On the Issues of Opening Up Telecommunications

Joshi ¢ The telecom monopoly of the government was the most glaring example of the socialistic policies of the Indian government. After waiting for years for a telephone hook up, the Indian consumer was given very poor quality service at exorbitant costs. Some of the common problems of India and Israel come from their common past, rooted in the British colonial system. When economic policies do change, the results are impressive. The changes in venture tax laws have led to significant increases in venture capital activities in India. The employee productivity among Indian high-tech companies is comparable to the U.S., and stock options have something to do with this. Open telecom is already showing improvements in the quality and cost of service to the Indian consumer that would have been unimaginable only a few years ago.

Gilo ¢ In Israel the cable, steel , and big telephone companies are all government owned. Really, there's no second carrier. Cellular is the only area in telecom that is open.

Joshi ¢ In India, one very interesting thing happened . The government could not regulate cable TV. So, the imaginative small entrepreneurs decided to provide this service to their own neighborhoods. Around their own satellite dish, they pulled the cables and wired the neighborhood without any government approvals . For a nominal monthly charge the consumers enjoy some 60 channels, and about 50 million households are connected with the world. The government scratched its head and could not come up with any existing laws that prohibited this phenomenon . Well, these cable signals are quite like sunshine and they thought they could regulate sunshine, but couldn't. So you have this flourishing cottage industry. Now we hear the same entrepreneurs want to do something similar for household telephony. I would love for it to happen. After all, no one can regulate sunshine!

Gilo ¢ When you look at high-tech business in India today, is there any focal point that through government intervention/assistance you have concentrated upon? Has your focus moved, for example to software development versus telecommunications or semiconductors, or is it all over the place?

Joshi ¢ The role of government in India is a very interesting story. In 1963 India had a massive problem in not being able to feed itself. So the government got out of the way and gave the farmers freedom, facilities, and tax incentives to grow and India today not only feeds its one billion citizens , but also outproduces the U.S. in agriculture, dairy , poultry, etc. It also has the largest reserve of food grains. This is truly an impressive story of supportive government actions.

Next comes the example of India's successful software industry. Here, the government did not quite know what it was and how to deal with it. They gave the industry export tax incentives in days when India was faced with a foreign exchange crisis. But, by and large, the government has stayed out and the results are there to see. Contrast this with the performance of the Indian hardware industry and there is not much to write home about. The governments had ridiculous requirements of domestic content in each product and import duty rates were sometimes several hundred percent. This led to inferior, expensive, and often outdated products, with very limited product options available to Indian consumers. The domestic hardware manufacturers had no incentive to be competitive under these protections .

Now, things have changed for hardware too. The automobile, television, and personal computer industries are great examples of the positive changes taking place in the Indian hardware manufacturing sector. Virtually every world-class manufacturer is now engaged there and some are finding India an attractive source of exports, such as the Mercedes cars being shipped from India to neighboring countries .

There are governmental bodies for long- term policy making, but the private industry associations are playing an increasingly effective role in shaping new policy changes in India.