In this paper we chart the development of telecommunications in Bhutan. Since the introduction of telecommunications services in 1963 Bhutan has faced many challenges as it has sought to roll out a network that covers the whole population and country. A small population, a mountainous geography, a transitional economy and a unique approach to development - Gross National Happiness - present many challenges that need to be overcome if the telecommunications industry is to develop further. Added to this is the decision of Bhutan to join the outside world through membership of the ITU etc that has added liberalisation and privatisation to the challenges faced by Bhutan. In this paper we argue that there are two broad policy options that Bhutan could adopt - network expansion nationally or investment concentration towards urban areas. With the limited resources available to Bhutan these policies contradict one another, and will take the telecommunications industry in quite different directions if adopted.