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The Department of Telecom Services, that brand-new new offshoot of the Department of Telecom, has finally decided to enter the cellular phone market.

Union Minister for Communication Ram Vilas Paswan said today that, to begin with, the services will be provided in three states.

The DTS will rely on the Global System for Mobile Telecommunications, which is used by private sector operators in India. The Mahanagar Telephone Nigam Ltd, meanwhile, continues to rely on the WLL system. The GSM is a superior technology and provides better coverage.

The investment involved is estimated to be Rs 450 million, and though Telecom Committee Chairman Anil Kumar declined to name the three states where DTS will provide its services. These could be the states that the licenses of private player Koshika were cancelled, Bihar, Orissa and Rajasthan.

While restructuring DoT, the government had separated the policy and licensing functions from the service provision functions, creating the DTS.

DTS will be like any other operator and will have no role in the policy and licensing functions. DoT will continue to manage this area.

DoT plans to raise Rs 21 billion through a seven-year bond from financial institutions. This will be done in three phases, sources said, refusing to divulge details.

Paswan admitted that the government alone cannot meet the telecom requirements of the country, especially going by the rate the information technology industry is growing.

"The government has invited private sector participation in practically all telecom services, including cellular phone services, fixed telephones and Internet services," he said.

The government has decided to end the era of two cellular operators in metros and telecom circles.

"There will be two more operators in addition to the existing two. And one of the two new operators will be either DTS or MTNL."

Earlier in the day, addressing the final day of the Economic Editors Conference, Paswan reiterated that the government has decided to end the 'duopoly' in fixed telephone services and to bring in a 'multipoly'. This would mean allowing more than two operators in various telecom services.

"The government's monopoly in domestic long-distance services will also be abolished with effect from January 1, 2000," he said.

Paswan said the government had decided that instead of a fixed licence fee, operators will have to pay first an entry fee and then a percentage of the revenue earned. This, he said, would liberalise various telecom services and simplify licensing conditions. The Telecom Regulatory Authority of India recommendations regarding the percentages to be paid, the number of operators permitted and other related issues are awaited.

Existing cellular and fixed service operators will be allowed to migrate from the fixed licence fee regime to the revenue-sharing regime, he said, adding that the entire arrangement was to be finalised by January end with the operators, with supplementary agreements being signed later.

Paswan said TRAI should be given sufficient clout to increase healthy competition in the telecom sector, which incidentally attracts the highest foreign direct investment. The New Telecom Policy aims at dispelling any misconception that DTS will take undue advantages or will be a hindrance to healthy competition.

"In fact, the corporatisation of DTS as in the form of 'India Telecom' will be done by 2001. For this I have constituted a steering group headed by the secretary, DTS. A consultant will be engaged to prepare a detailed report on setting up India Telecom. The consultant and the steering group will interact to produce a report on corporatisation, taking into consideration the views and interests of all concerned, including the staff and the union," he said.

Paswan has assured that all state capitals will be able to provide telephone on demand by March 31, 2000.

"Our target is to increase tele-density in rural areas from 0.6 per 100 to four per 100 by 2010 and to 15 per 100 in urban areas by 2010," he said. The current growth rate of new telephone connections is estimated at 20 per cent annually.

He also emphasised the need to expand the reach of the Internet to villages and gave an assurance that Internet nodes would be put up at all district headquarters by 2000.

The minister has set up two separate committees, aimed at looking into the development of rural areas and customer care respectively. Paswan said the communication problems in Orissa in the wake of the cyclone is being given top priority and said telecommunications in the state would return to normal by December 15.

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