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International Coalition TA will need to form ties with telecommunication companies and governments located in other countries. Once the India strategy is underway, TA will need to utilize the international community to place added pressure on India to adopt addition WTO BTA commitments.
Table 26- International Interest Groups and Organizations
The international strategy will parallel the media and negotiation strategies developed for the U.S. and India. To gain international support, it will be important for TA to be able to explain the problem concisely, offer solutions to the problem, and assure governments and firms that by supporting TA’s efforts, they will be acting in their own best interest. Exhibit 1 – Sample News Release
U.S. TELECOMMUNICATIONS INDUSTRY TO LOSE BILLIONS OF DOLLARS - THOUSANDS OF JOBS LOST DATE: TIME: PLACE:
As many sectors of the U.S. telecommunications market approach maturity, U.S. companies are increasingly looking to foreign market opportunities to expand their businesses. India’s telecommunications market is already worth close to $6 billion in 1998; it is projected to be worth $60 billion by 2006. Future growth of the U.S. telecommunications industry depends on the ability of U.S. companies to enter lucrative markets such as India’s. "U.S. companies are the most competitive telecommunications providers in the world; they are in the best position to compete and win," says the president of the Telecommunications Alliance. If the Indian telecommunications market can be forced to live up to its commitments under the WTO Basic Telecommunication Agreement and to expedite its liberalization process, experts project that one million U.S. jobs would be created and telecommunication costs would be reduced by 80 percent.
Exhibit 2 – Sample Press Statement On a global basis, telecommunications is already a $725 billion industry. But the recently negotiated WTO Basic Telecommunication Agreement (BTA) has the potential to double or even triple the industry’s business over the next ten years, if all countries make significant BTA commitments. U.S. companies are the most competitive telecommunications providers in the world. They are best positioned to compete and win under the BTA. According to the Economic Strategy Institute, the Agreement will lead to the creation of approximately one million U.S. jobs in the next ten years. The BTA will also save billions of dollars for American consumers and companies. Executive branch agencies and the FCC estimate that the average cost of international phone calls will drop by 80 percent – from $1 per minute on average to less than 20 cents over the next several years. For these reasons, U.S. companies must be able to enter foreign telecommunications markets, especially large, untapped markets like India’s, which represents a potential of close to $6 billion in 1998 and is expected to be worth over $60 billion by 2006. U.S. telecommunication companies must be able to compete in this market if their long term goals are to be met and jobs and savings are to be passed on to U.S. citizens. So far, U.S. telecommunications products and services have faced significant obstacles to entry into the Indian market. Currently, non-transparent decision making, red tape and ambiguous policies make entry virtually impossible. India has taken obligations to expedite liberalization of its telecommunications market, but it has done little to implement these obligations. The United States must continue its efforts to further expand BTA coverage. Doing so will create jobs, increase efficiency, lower costs, bring new technology to consumers and businesses in India and help India's development process. India can be the shining star of telecommunications development if it allows U.S. companies to aid in the development of India's telecommunication infrastructure.
Exhibit 3 – Sample Questions & Answers Questions and Answers
Traditionally, telecommunications services have been provided by national monopolies. For the past three years, the United States and other WTO member states negotiated in Geneva under the auspices of the World Trade Organization (WTO) to open up markets for basic telecommunications services, including local, long distance, and international voice and data transmission services. On February 15, 1997, 69 countries including the United States, reached agreement on the liberalization of these telecom services.
This is the first multilateral telecommunications trade agreement ever reached. The 69 countries that made commitments comprise the world's major telecom service markets and account for more than 90 percent of world telecom revenues. These markets are huge and growing, with 1997 revenues expected to exceed $725 billion. The BTA is particularly important because it covers the types of basic (voice) services that account for 85 to 90 percent of all telecom service revenues. The agreement covers three general areas. First, market access and national treatment for suppliers of telecommunications services. For example, 52 countries guaranteed access to their markets for international services and facilities. Five more countries guaranteed access for selected, but not all, international services. Fifty-six countries agreed to allow foreign access to all or selected satellite services. Second, the agreement allows foreign investment in telecommunications services and facilities. Under the terms of this agreement, 44 countries permitted full foreign ownership or control of all telecom services and facilities, while 12 countries allowed foreign ownership or control of certain telecom services. Nine other countries guaranteed some degree of foreign ownership in their telecom services market. Third, signatories to the agreement adopted procompetitive regulatory principles, which help ensure that market access is fully realizable and that firms will be able to compete in markets that heretofore have been closed to competition. One of the most significant results of the negotiations was that 55 countries adopted a common text on pro-competitive regulatory principles, four countries agreed to adopt such principles in the future, and six others adopted some of the regulatory principles. No, each country submitted an "offer" (now a "schedule" in the final agreement), a document in which it listed specific commitments it was willing to undertake. In most cases, the United States achieved balanced reciprocal commitments from its major trading partners. The 15 member states of the European Community, Japan, Australia and many of the United States’ Latin American trading partners all agreed to open their telecom markets in 1998 or soon thereafter. Many developing countries guaranteed some level of foreign investment, set dates to phase-in liberalization of their markets, and agreed to all or most of the regulatory principles. Such commitments represent a significant improvement in the current state of telecom liberalization efforts in many countries. Yes. The Federal Communications Commission (FCC) has said it will review and make any necessary changes to its existing procedures to bring them in line with the United States’ BTA commitments. In addition, the FCC has indicated that it will establish a policy on international benchmark accounting rates this year in order to prevent competition in the U.S. telecom marketplace from being distorted. Yes, although given the dynamism of the global market and the differing pace of liberalization around the world, it is difficult to come up with precise figures. It is clear that, as a result of this agreement, many foreign firms will establish new telecommunications operations or make investments in the United States to further the growth of existing companies. This will lead to new jobs in this country. The agreement is expected to give a major boost to U.S. manufacturers of telecommunications equipment, as new telecom networks are established in many countries. This, in turn, will stimulate the manufacture and export of related information technology products. Leading U.S. telecom companies have long supported a multilateral agreement that would open up foreign markets in telecommunications services. Their question was whether such an agreement could be achieved. Our industry played an important role in identifying market access problems in key countries. U.S. industry interest in the negotiations was also demonstrated by the fact that more than 30 firms sent representatives to Geneva during the final week of the talks. Most of these firms, along with telecommunications trade associations and user groups, issued press releases welcoming the successful conclusion of the WTO agreement. Many industry representatives said they were "wildly enthusiastic" about the deal. Industry officials also are expected to testify before Congress and explain their support of the agreement. Several different groups stand to benefit from the implementation of this agreement: U.S. telecom service providers, U.S. telecom equipment manufacturers, corporate users of telecommunications services, and individual consumers.
9. Since India has already tabled commitments, how can current efforts affect bilateral relations with India positively? Numerous studies by multilateral agencies such as the International Telecommunication Union and the World Bank demonstrate empirically how liberalization creates jobs, spurs technological innovation, and stimulates economic growth.
10. Is the United States prepared to make any concessions to India with
regards to the
Sanctions apply only to lending to the Indian government, not to corporate entities. Furthermore, projects that have already been approved or are in the pipeline to be approved will not be affected.
Exhibit 4 – Sample Fact Sheet
Exhibit 5 – Sample India Congressional Testimony PRESIDENT INDIAN COALITION FOR ACCELERATED TELECOM LIBERALIZATION (ICATL) Testimony before the Subcommittee on Telecommunications Rayja Sabah Hearing on Competition in the Indian Telecommunication Market April 25, 1999 Good afternoon, I am President of the Indian Coalition for Accelerated Telecom Liberalization (ICATL). I appreciate this opportunity to highlight the importance of telecommunications liberalization in India. The Government of India is to be commended for formally embarking upon the development of a comprehensive and forward-looking telecommunications policy for India. The National Telecom Policy of 1994 (NTP 94) set the tone for government acknowledgement that an efficient telecommunications network is vital for the health of India’s economy. The New Telecommunications Policy of 1999 (NTP 99), announced April 1, 1999, builds on the goals set-forth in NTP 94. NTP 94 and NTP 99 are important first steps towards liberalization. However, more needs to be done in order to assure that the goals set-forth in each policy are realized. Indeed, the current under-supply of telephony in India threatens to limit India’s future economic potential. Current estimates show that India will require over $60 billion in telecommunications investment by 2006. Over 2.3 million citizens are already on India’s registered waiting list for phones, and 97 percent of India’s 600,000 villages have no telephone line at all. India needs to make binding commitments to all the principles set-forth in the WTO Basic Telecom Agreement Reference Paper. It also needs to expedite the introduction of competition into its telecom market. The importance of telecommunications to India's economy cannot be overestimated. Look at the industrialized countries. Their efficient telecommunication networks enable businesses to function efficiently, help medicine to heal more people, and help school children to learn. Efficient telecommunications systems also support the production of cost competitive exports. These benefits can be realized in India. An improved telecommunications infrastructure would give Indian health care professionals better access to medical applications and information—which in turn can help to raise health indicators. Improved telecommunications systems could also bring education to rural villages. Furthermore, by allowing the private sector to develop the telecommunications network, the Indian government can continue to focus its attention on other pressing social issues. The increased FDI inflows associated with a liberal telecom policy will also help enable the government to increase social spending for health care, water supply and sanitation, among other things. A common fear associated with committing to the remaining principles set forth in the WTO BTA Reference Paper is job loss. The truth is that jobs will not be lost but in fact created. The introduction of competition will require mobilization of labor to meet India's current demand for telephones. The Word Bank concluded that between 1990 and 1994, employment in markets with varying degrees of competition increased by 21 percent, whereas in monopoly markets, employment grew by only three percent. Moreover, an improved telecommunications system will facilitate the growth of internationally competitive service industries—industries that will employ India’s growing population of university degree holders. By increasing work opportunities for degree holders, university enrollment is likely to increase, and India’s "brain-drain" is likely to slow. The software industry already transmits code from Bangalore to the United States. A better telecommunications infrastructure would make this industry still more competitive by reducing its data transmission costs and increasing data security and transmission speeds. Tourism, banking, and air transportation are just a few examples of other industries that rely on efficient telecommunications services and would benefit from further telecommunications liberalization. The stock market would benefit too. End-users require increasingly divergent telecommunication service applications to meet their needs. Privacy is paramount for some. Others need the ability to rapidly transfer large volumes of data. Still others simply need low cost telephone services. Because no single service provider can meet all these needs on a cost-competitive basis, competition involving multiple service suppliers is desirable. Competition is also desirable because technological advancements are already enabling service providers to bypass the Indian government’s monopoly telecommunications provider. These innovations include callback services, Internet phone, low-earth-orbit satellites and global operators, all of which threaten to erode the market position of DoT, VSNL and MTNL and their high profit margins. Convergence, which allows interoperability of different networks functioning on different platforms, will also enable new telecommunication services to bypass the incumbent operators, further eroding the value of the state’s monopoly providers. The only way for India to reach it telecommunication development objectives in a timely fashion is to signal to the international community that it is serious about reforms. There are few better ways to do this than to make additional commitments to the WTO BTA Reference Paper. In order for India to reap the benefits associated with telecommunication liberalization, ICATL recommends that India:
Emphasizing the importance of competition in India's telecommunication sector is critical for the entire society. The benefits of competition far outweigh any risks, and India can guard against any risk through using the assistance of multilateral institutions. India cannot afford to wait any longer to begin enjoying lower costs, increased efficiency, and the numerous other benefits only a deregulated and competitive telecommunications sector can provide. Thank you for you time today and I would like to ask again for India's commitment to telecommunication liberalization by making binding all principles set-forth in the WTO BTA Reference Paper.
Exhibit 5 – Sample U.S. Congressional Testimony STATEMENT FROM THE U.S. TELECOMMUNICATIONS INDUSTRY
Testimony before the Subcommittee of Trade of the House Committee on Ways and Means Hearing on Competition in the Indian Telecommunication Market Mr. Chairman, Members of the Subcommittee, I represent America's largest telecommunications trade association. I appreciate this opportunity to inform the Subcommittee of the numerous legal, commercial and political factors in India that work to impede U.S. firms’ ability to participate in major telecommunications projects in India. With a population fast approaching one billion, India’s demand for telecommunications products and services is huge. Current estimates show that India will require over $60 billion in investment by 2006. American firms, which are among the world's most competitive and experienced suppliers, want to be able to compete in this lucrative market. According to the Economic Strategy Institute, the telecommunications industry in the United States employs over 2 million citizens, contributes approximately $8 billion in annual tax revenue, and created over $450 billion in economic activity last year alone. With the World Trade Organization's Basic Telecommunications Agreement, we estimate that approximately one million more jobs within the telecommunications sector could be created over the next ten years—if India makes additional WTO BTA commitments. The Agreement will also enable American consumers to save billions of dollars. Executive branch agencies and the FCC estimate that the average cost of international phone calls will drop by 80 percent, from $1 per minute on average to less that 20 cents per minute over the next several years—again, if India makes additional WTO BTA commitments. In its offer to the WTO, India refrained from signing additional commitments on regulatory principles. As a result, U.S. telecommunications companies are questioning the sincerity of India's commitment to liberalization. Current challenges for U.S. providers of telecommunications products and services in India include:
Each of these challenges severely constrains the ability of U.S. telecommunications firms to conduct business in India. U.S. officials can encourage governments to develop environments that minimize investor risk. U.S. officials need to work with their foreign counterparts to promote best practices in reform strategies and to address systemic factors that affect investment in telecommunication sectors. I recognize the contribution of agencies such as the Department of Commerce, Export-Import Bank, Overseas Private Investment Corporation and the U.S. Trade and Development Agency in the well-known and widely used programs that assist U.S. telecommunication companies that do business in India. However, these agencies need support from the United States Trade Representative's Office. I encourage Congress to authorize USTR to adopt an aggressive, incentive-based policy to open foreign markets to U.S. telecommunication equipment and services. Continual bilateral negotiations with India aimed at getting India to make additional BTA commitments should be a top priority for both the White House and USTR. The United States cannot afford to lose the nearly one million American jobs that expedited liberalization of the Indian market can help create. India can also ill afford to lose the millions of Indian jobs that expedited liberalization can help create. The Economic Strategy Institute estimates that if U.S. firms were able to capture 25 percent of non-U.S. telecommunications services markets, U.S. firm revenue would increase by $72 billion, and approximately $3.61 billion in net income would be repatriated to the United States. As foreign markets expand, the repatriation effect will grow significantly. If U.S. firms continue to maintain this share of foreign telecommunications services markets until the year 2005, U.S. firms would accumulate over $874 billion in revenues. Without appropriate support, U.S. firms are likely to lose market share to competition by firms from countries such as France, Germany, Sweden, Japan, Canada, Korea, Singapore, Finland, Australia and Hong Kong. This will translate into significant economic losses for U.S. telecommunications firms, losses in tax revenue to the U.S. government, and ultimately, the potential loss of thousands of American jobs. We need immediate action to remedy the continuous problems U.S. firms face while trying to conduct business in India. We ask for your support. Thank you for you time.
Exhibit 6 – Sample Op-ed (India) Op-ed Although India did make some market opening commitments in the World Trade Organization's Basic Telecommunication Agreement, it continues to stifle foreign direct investment in its telecommunications sector—this despite the fact that India sorely needs investment to bring the country’s telecommunication network up to par with international standards. Liberalization, deregulation, privatization and competition are all words that need to be seen in a positive light. They enable prices to tumble, innovation to accelerate, and development of information infrastructures to take off. Telecommunications will be the backbone of India's future economy and the international competitiveness of our economy increasingly depends on a telecommunications infrastructure that meets international standards. Furthermore, if India is to meet the objectives set-forth in the New Telecom Policy of 1999, India must be able to signal its commitment to liberalization and to the establishment of a pro-competitive regulatory environment. Only then will India be in a position to attract the capital flows required for the development of its telecommunications infrastructure. There is no better way to do this than to implement the commitments tabled at the WTO and to commit to all the principles set-forth in the Basic Telecommunication Agreement's Reference Paper. What good was signing the WTO Agreement if foreign companies are hesitant to invest in India? Exhibit 6 – Sample Op-ed (U.S.) Op-ed The successful conclusion of the World Trade Organization's negotiations on Basic Telecommunications signaled to the United States that the world's $725 billion telecommunications market would soon be liberalized. Nonetheless, India continues to maintain some of the most restrictive telecommunication policies in the world. Foreign ownership is severely limited and competition is restricted to a handful of wireless and value-added services. Monopolies retain exclusive control of the infrastructure necessary for competition. Monopolies, the established players in the Indian market, derive large revenues from their privileged market position. But India’s consumers lose out. If India doesn’t allow competition in its telecommunications market, it is unlikely that the country will be able to establish an up-to-date telecommunications infrastructure needed to support the information intensive industries that are expected to define the 21st century. Market liberalization is difficult to manage. Indeed, the U.S. Congress faced significant challenges in opening the U.S. market. However, this process is well worth it. Liberalization enables prices to tumble, innovation to accelerate, and the development of information infrastructures to take off. To truly reap the benefits of the information age, India must not only dedicate itself to implementing the commitments it tabled at the WTO, it must also make binding all principles set forth in the Basic Telecommunication Agreement's Reference Paper. It would be wise for India to take additional commitments, similar to those taken by 59 other countries, to expedite liberalization of its telecommunication market.
Exhibit 7 – Sample Letter to the Editor (India) Letter to the Editor Sir, in response to the article in your March 4, 1999 issue that praised the successes of the WTO Basic Telecommunications Agreement (WTO BTA), I would like to point out that the picture isn't as rosy as you painted. Due to India's minimal BTA commitments, India is now internationally recognized as a country that is not dedicated to telecommunication liberalization. Fifty-nine of the world’s largest and most successful economies have committed to all the principles stated in the Basic Telecom Agreement's Reference Paper. They seem to understand the importance of telecommunications competition, privatization, deregulation, and liberalization. Although India recognized the importance of telecommunications liberalization in its New Telecom Policy of 1999 (NTP99), many of the objectives listed in NTP99 will never be realized due to India's minimal WTO BTA commitments. India needs to commit to all the principles set forth in the BTA Reference Paper in order to signal to the international community that it is serious about telecommunications liberalization. Sincerely, President
Exhibit 7 – Sample Letter to the Editor (U.S.) Letter to the Editor Sir, in response to the article in your March 4, 1999 issue that praised the successes of the WTO Basic Telecommunications Agreement, I would like to point out that the picture isn't as rosy as you painted. This Agreement, it was hoped, would liberalize the world’s $725 billion telecommunications market. For this reason the United States took commitments that offered foreign firms unfettered access to compete in its markets on an equal footing with national companies. Despite these commitments, India maintains regulations that restrict U.S. participation in their markets. These barriers have substantial negative consequences for U.S. telecommunication firms and the U.S. economy. If U.S. firms were able to capture 25 percent of non-U.S. telecommunications services markets, it is estimated that their revenue would increase by $72 billion, and approximately $3.61 billion in net income would be repatriated to the United States. If U.S. firms continue to maintain this share of foreign telecommunications services markets until the year 2005, U.S. firms would accumulate over $874 billion in revenues. For these reasons, the United States cannot tolerate minimal commitments from India, a country that will need over $60 billion in investment to meet its own goals by the year 2005. The United States must stand firm and not only ensure that commitments made at the WTO are enforced, but also demonstrate to India the benefits of liberalization. We cannot wait and let opportunity slip by. Let our elected officials know that if the United States is to live up to its commitments, so must India! Sincerely, President
Exhibit 8 – Sample Letter to Member of Congress Dear Congressional Colleague, U.S. telecommunication firms that export their products and services internationally face extreme difficulties in entering the Indian marketplace. With the completion of the WTO's Basic Telecommunication Agreement, U.S. telecommunication firms anticipated a market that would offer new opportunities for growth, which the already saturated U.S. market can not offer. But the challenges U.S. telecommunication firms face in cutting through the Indian government’s red-tape and non-transparent policies are costing millions of dollars in wasted effort. If U.S. firms cannot overcome these challenges, American jobs could be lost. The U.S. telecommunication industry currently employs over two million citizens. It is expected that through opportunities that exist in emerging markets such as India, an additional one million jobs can be created over the next ten years. In addition, expanding into overseas markets can help to reduce the average cost of phone calls from over $1 per minute to less than $.20 per minute over the next several years. The U.S. has aligned its domestic policies with the principles stated in the WTO BTA Reference Paper. So too should other countries. We cannot afford to wait until India slowly aligns its policies with its minimal BTA commitments. For these reasons, we ask you to raise the issue in appropriate fora. This way we can ensure that your constituents are not displaced from their jobs in the telecommunication sector. We will also be able to create new export opportunities for firms in your district, which will not only bring increased revenue to your constituents, but will also lead to increased job opportunity. We look forward to your support in this matter. Should you have any additional questions, please don't hesitate to contact me. Sincerely,
Exhibit 9 – Sample Letter to U.S. Telecommunication Company Executives Dear Telecommunication Company President: The Telecommunications Alliance is developing a strategy to address your concerns about market entry into India. We would like you to participate in a Roundtable discussion on March 21, 1999 with other telecommunication industry leaders from the United States as well as the international community. Although American telecommunication firms are among the world's most competitive and experienced suppliers, numerous legal, financial and political factors in India serve to impede our participation in major development and enhancement projects. Our Telecommunications Roundtable will address the following issues related to the Indian market:
It is our hope that through discussion, we will be able to develop innovative solutions to the current problems. The results of the discussion will be incorporated into a report that subsequently will be forwarded to U.S. officials who can encourage foreign governments to develop less risky investment environments. U.S. officials need to work with their foreign counterparts to promote best practices in reform strategies and to address systemic factors that affect telecommunications investment in India. Your participation is strongly encouraged. Please complete the attached registration form and mail it to us in Washington D.C. Should you have any further questions, please don't hesitate to call. Sincerely,
Exhibit 10 - Letter to Foreign Telecommunication Company Executives and Government Officials Dear Telecommunication Company President: The Telecommunications Industry Association would like to request your presence at a Roundtable discussion on March 21, 1999. Other participants will include telecommunication industry leaders from the United States as well as the international community. The purpose of this Roundtable will be to address the numerous legal, financial and political factors in India that serve to impede foreign firms’ participation in major development and enhancement projects within India’s telecommunication sector. Our Telecommunications Roundtable will address the following issues concerning the Indian market:
It is our hope that through discussion, we will be able to develop innovative solutions to the current problem. Your participation is strongly encouraged. Please complete the attached registration form and mail it to us in Washington D.C. Should you have any further questions, please don't hesitate to call. Sincerely,
Exhibit 11 – Sample White Paper
Diffusing India's Fears of Telecommunication Liberalization Sample White Paper (For Distribution in India) India has everything to gain from facilitating the entry of competitive private sector companies into its telecommunications market. With privatization, telecommunications services would likely drop in price, become more reliable, and become better able to meet the diverse needs of end-users. By improving local firms' access to efficient telecommunication providers, India can greatly enhance its businesses’ competitiveness – including their ability to participate in the dynamic international markets for information-intensive products and services. Moreover, by facilitating the entry of foreign companies into the market, India would gain valuable investment inflows. India's participation in the WTO’s Agreement on Basic Telecommunication Services as well as India's forward-looking telecommunications policies set the stage for a new era of telecommunications development in India. The National Telecom Policy of 1994 (NTP 94) set the tone for government acknowledgement that an efficient telecommunications network is vital for the health of India’s economy. The New Telecommunications Policy of 1999 (NTP 99), announced April 1, 1999, builds upon the goals set-forth in NTP 94. Although NTP 94 and NTP 99 are important first steps towards liberalization, more needs to be done if the goals set-forth in each policy are to be realized. The Indian government’s monopoly on telecommunications services has failed to develop cheap, reliable, and state-of-the-art communications systems. New technological developments will soon render this monopoly system largely obsolete. India should waste no time in adopting a pro-competitive regulatory environment and making binding commitments to all principles set forth in the WTO Reference Paper. The Shortcomings of India’s Telecommunications Monopoly Advocates of India’s monopoly telecommunications system argue that privatization would lead to wasteful duplications of facilities, fail to provide universal service, result only in cream skimming, and lead to significant job loss. These are outdated concerns that fail to consider the benefits of modern technological advances.
Indian officials have also argued that new entrants in their telecommunications markets are likely to focus on the most profitable parts of the market – typically international and national long-distance and local business telephone services – or on the largest customers in these market segments. Cream skimming should be viewed not as a negative and unwholesome activity, but as normal market behavior. "Taking the cream away," helps correct price distortions and enhance incentives for cost reductions.
India’s Need for New Telecommunications Policies The rapid expansion of global services and technological advances places serious pressure on India to create new policies to accelerate telecommunication liberalization. Sooner or later, on their own initiative or forced by technological innovation, India will have to compete with large public operators based in their own domestic market as well as foreign markets. 1. Domestic Competition
Until quite recently, governments and public operators in India were fairly effective at blocking international competition in their domestic telecommunications markets. Since the mid-1990s, however, new and difficult-to-control sources of competition have been emerging and spreading rapidly. These include:
India could attempt to contain these pressures through regulatory mechanisms, but there are few policies that can control the expansion of the new technologies, and unprepared public operators in India will find it increasingly difficult to compete against the commercial and technological sophistication and dynamism of international competition. New information technologies and services will progressively and irreversibly erode the market position of DoT, VSNL and MTNL, as well as their profit margins. The financial value of these companies are almost certain to deteriorate, making them even less attractive to future investors. Since the 1980s, information has been recognized as a fundamental factor of production, along with capital and labor, because businesses are more and more dependent on timely access to physical and informational inputs from around the globe. The information sector accounted for one-third to one-half of GDP and employment in OECD countries in the 1980s, and this number is expected to reach 60 percent for the European Community by 2000. The simple fact is that efficient and diversified telecommunications networks are now vital to the smooth functioning of an economy, and India’s economy is no exception. India’s information-based industries are expanding rapidly, and these industries are dependent on fast and reliable information transmission. Indian engineers, for example, transmit software code from Bangalore to Texas Instruments; they must be able to transmit large amounts of data securely and at a reasonable cost if they are to remain competitive internationally. By reducing telecommunications costs, India’s information industries can become even more competitive. India’s policies need to be reassessed to better address the needs of its information-based industries, as well as other industries.
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