India Opens International Telephony Ahead of Plan

BANGALORE, INDIA (09/06/2000) - The Indian government has announced that it is opening international telephony to the private sector ahead of schedule. Coming on the eve of an official visit to the U.S. by Indian Prime Minister Atal Behari Vajpayee, the move is evidently aimed at attracting U.S. investment in the India's telecom sector.

India has decided to end the monopoly of Videsh Sanchar Nigam Limited by April 1, 2002, according to an announcement made by Ram Vilas Paswan, India's minister of communications, on Wednesday. Videsh Sanchar Nigam Limited (VSNL), the country's overseas telecom carrier, which is majority-owned by the government, was to have a monopoly on international telephony until 2004.

Earlier this week, the government also announced that it would throw open the operation of basic telephone services in the Indian states to any number of private sector entrants. The government had earlier restricted the number of operators in each state to two, of which one was the government's own department of telecom services (DTS). Paswan announced that the government had decided to let market forces determine the number of players the sector could support. Private sector entrants will no longer have to pay upfront license fees to the government but instead enter into a revenue sharing agreement with the government.

Even as it privatizes both domestic and international telecom services, the government continues to restrict foreign investment in companies offering telephony and Internet services to 49 percent of the equity of these companies.

In the last few months, VSNL has seen its control over a number of international services whittled down. For instance, the government has allowed private sector companies to set up their own international gateways to the Internet. Earlier, VSNL was a bulk buyer of Internet bandwidth, which it sold out to private sector Internet service providers (ISPs). The government has announced that it will compensate VSNL for losing its monopoly over international telephony ahead of schedule by a number of measures, including allowing the company to get into domestic communications services such as country-wide long distance telephony.

The government is continuing with its reforms of the telecom sector, even as staff of the government-run DTS and department of telecom operations (DTO) are on strike in connection with the government's plans to merge the DTS and the DTO into a corporate entity called Bharat Sanchar Nigam Limited.

India's Ministry of Communications in New Delhi can be reached at 91-11-3710350 or http://www.dotindia.com

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