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Monday, November 24, 2003

On rural telephony

There is a thought provoking article on rural telephony on the current issue of Business World:

"Policymakers have been tinkering with the noble goal of universal service for some time now. Historically, the incumbent Bharat Sanchar Nigam (BSNL) has been responsible for it, receiving subsidies through the access deficit charge. When telecom was privatised in 1997, the rural obligation was included in the licence conditions for private players. That didn't work out at all - the private basic operators chose to ignore the obligation and pay the fines instead. Also, as the definition of rural connectivity asked for a mere point of presence, or village public telephones (VPTs), some basic service providers created the VPTs without giving the actual connection. The result: while private basic operators promised to put up 98,000 phones, they have set up just 12,000.

So the National Telecom Policy 1999 announced the setting up of a Universal Service Fund (USF) in April 2002. This fund gets 5% of the revenue share of all private telecom players. Companies are invited to bid for rural tenders and the winner is the operator that asks for the least subsidy from the fund. Thus, the USF expects to disburse $2 billion over the next five years.

On paper, the model appears flawless. It is based on a competitive model of bidding (the tenders are auctioned); the financial burden is equally spread (all private players contribute to this fund) and the selection is based on parameters other than cost. The model works on the principle that if the losses incurred in rural telephony are adequately covered, then companies will eagerly do their bit for rural India."

Dhawan goes on to cite the example of Bangladesh to demonstrate that universal access is indeed possible in the South Asian context and talked to n-Logue which has an alternate vision of what can be done to achieve universal access.

Brad had posted a story on his weblog sometime back which quoted TRAI as claiming that it expects the country's phone user base to cross 70 million by March. At that time, I commented that the million PCOs in India go a long way towards meeting the needs of the rural poor. Now I am not so sure. It would be interesting to look at how those PCOs are distributed geographically.

But any which way you look at, the existent incentives to jumpstart rural telephony is not working. But I guess the good thing is that at the rate at which we are going, we are poised to add 20 million telephone lines in a year's time.

Incidentally, TRAI rolled out its new recommendations on unified licensing regime sometime back. Hindu Business Line is not too impressed.

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