacturing, building and telecommunication industries is 5.2%, 6.7%, 6.8% and 15% respectively. In addition, the real estate industry, retail industry, commercial undertakings and other trades also registered a growth of 7.4%. The GDP growth rate 4% is just based on the growth of these industries.
In the next three years, India will lower its import duty by a large margin as promised. In order to safeguard domestic industry, India is considering to adopt such tariff structure as is being implemented in the USA and some other development countries, that is, with low average duties combined with extremely high duties combined with extremely high duties for a few commodities, thus to safeguard the selected industrial sector or sub-sectors. The target for export growth in India for the 2000-2001 fiscal year has been adjusted downwards to 3%. The 3% growth target after the adjustment is still high than the expected 2% by the WTO. The September 11 terrorist attack on the US seriously affected India's export, especially to the USA, European Union and Japan. India's export to these countries has accounted for 45% of its total export. The growth rate of export reached 21% for the 1999-2000 fiscal year.

1.2 Development Status and Trend of Communication Industry
1.2.1 Construction and evaluation of communication infrastructure system in India
Popularization of telephone in India was only 0.04% in 1951. Since the beginning of the 1990s, however, the communication industry in India has experienced rapid development and popularization of telephone increased drastically from 0.6% in 1991 to 2.2% in 1999. The communication industry in India has developed rapidly and is moving to the fast lane over the recent years.
1. Status of construction of communication infrastructure system in India
According to the latest statistics and forecast report of, Dataquest the American international market survey company, mobile telephone users in India totaled 1,076,900 in 1999 and the popularization rate reached 0.1%, an increase of 39.9% over the figure of 769,500 in 1998. The newly added number of mobile telephones in 2003 is expected to reach 1.35 million, and the accumulated number of users at that time will reach 4.5 million with a popularization rate of 0.4%. The number of Internet users in India was 90,000 in 1998, this figure increased to 150,000 in 1998 with a growth rate of 66.7%, and is expected to reach 1.35 million in 2003.

The popularity rate of telephone in India is extremely low at 2 sets per hundred persons currently. The telecommunication business covered 5,000 cities and towns nationwide in 1991, but only 53% of the 600,000 villages are enjoying telecommunication services currently. Internet lines have only connected to 100 medium and large cities, 25 of which can provide private Internet services. The India government states that Internet users have exceeded 800,000, but according to statistics of the National Software and Services Companies Association, the number of Internet accounts is not yet up to 400,000. In the cellular communication market in India, the charge rate was US$ 0.36 per minute for peak hours and US$0.18 per minute for normal time in 1995, and now the rate has been reduced by half. Currently the modes of pre-charge and post-charge account for 50% each, but the development trend is pre-charge in the future.
Nowadays in India, both public and private telecommunication companies are increasing investment significantly. For instance, the public VANL will invest US$ 1.5-2.0 billion in the five years to come, and the Department of Telecommunication DOT will invest a total of US$ 50 billion for the period 1997-2007. Foreign companies are also increasing investment in India. Sing Tel (Singapore Telecommunication) will march to the domestic long distance communication market in India and will lay a line of optic fiber cable with a total capacity of 7.6 T bit/s, the highest in the world currently. AT&T is another one that is actively finding access to the Indian telecommunication market and has already invested US$ 300 million in the telecommunication industry in India. Nortel Networks will build a network of optic cable jointly with Indian local companies, which has a capacity of 10G bit/s to connect the major commercial centers in India. Cisco, which has enjoyed a 40% share in Indian network market, will also invest US$ 100 million to extend its network in India.
2. Future trend of communication infrastructure system
There is a strong demand in Indian telecommunication market, which is reflected in the following aspects:
There is a tendency of booming in the telecommunication facilities market. The 1999-2000 fiscal year reported a 40% increase in the sales value of telecommunication facilities over the preceding year. Public telecommunication companies were still the major buyers of telecommunication facilities whereas private telecommunication companies monopolized the demand for mobile telecommunication facilities. The main driving force for the demand of Indian telecommunication industry comes from cellular phones, the Internet and long distance telephone business. More private telecommunication carriers companies will appear in the future. In the basic telephone field, there will be private companies operating in various places in 15 state of India, while in the cellular communication field, each state will have more than two additional telecommunication carriers, one of which however, should be BSNL or MTNL (both are newly organized telecommunication companies by the DOT). The number of cellular phone users will likely increase to 20-25 million within five years. In addition, with the opening up of the long distance call market, there will appear demand for DWDN (Dense Wave Division Multiplexing) backbone net-work and wideband network.
Internet communication in India are developing rapidly. By March 2000, 315 ISP licenses had been granted nationwide; by July year, 72 ISPs had been operating. The number of Internet users has exceeded 1.4 million and is expected to reach 7.5 million by 2003. The Internet telephone in India is likely to take off in 2001 and this will increase the demand for IP products.
Facing the booming demand, both public and private telecommunication companies are increasing investment generously. For instance, the public VSNL will invest US$ 1.5-2.0 billion in the five years to come, and the DOT will invest a total of US$ 50 billion for the period 1997-2007. Foreign companies are also increasing investment in India. Those foreign telecommunication companies which used to think only the cellular communication business profitable in India are now planning to involve themselves in national long distance (LND) and international long distance (ILD) communication fields. The major ISPs is India have also attracted considerable amount of foreign capital.
Sing Tel (Singapore Telecommunication) will march to the domestic long distance communication market in India and will lay a line of optic fiber cable with a total capacity of 7.6T bit/s, the highest in the world currently. AT&T is another one that is actively finding access to the Indian telecommunication market and has already invested US$ 300 million in the telecommunication industry in India. Nortel Networks will build a network of optic fiber cable jointly with Indian local companies, which has a capacity of 10G bit/s to connect major commercial centers in India. Cisco, which has enjoyed a 40% share in Indian network market, will also invest US$ 100 million to extend its network in India.

1.2.2 Development status and trend of communication industry
1.Development Status of Communication Industry
India adopted the proposal for establishing separate telecommunication regulatory institution in 1995 and set up the Telecommunication Regulatory authority of India (TRAI) according to relevant law in 1997 to regulate the interconnection and earnings sharing among carriers, so as guarantee the execution of license conditions, promote competition and settle disputes among services providers. The TRAI is also responsible for working out the charge rate and fee for the telecommunication services and only the high courts or the supreme court of India can voice their objections to TRAI's decision. The DOT is responsible for license granting and extension.
In 1997, India made a commitment in the WTO negotiations concerning the basic telecommunication services to further realize liberalization of the telecommunication industry by granting licenses to new liberalization of national and international long distance services in 1999 and 2004 respectively, though he former, was not realized as scheduled. In October 1999, India set up the Department of Telecommunication Services (DTS) to provide telecommunication services. However, because of functions overlapping with the DOT, India had to set up the "Telecommunication Committee" to coordinate the activities of DOT-DTS, including pushing on the privatization of DTS to form "India Telecom". In order to effectively push on the telecommunication reform and regulation, India promulgated the "Amendment Act on Telecommunication Regulation for 2000" on 24 January, 2000 to change the original TRAI into small TRAIS without judicial power and clearly define the consultative and regulatory functions of TRAI. In the Act it is also decided to set up a separate organ for settling disputes and accepting appeals-the "Telecommunication Dispute Settlement and Appeal Acceptance Court"-to decide on any dispute arising between the license grater and the license holder, between two or among several service providers, and between the services provider and the consumer, and hear and handle any appeal concerning new TRAI decisions. The new TRAI is staffed with a chairman, two standing committee members and two part-time committee members, and has the responsibility to work out telecommunication services charge rate and fee, interconnecting fee, interconnecting technical standards and quality standards for the government and put forward unbinding suggestions for granting and cancellation of licenses.
The year 2000 was a decisive one for the telecommunication industry in India. This is mainly reflected in the rapid progress in the cellular communication in India. The total number of subscribers reached around 2.7 million; the remarkable development of the Internet (according to the standard of India) left a deep impression; the government's communication policy was proactively shifted; the national long distance communication market was opened to private telecommunication companies in August 2000, and the opening of international long distance market entered the countdown stage (the scheduled opening time being 1 August, 2002). The India government also reduced the customs duties and business tax of both wired and wireless telephone facilities, and cut down on the customs duties of optical fiber cable by a large margin. All these proactive policies vigorously promoted the development of the telecommunication industry in India. The following is an introduction to the recent development of the telecommunication market in India in several aspects.
The total revenue of the telecommunication industry in India reached US$ 12 billion for the 1999/2000 fiscal year, up 22% over the preceding year. The growth rate for the period 2001-2005 is expected to approach 30%. By the year 2005, the telecommunication network of India will possibly rank the 6th largest worldwide. At the beginning of 2001, India has 21.6 million lines of telephone, and the target for 2002 is 18.5 million new lines, so that the total capacity will reach 45.3 million lines. It is also planned that the popularization rate of telephone will increase to 15% by the year 2010. India is now constructing the wideband infrastructure so as to satisfy the demand of growing telecommunication.
2. Development potentialities and trend of communication industry
What is most directly related to development of the telecommunication industry in India is to fix on the reasonable charge rate and fee and provide quality services to the satisfaction of customers. To this end, India has carried out reform to the telecommunication charge rate and fee over the recent years, adopted new technology to improve the quality of telecommunication services and formulated such policy frame-work as to encourage the development of mobile network and the Internet. Moreover, the (NTP) 1999 National Telecommunication Policy defined the development targets of the national telecommunication industry as follows:
To eliminate the telephone installation waiting list, maintain at least one telephone line for each village with reasonable price, and provide high level services; to reach a telephone popularity rate of 7% by 2005, which will further increase to 15% by 2010; to increase the popularity rate in the countryside from the present 0.4% to 4% in 2010; to allow all regions to access the Internet in 2000; to provide all towns and cities with population over 200,000 with ISDN-included high-speed data services and multimedia communication services; all telecommunication carriers must turn in general services obligation fees of telecommunication according to the license conditions, but as a financial source for general services obligation of telecommunication in India, the standard of charging is yet to be fixed.
To provide voice and data services to the 210,000 villages where currently have no telephone services, and provide telephone services in all cities and villages. As the initial installation fee of fixed network telephone in India is costly at about US$ 775, the popularity rate of telephone is very low. However, telecommunication carriers are most interested in the wireless local line loop with low initial installation fee and the new technology of mobile data transmission, which has accelerated the development of the mobile communication industry. In recent two years, the proportion of the mobile communication market in large cities has decreased from 75% to the current 355 in the overall Indian mobile communication market, indicating that the development speed of mobile communication in telecommunication regions has exceeded that in large cities.
Up to the beginning of 2000, 8 licenses had been granted to 4 large cities, and 34 licenses had been granted to 18 communication regions; the number of mobile telephone use us in the 4 large cities had reached 824,850; that in the 18 regions had reached, 1,137,937 (of which, 608,415 were in Category A communication regions, 483,972 in Category regions and 45,550 in Category C regions). The average annual growth rate of mobile communication users in India has reached above 50% since 1997.
The cellular communication have given new impetus to the development. The number of cellular communication users in India increased by more than 1 million from January to September 2000, while that had just increased by 500,000 for the whole year in the previous year. According to the estimation of American Frost & Sullivan, the market scale of cellular communication in India is US$ 5.4 billion. The cellular communication industry in India is at a stage of most rapid growth, and there is still plenty of room for future development.
On the cellular telecommunication market in India, the charge rate was US$ 0.36/minute for peak hours and US$ 0.18/minute for normal hours in 1995, now the rate has decreased by half. However, what is most impressing is the growth in pre-charge services. Although the pre-charge mode charges a high rate for telephone calls (at US$ 0.13~0.17/min), users may limit the use of pre-charge cards. Currently the modes of pre-charge and post-charge account for 50% each, but the development trend is pre-charge in the future.
The Indian government has pushed out the policy framework for Cellular Mobile Services Providers CMSP), requesting CMSPS to pay the access fee all at one time and enter into an earnings sharing agreement with the state to cover the license fee. CASPS are permitted to transmit long distance calls in their own services regions without additional licenses. After the domestic long distance services was opened, CMSPS have been permitted to directly connect to VSNL and to interconnect with any other services providers in their respective services regions.
In January 2001, the Mahanagar Telephone Nigam Ltd (MTNL), which was held by the Indian government by shares, accessed the cellular mobile communication market to provide cellular mobile services in Bombay and Delhi at a lower price (US$ 0.058/min for outgoing call, US$ 0.032/min for incoming call) than that offered by other cellular services companies. In addition, the Indian Bharat Sanchar Nigam Ltd (BSNL), with an initial investment of US$ 344.4 million and adopting the CDMA system and one way charging, will start to provide mobile services at lower price in more than 600 cities in the first half of 2001.
NTP announced in 1999 DTS (MTML) was permitted to become the third largest mobile communication company in large cities and telecommunication regions, and thanks to tis low capital investment and availability of its own existing infrastructures, the new TRAI will supervise on it to see if it will give subsidy for operation in remote areas. The MTNL started to provide CDMA mobile communication services in Delhi in October 1999 and then in Bombay in August 2000. DOT/DTS are now carrying out trial operation of GSM mobile communication services in 18 cities. Mobile phones in India are imported from foreign countries. The high import duty in the past affected the development of mobile communication business; now the import duty rate has been reduced from 25% to 5%, which might stimulate mobile communication consumption.
India revised the interconnecting regulations September 1999 and has adopted the CCP mode (collecting on calling party), and new charging structure and income sharing mode among different carriers.
1.2.3 Telecommunication operation market pattern and developmental trend
1. Competition pattern of the telecommunication operation market
As the first state-owned company to access the mobile communication market, Indian telecommunication company MTNL will enjoy the favorable policy given by the government in respect of taxation, and thus have considerable "super strong" advantages. Currently the out calling is charged at Rs2.70 Rupees/minute by the company and cellular phone call receiving is charged at Rupees Rs1.5/minute, whereas other private companies are still maintaining the call charge at RS4/minute in New Delhi.

Split of regulatory functions
Number plan Charge suggestion Charge approval Technical standard Interconnect. fee Frequency distribution Type approval Services quality monitoring Defining license fee
Regulatory authorities Regulatory authorities Regulatory authorities Regulatory authorities Regulatory authorities Regulatory authorities DOT Regulatory authorities Regulatory authorities

Major Carrier: The major fixed link carrier was re-organized to become a company in 1986. Mahanagar Telephone Nigam Ltd. (MTNL) was established as a public company that operates in telecommunication business in Delhi and Bombay. Currently the majority of stock-shares are held by the government (57%), with the remaining 43% held by financial institutions, banks, common funds and other organizations.
Other: Videsh Sanchar Nigam Limited (VSNL) is a private carriers specially providing international services. There are now more than 30 GSM cellular mobile services carriers, each facing competition in its own geographic region.
Allowable foreign ownership: 49%.
In face of competition, two mobile telephone carriers in the capital city New Delhi cut back on their telephone charge standards by a large margin at the beginning of this year to meet the challenges arising from the accession of the state-owned MTNL into the mobile communication market. Sterling Cellular co. took the lead in announcing a price cut. It adjusted the receiving charge to Rs2.8 per minute while the out calling charge was however adjusted to Rs1.6 Rupees minute. Formerly both the receiving and out calling charges collected by the company was Rs4.0 Rupees per minute.
It is forecasted that the number of cellular phone users will be increased from the current 3 million to 100 million by 2008.
2. Opening progress of telecommunication operation market
The telecommunication market in India has been monopolized by the state before 1985. The telecommunication reform started in 1995 and by 1999, India had adopted the new telecommunication law. The reform has undergone the stages of prudent trial, partial opening and complete opening.
The telecommunication facilities market was first opened to allow domestic private enterprises to produce telecommunication facilities and then foreign enterprises to access the telecommunication facilities market. Followed next was opening of the added value market. With the promulgation of national telecommunication policies in 1994, the basic telephone services market was opened. However, after opening of the mobile telephone market and the fixed telephone market, administration on the telecommunication industry was in disorder, and the intensifying conflict between private enterprises and the government seriously hindered the development of the telecommunication industry in India. The Indian government than had to push out new telecommunication policies in 1999 to relax the administration on private enterprises and open up the domestic telecommunication market to a larger extent, thus offering new opportunities for the development of national telecommunication industry. Major events during the reform include the following:
¡ñTrial stage of reform (1985-1994). In 1985 the Indian government carried out separation of telecommunication and postal services. In the meanwhile, it started the trial of share-holding system in the telecommunication field and established the DOT. Also VSNL was founded to monopolize the operation of international services and MTNL to operate the local business in Bombay and New Delhi, both belonging to the DOT. At the beginning of the 1990s, India opened the added value services with a scope including e-mail box, voice mail box, data domestic services by means of VSAT, audio frequency text, direct access code dialing, public board services, image video frequency, television conference, morning call services, paging services, cellular mobile telephone services, mobile wireless cluster services, etc. With exception of the above, the telecommunication reform has been at the trial stage, without much progress.
¡ñOpening stage of basic telephone services (1994-1999). The parliament of India adopted The National Telecommunication Policy in May 1994, by which the Department of Telecommunication (DOT) more than 20 telecommunication regions nationwide, and allows more than 20 companies to carry on competition with the DOT's companies in their respective regions, thus to attract capital funds from all these companies to speed up the communication development.
¡ñLiberalization stage of communication markets (1999-present). The Indian government adopted new telecommunication policy in March 1999 and decided to further open up other telecommunication markets to realize full liberalization of telecommunication markets. The new telecom policy stipulates: the DOT-monopolized national long distance telephone services to be fully opened as of January 2000, allowing for free competition, and it was also considered to introduce international competition in 2004; allow cable TV companies to provide voice and data services; DOT to be split into two parts: one to provide telephone services and the other to perform administration on the telecommunication industry; gradually to realize fair competition in the real sense so that MTNL will turn in the same fees and abide by the same industrial regulations and specifications as other private telecommunication companies.
The Indian government's communication policies have experienced a proactive shift: the national long distance communication market was opened to private telecommunication companies in August 2000, and opening of the international long distance (ILD) market has entered into the countdown stage (the scheduled time for opening being March 2002). The Indian government also reduced the customs duties and business tax of both wired and wireless telephone facilities, and cut down on the customs duties of optical fiber cable by a large margin. All these proactive policies vigorously promoted the development of the telecommunication industry in India. The extent of market liberalization is as follows:

Local services NLD ILD Data Telex Leased line
Competition Monopolization Monopolization Competition Competition N.A.

Cellular analog Cellular data Paging Cable TV Satellite fixed Satellite mobile
N.A. Competition Competition N.A. N.A. N.A.

¡ñ Lift the ban on IP telephone. Currently in India, it is forbidden to provide telephone services by means of the Internet. However, national netizens hope to use Internet telephone because it can reduce the expense of long distance calls while being difficult for interception. A panel of consultants for Indian Prime Minister suggested in a recent report that the government consider permitting introduction of telephone services over the Internet so as to significantly reduce the user's expenses. An economic survey by the Indian government in January 2000 supported the above suggestion. By March 2000, 315 ISP licenses had been granted nationwide, the number of users had exceeded 1.4 million and is expected to reach 7.5 million in 2003. India will permit the operation of Internet telephone services from April 2002, two years in advance of the scheduled 2004.
¡ñThe Internet. There are limitations for Internet services provision: ISPs are forbidden to provide voice services through the Internet by means of leased capacity. Major ISPs include Videsh Sanghar Nigam limited and the DOT.
Telecommunication operation market trend
¡ñFuture Regulatory Plan: to open up international services in 2004. With the implementation of telecommunication liberalization policies of India, in the basic telephone field, there will be 15 states in which private telephone companies will operate in various places. While in the cellular communication field, each states will have more than two telecommunication operators added, one of which ,however, must be a BSNL or MTNL company (both BSNL and MTNL being newly established telecommunication companies by the DOT).
¡ñAccelerate the privatization of public telecommunication enterprises. The VSNL is gradually stepping into privatization, and stock-shares held by the government has decreased from 52.97% to 26%. It is expected that it will lose its monopoly in the international long distance telephone market. So it is taking proactive actions to extend its business scope and snatch market shares. The VANL has expressed interest in basic telephone services and mobile communication.
Currently, the VSNL has applied for the basic services license to provide basic telecommunication services in Delhi and the Maharashtra State-of west India. Viewing that the policy allows basic services operators to provide confined mobile services by means of local loop circuit technology, the VSNL has designated a panel of experts and consultants to work out the scheme for mobile services license application and the economic feasibility.
Vying in operation license application. Currently, the trend for telecommunication companies to apply for basic or fixed telecommunication services operation licenses is growing in intensity. Telecommunication consultants India Limited (TCIL), a public enterprise subordinate to the DOT, has also applied for basic telecommunication services operation licenses for operating in Aryana, Madhya Pradesh and Rajastha States. The public BSNL Ltd. has also applied for fixed services operation licenses for operating in Mumbai and Delhi regions.
Furthermore, Reliance Group has also applied for providing basic telecommunication services in 5 or more states. It had previously applied for licenses in 12 states. Reliance Group has also obtained the license to operate nationwide optic fiber network, and has laid optical fiber cable in 10 provinces. The cellular Operators Association of India (COAI) has also suggested officially that its members apply for Fixed Services Provider (FSP) operation licenses, since given the new policy, there will be more communication carriers accessing the mobile communication services market by means by wireless local loop circuit technology.
In the same year, the Indian government decided to recall VSNL's right for international telephone services operation 2 years ahead of schedule (the scheduled expiry being the year 2004). As a repay, the Indian government permits VSNL to access the national long distance telephone market on preferential conditions, and extend its business to the whole country from the current 6 places. The Indian government has also taken steps to open the market of "global mobile personal communication services" through satellites.
On 15 July 2001, Indian Prime Minister Vajpayee issued a decree: the State will break the monopoly in the international long distance and transoceanic telephone services and allow private companies, including foreign companies to take part in the competition in Indian telecommunication industry from August 15,2001. This new decree further removed the largest obstacle for India to step into the information age. The Indian government stated that any telecommunication company, either national or foreign, is permitted to enter the telecommunication market of India to take a share with governmental telecommunication companies as long as it turns in US$ 25 million.
Make greater efforts to attract foreign capitals. In order to attract more foreign investment in the telecommunication industry of India, the Indian government intends to give foreign investors the right to hold 1005 stock shares instead of the current 49%. This would arouse the great interest of foreign investors. The Enron Corporation expressed their intention to shift their investment intended for the power sector of India to the telecommunication industry. This company is now cooperating with the National Power Corporation of India to invest US$ 500 million to lay data transmission cables along their electricity transmission lines. The Reliance Petroleum Ltd the famous petrochemical enterprise is making use of the wideband to enter the Internet Age by investing US$ 3 billion to lay cables crossing 25 states of India. The TATA Group, which has assets of US$ 8 billion, also plans to invest US$ 1.45 billion to construct telecommunication infrastructures and lay cross-India optical fibers cables as long as 2000km within 2 years. Indian local telecommunication companies are not willing to be outshone. The Bharati Telecomm Company, which has assets of US$ 380 million and has in the past two years risen to be a leading company in the telecommunication industry of India with the help of development of small-size suppliers in the middle-east area of India, is ambitious to lead the voice message, data and Internet information transmission of the whole country, and is planning to invest US$ 500 million in the construction of optical fiber cables reaching from Himachal Pradesh in the north to Tarmil Nadu in the south. Many other telecommunication companies, either national or foreign, are also eager for making a great achievements in the development of the telecommunication industry of India so as to take a bite from the "big cake" of telecommunication industry.
India sold Rs100 billion (43.3 Rupees equal about 1 US dollar) stock shares of public enterprises in 2001, changed the traditional administration mode, permitted private enterprises to operate the FM broad-casting business, and decided to lower the Internet networking charge by 15%. This was the third successively year in which the Indian government sold the stock shares of public enterprises. For 2000, the stock shares of public enterprises planned for selling totaled Rs50 billion but the actual selling reached Rs61.9 billion. The public enterprises under the selling plan for 2001 are mainly involved in telecommunication, tourism, electric power, chemical fertilizer and natural gas industries. Telephone companies subordinate to the DOT sold 19 million shares, thus lowering the governmental shares from 56% to 51%.
4. Existing issues in the telecommunication market of India-interconnecting among networks (Gateway)
Network interconnecting is an important aspect of the telecommunication policy of India. If this issue is not properly addressed, serious barrier will arise for market accession, whereas high quality interconnecting may promote the value of networks. It can be thus said that network interconnecting (gateway) is the footstone for genuinely competitive market. The interconnecting issue in India has always been the major obstacle to the development of mobile communication. In India, when the fixed telephone calls the mobile telephone, the fixed network carrier does not pay any interconnecting charge to the mobile communication carrier, whereas when the mobile telephone calls the fixed telephone, the mobile carrier has to pay full amount of local call charge of the fixed network i.e., Rs1.2, each time to the fixed network carrier. Mobile communication carriers are compelled to interconnect with the MTNL network in Delhi and Mumbai in order to connect terminal calling, and to interconnect with DOT-DTS for local and long distance junctions in other regions. Still, their international traffic services has to access VSNL's international gateway exchange. Although mobile communication carriers have been discussing the interconnecting issue with existing fixed network carriers since 1996, no interconnecting protocol has been reached between DTS/MTNL and mobile communication carriers up to now. The two issues needing to be addressed are multi-interconnecting and access charging. Mobile communication carriers are asking for the same sharing proportion of long distance and international call charge with basis services operators. They insist that the interconnecting access charging applied to fixed se5rvices operators should also be applicable to mobile communication carriers.

1.3 Market Analysis of Electronic Information Products in India
1.3.1 Market scale, development features and growth potential of electronic information products
The market scale of electronic products in India was US$ 4.693 billion in 1998,down6.9% from 1997, among which ,that of consumption electronic products ranked first, totaling US$ 1.542 billion, down 4.9% from 1997 and accounting for 26.1% of the total; that of electronic components ranked second, totaling US$ 1.225 billion, down 5.3% from 1997 and accounting for 21.2% of the total.
The total market amount of electronic products in India was US$ 6.225 billion in 1999,up 5.4% over 1998,among which, that of consumption electronic products ranked first, totaling US$ 1.598 billion, up 3.6% over 1998 and accounting for 25.7% of the total; that of electronic components ranked second, totaling US$ 1.332 billion, up 10.0% over 1998 and accounting for 21.45 of the total.
The market amount of electronic products is India was US$ 6.696 billion in 2000, up 7.65 over 1999. That of consumption electronic products reported a growth rate of 7.3% and that of electronic data processing products enjoyed a growth of 12.0%. See the following Table for the market situation of electronic products in India for 1998-2000.
Electronic components enjoyed a market amount of US$ 1.539 billion in India in 2001 and it expected to reach US$ 1.656 billion in 2002.

1.3.2 An Analysis on electronic information products
The computer hardware market scale of India has been shrinking over the recent years, and most particularly the export has drastically decreased. The export value of computer hardware of India was Rs155 million in 1998, down 985 over the preceding year. The domestic market also experienced a negative growth of 5.9%. The fierce competition in the international market and the falling of price are the major causes to the export decrease. In spite of that, in the 1998 fiscal year in India, the extent of computer application in enterprises was rising up, the small-and medium-size enterprises and SOHOs (small office and household office) were rapidly growing, the PC sales value accounted for 32% of the software market and that of serves accounted for 8.17%. The Indian government has realized the urgency of hardware development in recent two years and holds that India must vigorously enhance the development of hardware if it hopes to become a super power in the IT world. The Indian government named the year 2001 as "the year of hardware development" so as to push on the IT hardware construction.
1. Computer peripheral apparatuses and network products
The year 1998 witnessed a high-speed growth in the computer peripheral apparatuses market in India, with output value totaling Rs13.6 billion, up 63.27% over the preceding year. Network products are major products of the IT industry. Network products in India enjoyed a growth of 37.6% for 1998, reaching Rs7.15 billion.
2. Software
As a developing country, India had become a global software export giant through the efforts of less than 20 years. Its export of software (including services) was only US$ 4 million in 1980, whereas in 2001, export of the software industry has reached UUS$ 6.1 billion. See Figure 2 for specific data.
A distinctive feature of the software industry of India lies in the fact that almost all its software products are exported and the domestic market scale of software is very small. This is related to the national economic foundation and economic scale of India. India is currently the second largest software exporter globally next to the US. The export of India software and services industries has grown in a sustained manner over the recent years and the destinations of such export are extensively distributed in 95 countries and regions, but mainly in the US, Canada and Japan. See the following figure.
3. Electronic Information Products
Indian domestic producers are only competitive in the middle and low end apparatuses. To change such situation, C-DOT the first telecommunication R&D institution, commercialized its exchange technology and is now developing technology that is comparable to foreign products (but with lower price), thus to challenge foreign companies. The fierce market competition caused drastic price downslide of telecommunication products, and foreign companies acquired 60% of the orders for traditional exchanges of the DOT for 1999-2000 by means of price-cutting competition.

1.4 Development of National IT Industry
1.4.1 Overview of IT industry development
There were 25,000 sets of automatic telephone exchanges, 26.05 million telephone lines and 5000 lines of satellite telephone lines in India by 31 March 1999 and 1.88 sets of mobile telephone by April 2000. It is thus apparent that India had very poor IT infrastructure.
Since the Internet was put into commercialization in India in 1995, Internet subscribers have boomed in India at a surprising speed. The IT revolution has given great impetus to the development of the in India at a surprising speed. The IT revolution has given great impetus to the development of the computer software based IT industry in India. Up to April 2001, the number of Internet users had reached 1 million. The wide application of the Internet globally and the Intranet building rush in large companies and enterprises, especially the rising of e-Commerce in recent years, have offered unlimited business opportunities for the computer software industry in India. Indian export of software has increased at an annual rate of 60% over the recent years, rendering India the second largest software exporter next to the US currently. During the development of more than ten years, Indian software has reported an average growth of over 53% both in market scale and in export value, and exhibit a trend of high-speed development.
India aims at becoming a super power worldwide in terms of information technology. It has placed the development of IT industry on top priority of national strategies, exporting talents to the world and snatching strategic advantages in the era of knowledge economy development.

1.4.2 Development features and trend of major products
1. Position of IT industry in national economy
The IT industry accounts for 1.68% of the GDP in India. As a developing country, India has developed a new style of its own to start from the software industry to catch up with the IT wave with big strides. Its software industry takes the lead in developing countries and enjoys a worldwide fame.
The software industry is the largest sector in Indian IT industry. Software enterprises have grown into considerable scale and there have appeared a lot of internationally competitive enterprises. Software export has grown at high speed, rendering India the second largest software exporter globally. According to the survey and evaluation of the World Bank on the capacities of software exporting countries, India comes out on the top worldwide in terms of the comprehensive index of scale, quality and cost of soft-ware export. The export value of India software industry was US$ 6.3 billion in 2000. According to a study made by Mckinsey CO. & AND National Association of Software Services Companies (NASSCOM), in the 8 years to come, the output value of Indian software industry is likely to reach US$ 87 billion, 50 billion of which will come from the export value. The main reason why India has grown into a software giant from a poor country in the world and is daring to challenge the USA, the number one software giant in the global software market, is that India has treasured software talents, attached great importance to developing software products with its own intellectual property rights, and put its software products promptly into the global market.

The software industry is one of pillar industries in India. It has the following characteristics:
Numerous software talents. Private software companies are the pools of software talents, and many software export companies are galaxies of talents. In the more than 600 companies engaging in software export in India, software engineers total 35,000, of which, senior talents account for one third, reaching 11,000. While the whole world is in urgent need of software talents, Indian has plenty and has thus become the envy of foreign counterparts. This is because the Indian authorities have, on the one hand, attracted software engineers working in the US to come back by means of rich and generous treatment, and on the other hand, tried all out to prevent foreign countries from hunting Indian software engineers.
Reasonable scale of software production. Indian software production is mainly concentrated in a couple of large software producers, the largest one has a business value accounting for 78% of the total of the national software industry. It is thus apparent that Indian software industry is relatively centralized, and scaled intensive operation has taken shape.
Possession of own intellectual property rights. Over the recent years, the proportion of software products with intellectual property rights owned by the software industry of India has been increasing year by year, at 47% in 1996, 63% in 1997 and 85% in 1998.
Emphasis on execution of international standards. In order to boost international competitiveness of software products, the software industry of India has attached great importance to improving product quality. Currently the software products from 120 Indian software producers have obtained the ISO9000 certification, and among the 41 companies of cmm5 grade for software development, the global top quality evaluation standard has 28 in India.
Advanced mode of export. Over the recent years most Indian software producers exported their software products directly by way of high-speed data transmission lines with transmission speed up to 64 k bits/min. Software producers transmit their new software products to the customers via these lines; in case of need for revision, the products can then be transmitted back through the lines, therefore the transmission is highly efficient.
Low price of products. It is globally known that Indian software products are inexpensive, their price being just 10%~20% of that of similar US products. Such low price of software with reserved copy rights makes the pirates flinch. Therefore, Indian software products sell well, with a high rate of reserved copy rights and very little piracy.
Leading role of the government. Ever since the 1980s, the Software Development Bureau of the Ministry of Communications and Information Technology on Department of Technology India has appropriated a sum of special fund every year for developing international markets. The Indian government formulated the "Indian IT Action Plan" in May 1995. The government has taken a series of measures to promote the export of software, such as zero customs duty, zero circulation tax and zero services tax for software, package agreement for overseas investment and procurement, preferential loans from banks, venture capital investment, etc.
Establishment of numerous software parks. The Indian government has set up scores of software parks domestically, with 4-5 in Karnataka alone. The Bangalore Software Park is the largest and most famous one in Karnataka, which also enjoys a worldwide fame and can be taken as the "Silicon Valley in India", so to speak. Figure 4 shows the export statistics of Bangalore Software Park. It can be seen from the figure that Bangalore Software Park has enjoyed a rapid growth in the output of software products since the 1997-1998 fiscal year, with the 2000-2001 fiscal year reporting the most rapid growth, up 73% over the preceding year.
To train and attract talents is the foundation for development. By 31March, 2001, the software industry in India employed 340,000 professionals, with an increase of 180,000 in nearly three years. There will be a demand of 2.2 million software professionals and 1.6 million hardware professionals by 2008. Moreover, there is a drastic increase in the demand of Indian IT professionals in overseas human resource markets. Facing such situation, the Department of Information and Technology India is formulating a talent training plan by the name of "Knowledge Action" to satisfy the increasing demand both at home and abroad. First, it is planned to promote 43 regional engineering academies nationwide to the same level as Indian Academy of Science and Technology. Second, establish Indian IT Academy at all states in India. Third, vigorously encourage private schools and academies. Fourth, yigorously encourage famous software industrial companies to run schools and academies. The Department of Electronics of India has set out to establish 3 software parks respectively in Bangalore, Bhubaneswar and Poona since 1987. Now Bangalore has become the software capital of India and is known as one of then ten silicon valleys in the world. India has established 17 software parks successively and more than 1300 foreign companies have registered at these parks.
2. Import and export of electronic products
The foreign trade of electronic products in India recorded an unfavorable balance of US$ 1 billion in 1997. It was the same case with 1998 with an unfavorable balance of US$ 1.212 billion.
The export value of Indian electronic products was US$ 540 million in 1997, among which, that of electronic data products ranked first, totaling US$ 250 million and accounting for 46.3% of the total; that of electronic components ranked second, totaling US$ 120 million and accounting for 22.2% of the total.
The export value of Indian electronic products was US$ 384 million in 1998, down 28.9% over 1997, among which, that of electronic data products ranked first, totaling US$ 194 million, down 22.4% over 1997 and accounting for 50.5% of the total; that of electronic components ranked second, totaling US$ 81 million, down 32.5% from 1997 and accounting for 21.1% of the total.
Import: The import value of Indian electronic products was US$ 1.54 billion in 1997, among which, that of electronic data products ranked first, totaling US$ 609 million and accounting for 39.5% of the total; that of electronic components ranked second, totaling US$ 445 million and accounting for 28.9% of the total.
The import value of Indian electronic products was US$ 1.596 billion in 1997, up 3.6% over 1997, among which, that of electronic data products ranked first, totaling US$ 702 million, up 15.3% over 1997 and accounting for 44.0% of the total; that of electronic components ranked second, totaling US$ 420 million, down 5.6% over 1997 and accounting for 26.3% of the total.

1.5 An Analysis on IT Application
By encouraging the people to get actively involved in the IT revolution, India undertakes to seize the opportunity and bring its advantages into full play to vitalize the IT industry, aiming at realizing a development scale of Indian IT industry of US$ 140 billion by 2008 and offering millions of job opportunities. At present the Indian government is implementing e-Government and e-Finance, and all schools will connect to the Internet. The Indian government intends to turn India into a "super power in the world IT industry" by making efforts both in development and in application.
1.5.1 E-Commerce
In developing countries such as India, e-Commerce is reshaping people's life rather than be enjoyment of the very few. In New Delhi, more and more housewives are selecting daily necessities such as vegetables, rice, cooking oil and table salt through the wide cyberspace. In the western commercial city Bumbai, thousands of shareholders are fixing their eyes on the electronic screen to keep abreast of the constantly changing stock market. The new generation of farmers in Madhya Pradesh are making use of their computers to get to know the updated price information before they determine the selling price of their own products.
With the development of information technology and popularization of the Internet, e-Commerce is approaching thousands of households. Almost all business related activities, such as banking services, purchase and sale of commodities, job and marriage seeking, business negotiation, financing and stock transaction, etc. can be completed at home or in the office through the network easily. You just have to click the mouse of your computer and all these activities are completed in a short while with ease, saving time and offering unlimited business opportunities. However, as a new and rising industry, e-Commerce is experiencing an unbalanced developed worldwide. The drafting of the "IT Act" of India was finished in December 1999 and the Act was adopted in May 2000 to become a national law. The Act legalized electronic signature and electronic recording, and such signature and recording shall become effective by passing the certification of competent certification authorities. This is an important move that the Indian government has made to encourage e-Commerce.
After a recent survey and evaluation on the e-Commerce market, the Indian National of Software and Services Companies (NASSCOM) stated in its Nasscom Report that from 1999 to 2000 the volume of business of e-Commerce increased by 2.5 folds, reaching US$ 573.6 million, and since the Internet was formally put into operation in 1995, Internet subscribers have been grown in multiplies at surprising speed. According to NASSCOM's survey, by the end of 2000, Internet subscribers had totaled 5.5 million, and more than 200 towns and cities had accessed the Internet.
With the rapid popularization of the Internet in India, e-Commerce in now in the ascendant, so to speak. The total volume of business of e-Commerce in 1998 was Rs1.31 billion (US$ 30 million), 91% of which was from B2B and 9% from B2C; the national business volume of e-Commerce in India reached Rs4.5 billion, 4 billion of which was from B2B and Rs500 million from B2C; the key aspect of e-Commerce is Business to Business, consistent with the global trend of e-Commerce; the business volume of e-Commerce reached Rs35 billion Rupees in 2000. it is expected that the business volume of e-Commerce in 2001 will total US$ 1.31 billion, 91% of which being B2B and 9% being B2C. This business volume will increase to US$ 2.2946 billion, US$ 5.7365 billion and US$ 11.479 billion respectively in the years 2002 and 2003. It is thus clear that e-Commerce in India will have a great market potential and a good prospect for development.
By 2002 the sales value of national software and related industries will have reached US$ 700 million. More importantly, the global development of e-Commerce has offered India such a rare chance that the domestically provided e-Commerce services can also be used to indirectly earn US$ 340 million of export income for India.
1.5.2 Fully opening the Internet services
India started to provide Internet service in August 1985. The Internet services in India have developed at high speed and with wide coverage. In large cities in India, there are Internet cafes almost in every street. The utilization rate of the Internet is extremely high, with average logging on time per household per month reaching 14~20 hours, which is comparable to North American areas. Internet users in India reached about 500,000 households in 1999, and will likely have reached 1 million by the end of 2000. With the lowering of price of household computers and the possibility of accessing the Internet through cables, the next few years will see a considerable growth in the number of Internet users. The Indian government announced their policy on ISPs in November 1998, stating that no limit will be given to the number of private ISP s for entering into the Internet; ISPs need not pay the license fee for the initial five years, and shall pay a nominal license fee of 1 Rupee after 2003. According to the forecast of IDC India Company, Internet users in India will reach 37.5 million people by 2005, and by 2003, the business value over the Internet by Indian companies will reach as high as US$ 8 billion; such a big market will enable some formerly losing companies to gain profits. The Satyam Infoway, the second largest ISP in India, states last month that the fourth quarter of the current fiscal year up to March 31 had reported an increase in the amount of loss by quadruple in the company, reaching as high as US$ 18.2 million. The growth in Internet users will also drive the PC selling and bring about tremendous gaining for some PC manufacturers and small-size companies.
In February 2000, the Indian government pushed out a policy to encourage ISPs to set up their own international gateway exchanges. It is allowable to apply for national "Class A" license, regional "Class B" license and city level "Class C" license. By 28 February, 2000, India had granted 250 ISP licenses. In February 2000, DOT in principle approved several ISPs to set up their VAST gateway exchanges by means of foreign satellites. The public VSNL is the largest ISP in India, having 344,000 Internet subscribers by the end of March 2000. DTS and MTNL had 96,000 and 21,000 Internet subscribers respectively. Major ISPs in India are shown in the Table.

The Indian government has decided to formally open the Internet telephone services in April 2002, two years ahead of schedule. The Minister of Telecommunication stated that because of the difficulties to lower the cost of long distance telephone, it is still not allowable to provide voice telephone services over the Internet, it is hoped that Internet telephone services will be provided after the Internet has reached the countryside.
The Indian government granted the first private ISP license on 7 November 1998, and thus ended the monopoly of the business Internet services of the public VANL. The Indian government has set out to implement the policy for liberalized Internet services and allows foreign companies to hold 49% shares of ISPs. Indian Prime Minister announced the details for ISP administration and hoped that the enterprises in this industry could extend their high quality Internet services as soon as possible to promote the rapid development of the Internet in India so that the wide range of netizens could keep pace with the network age. The Indian government expressed that they will not limit the granting of ISP licenses and will not collect any fee from the first five ISPs for 15 years operation.
Internet users in India have totaled 1.07 million, about 80% of which access the Internet through the network facilities of VSNL telecommunication companies. VSNL introduced its business Internet services as early as 1996, and the number of its subscribers has increased year by year, which has greatly promoted the networking craze in India. However, as VSNL has monopolized the business Internet services in India over the years, this has hindered the opening and development of the Internet services in India and is extremely harmful to the development of the communication industry of India. To change such situation, the Indian government decided to break the monopoly in telecommunication and open the Internet services all over. Since the Indian government began to implement opening of the Internet services, the Internet industry in India has developed quite rapidly. The number of Internet users has doubled from 500,000 in 1998 to 1.07 million presently, and the Internet industry in India has exhibited a booming development.
The full opening of the Internet in India has imposed a favorable influence on the development of the software industry, this is because the sustainable development of the software industry must rely on the inexpensive Internet accession. The ISP policy adopted by the Indian government satisfied the need of development of the software industry, and has received the support from the ISPs both at home and abroad that intend to push out private Internet services. For example, AT$T, BT and America Online have expressed their strong support to it. Currently more than 70 Indian companies and more than 40 foreign companies have shown their interest to join the ISPs to promote further development of the Internet industry in India. As a branch of e-Commerce, mobile commerce has also gotten off the mark in India, which will add to the business volume over the mobile network and thus to the new source of earnings. The middle class and the rich class in India are adding to the growth of such mobile commerce, and mobile services operators are providing such services in cooperation with software companies and banks. Bharti Tele soft has developed the mobile bank services platform, which was put in commercial services in March 2000.
1.5.3 Enterprise management
The IT revolution has given impetus to traditional industries in India, bringing great vitality for their development. Some famous auto manufacturing companies in India, for example, have enhanced their management, reduced the number of intermediate links and raised labor productivity with the help of the Internet, and are selling automobiles through online shops. The 1999-2000 fiscal year saw an increase of 51% over the preceding year in the total domestic sales of sedan cars in India, exceeding 600,000 cars, to which the selling over the Internet has made an undeniable contribution.