India’s mobile revolution connected hundreds of millions of people, made calls cheaper and expanded internet access. But the rules governing the industry continued to follow a system designed for the landline era. The country was divided into telecom circles, and operators had to navigate separate licences and conditions to expand across regions. Although the government eased the industry’s financial crisis in 1999, it retained this structure.
The Telecommunications (Authorisation for Provision of Principal Telecommunication Services) Rules, 2026, introduce a new framework under which operators can seek authorisation for the whole country or individual circles. The change raises a larger question: could India have built its mobile network with fewer regulatory hurdles and lower costs, and will the new rules address the problems left behind by the old system?
TIMELINE
1994 – Private mobile licences begin: The first licences cover Delhi, Mumbai, Kolkata and Chennai. The country is divided into telecom circles, with separate licences for each area.
1998 – Operators face financial trouble: High licence fees and lower-than-expected earnings leave eight operators in default.
1999 – Payment rules change: The New Telecom Policy allows operators to shift from fixed licence fees to revenue sharing, easing financial pressure.
2003 – Services become more flexible: Operators can offer fixed-line and mobile services under a single licence, but the circle system remains.
2010s–2025 – Calls for reform continue: Industry submissions seek changes to interconnection arrangements. In February 2025, TRAI recommends changes to telephone-number management, including the migration of SIM-based machine-to-machine connections using ten-digit numbers to a 13-digit numbering series.
2026 – A new authorisation system: Rules notified on June 23 establish a new framework for telecom authorisations. Existing licensees can apply to migrate to the new regime under separate rules.
How did India create its circle-based telecom system?
In November 1994, the Department of Telecommunications issued India’s first cellular mobile licences, covering Delhi, Mumbai, Kolkata and Chennai. The National Telecom Policy of 1994 opened the market to private operators because the government needed private investment to expand telecom infrastructure.
The country was divided into 22 administrative telecom circles, broadly based on state boundaries, with four metropolitan circles treated separately. The arrangement drew on the landline system, which was organised around geographical areas for administration and billing. Two operators were allowed in each circle, with fixed licence fees payable upfront for ten years.
The system gave the government a way to organise the early market. But as mobile services expanded, companies had to navigate a licensing structure organised around geographical boundaries even as their networks increasingly operated across them.
Why did the original licensing system run into trouble?
By the late 1990s, operators were struggling to meet the fixed licence fees they had agreed to pay. They had invested heavily in network infrastructure, but subscriber growth and usage fell short of expectations.
An ICICI study found that 17% of subscribers had barely used their mobile phones, while 37% paid monthly bills of less than ₹500. A separate TRAI study in 1999 reported that expensive infrastructure was underused and operators were struggling to recover their costs.
High licence fees, interconnection charges and spectrum usage charges added to the pressure. Interconnection charges arose from arrangements between operators to connect their networks and carry calls between them. By 1998, eight operators were in default on licence-fee payments.
How did the 1999 policy rescue the industry?
The New Telecom Policy of 1999 allowed operators to move from fixed licence fees to revenue sharing based on Adjusted Gross Revenue (AGR). Payments were linked to revenue rather than a fixed amount that companies had to pay regardless of their earnings.
The change eased the financial burden and helped encourage investment and industry recovery. However, it addressed the immediate financial crisis without overhauling the licensing structure.
Why did the 2003 reforms not remove the circle system?
The Unified Access Services regime introduced in 2003 allowed operators to provide fixed-line and mobile services under a single licence. It gave companies greater freedom over the services they could offer, but the geographical licensing framework remained.
Why did the old system continue to create problems?
The circle system affected more than licensing. Interconnection arrangements also retained elements of the older, geographically segmented telecom system.
In modern internet-protocol networks, voice can be carried as digital data, broken into packets and routed across an integrated network. Yet some interconnection arrangements continued to reflect older network structures. Industry submissions through the 2010s and into 2025 sought more uniform national interconnection points that better matched modern network design.
Telephone numbering presented a related challenge. Even after ten-digit mobile numbers and Mobile Number Portability allowed customers to change operators without changing their numbers, some rules governing routing and billing remained tied to older geographical boundaries.
In February 2025, TRAI recommended changes to the national numbering plan, including the migration of SIM-based machine-to-machine connections using ten-digit mobile numbers to a 13-digit numbering series. It also recommended measures to improve the use of numbering resources and address shortages. These proposals illustrated how telecom regulation involved not just licences but also the systems used to identify, route and manage services.
Why did the old arrangements persist?
The existing framework was embedded in licensing conditions, spectrum management, network investments and established interconnection arrangements. Moving away from it required changes across several parts of the regulatory system, as well as coordination between the government, regulators and operators.
The available evidence does not establish how much responsibility each factor bore for the delay in reform.
What do the 2026 rules change, and what remains unresolved?
The Telecommunications (Authorisation for Provision of Principal Telecommunication Services) Rules, 2026, notified on June 23 under the Telecommunications Act, 2023, establish a new authorisation framework. The framework provides for authorisations with a validity of 20 years, subject to the applicable terms and conditions. Operators can seek authorisation for the whole country or individual service areas.
The framework is designed to simplify the regulatory structure and provide greater flexibility in the services and technologies operators can use. It consolidates several categories of telecom permissions into a common framework, with distinct authorisations and conditions for different services and operators. The authorisation document is designed to be a single page, compared with the extensive conditions associated with the earlier Unified Licence.
The transition is not automatic. Existing licensees can apply to migrate under separate migration rules, while those that do not migrate may continue under their existing terms, subject to the applicable provisions.
The new framework simplifies authorisation, but it does not by itself settle wider questions about spectrum policy, interconnection pricing or infrastructure sharing. Nor does it automatically remove every arrangement linked to geographical service areas.
Did India squander its chance?
India built one of the world’s largest telecom markets despite the complications. Voice calls became among the cheapest in the world, and mobile internet expanded rapidly. The circle-based system helped organise private investment and supported that growth.
But the industry’s success does not mean the regulatory system was as efficient as it could have been. India may have carried avoidable costs and complications for longer than necessary. Whether a different system would have delivered substantial savings remains uncertain.
How much did circle-based licensing and interconnection add to operators’ costs?
Under the earlier licensing system, telecom operators faced several costs for operating across different service areas, known as telecom circles. These included entry fees, processing charges and bank guarantees. Entry fees varied by licence category and service area, with the figures cited in the applicable schedules ranging from ₹50 lakh for smaller circles to ₹15 crore for nationwide multi-service coverage. Operators also paid an annual licence fee of 8% of adjusted gross revenue (AGR) under the applicable Unified Licence terms.
Beyond these direct charges, managing separate licences, compliance requirements and interconnection agreements across circles added to administrative and legal work. However, the available information does not quantify the total cost of these arrangements or establish how much operators could have saved under a simpler system.
Which requirements will change under the 2026 framework, and which will remain?
Under the Telecommunications Act, 2023, and the 2026 framework, the system is moving from licences and permissions issued under the older telegraph laws to an authorisation regime. The changes include consolidating several service categories under a common framework, revising applicable entry fees and financial guarantees, and moving towards paperless online processes. Network Service Operators (NSOs) and Virtual Network Operators (VNOs) are covered under the framework, with separate eligibility conditions and financial requirements.
However, authorisation does not remove other regulatory obligations. Operators must continue to comply with applicable national security checks, ownership and foreign investment rules, requirements on trusted network equipment, technical standards, lawful interception provisions and data-retention requirements. Spectrum allocation will also continue to be governed separately under the applicable rules, including through government auctions where required.
The precise obligations and financial requirements will depend on the type of authorisation and the conditions applicable to each operator.
What practical changes would show that the new rules have made telecom regulation simpler and less costly?
The impact of the new rules can be measured by how much easier and faster operators find regulatory processes. Shorter waiting times for letters of intent and authorisations through the Department of Telecommunications (DoT) eServices portal would indicate that approvals are becoming faster. Lower bank guarantee requirements, where applicable, would mean that operators need to set aside less money, leaving more funds available for their businesses.
Other signs of improvement would include fewer duplicate submissions, simpler procedures for existing licence holders to migrate to the new system, fewer disputes over overlapping licence definitions, and an easier path into the market for VNOs and internet service providers.
Comparing these measures before and after the new rules take effect would help establish whether regulation has become simpler and less costly, and by how much.