This paper explores the causes behind the institutional change that promoted regulated private-sector competition in India's booming telecommunications sector. This change occurred incrementally by resolving conflicts of interest driven by the twin engines of fiscal crisis and technological change in cellular telephony. The Prime Minister's Office and the Ministry of Finance pushed for the change, whereas the Department of Telecommunications resisted it. As private participation succeeded, the relationship between the private sector and government financial organizations made a significant impact on parts of the government that favored change. Cellular technology offered the private sector with a first-mover's advantage because it had gambled on it when government-owned corporations had ignored its commercial potential. Evolutionary change occurred through a process of institutional layering that involved establishing new institutions along the edges of old ones and allowing them to grow differentially. The pace of institutional change accelerated in times of financial crises when the mismatch between policy intention and institutions led to a withdrawal of private investment.

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