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Techno-Economic Modeling of Basic Telecommunication Services in India: A System Dynamics Approach

Techno-Economic Modeling of Basic Telecommunication Services in India: A System Dynamics Approach
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Author(s): Piyush Jain (Indian Institute of Management, India)
Copyright: 2003
Pages: 3
Source title: Information Technology & Organizations: Trends, Issues, Challenges & Solutions
Source Editor(s): Mehdi Khosrow-Pour, D.B.A. (Information Resources Management Association, USA)
DOI: 10.4018/978-1-59140-066-0.ch344
ISBN13: 9781616921248
EISBN13: 9781466665330


Traditionally, voice communication has been characterized as three distinct types of services: local, national long distance and international long distance. Local telecommunication service (also referred to as Basic Telecom Service) is used to describe the provision of local access networks (“last mile” connection) over relatively short distances. Historically, basic telecom services were considered as “natural monopoly” because of the following reasons: there is huge fixed and sunk cost associated with the investment on the local loop; duplication of local loop is not possible and economically justifiable. In the U.S. basic services were opened up for competition after the landmark Telecommunications Act of 1996 was passed. In India, basic services were provided by the government owned/controlled monopoly operators. The service areas are designated as circles. The government invited private participation in 1995 for the provision of local and intra-circle long distance calling and envisaged a duopoly structure. During 2001, the government decided to further open up basic services without any restrictions on the number of operators. Currently the new license holders are deploying infrastructure and have already started rolling out services in certain circles. India’s tele-density is a little over 3.8 per 100 currently. The New Telecom Policy drafted in 1999 envisages a tele-density of 7 by 2005 and 15 by 2010 (NTP, 1999). A thorough understanding of the mechanics of growth of the basic telecom services is of interest to policy makers, regulators and the service providers. Especially in developing countries such as India where the basic telecom services is still in its infancy, an understanding of the structure of the erstwhile monopoly market is the first step in this direction. This study can pave way for analyzing the more complicated oligopoly market, which countries such as India will face in the near future.

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