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Long Way to Go: Issues and challenges in rural telecom growth

June 01, 2012

As per the Census 2011, of India’s 1.21 billion population, 833 million live in the rural areas while 377 million live in the urban areas. In sharp contrast, of the 951 million telecom connections in the country, 620 million comprise urban subscribers while only 331 million are rural users. These facts underline the urban-rural digital divide in the country. While the gap is narrowing due to the telecom operators’ increased focus on tapping these regions and the government’s efforts to take the communications network to the hinterland, the road to success seems long.

In 2011, the government announced a project to develop the Rs 200 billion National Optical Fibre Network (NOFN) for providing connectivity in the rural areas. Through the NOFN, the government plans to provide rural broadband connectivity to the 250,000 panchayats in the country over the next three years.

However, the government needs to now fast-track the project. While  a beginning has been made by identifying the organisations that will implement the project, work on the ground has reportedly not been initiated.

The state-owned operators have played a key role in expanding rural telephony. Bharat Sanchar Nigam Limited (BSNL), for instance, has a vast telecom network, covering the remotest regions of the country and accounts for 30 per cent of the rural wireline subscribers. However, the company’s operations in rural areas have proved to be financially unviable and have been the key reason for its reported losses during 2010-11. Recently, BSNL was pulled up by the government for delays in the execution of projects and substandard performance.

As far as private operators are concerned, the rural sector was high on their priority list about a year and a half ago. However, the financial overstress caused by the high spectrum costs has put their rural expansion plans on the back burner.

Growth so far

The rural wireless subscriber base witnessed a growth of 17 per cent from 282.23 million as of March 2011 to 330.82 million as of March 2012. In comparison, it grew by 41 per cent between March 2010 and March 2011.

The share of rural users in the total wireless subscriber base increased marginally from 33 per cent in March 2011 to about 35 per cent in March 2012. The wireless segment has played a major role in the spread of rural telephony. Almost 98 per cent of rural connectivity is through the wireless platform.

As urban clusters have become saturated, the sector’s overall growth too has slowed down. The subscriber addition has come down from 18-20 million per month to 5-7 million. Most of the new users belong to Category B and C circles. In the past one year, the Category B circles have shown the highest net addition in subscribers and the Category C circles have shown the highest monthly growth rate in the wireless segment.

Compared to the growth in wireless services in the rural segment, broadband penetration in these regions has been poor. Broadband is one of the key catalysts for economic development. Major initiatives taken by both the government and service providers are needed to increase its penetration. However, the high cost of devices like PCs and laptops, high internet charges and low wireline connections have been some of the major factors inhibiting broadband penetration in the rural areas.

Besides the centre’s e-governance initiatives and the Universal Service Obligation Fund’s optic fibre cable  programmes, there has been no major innovative move on the part of private sector players to take the internet to these regions. In fact, as part of their 3G and 4G service roll-out strategy, operators are concentrating on urban areas where ARPUs are much higher compared to those in the rural regions. The high speed wireless platform could have been a faster way of broadband deployment in the hinterland. But it seems from the plans of various operators that these regions will not have access to 3G and 4G services before 2013.

Key challenges

Lack of telecom infrastructure like towers and base transceiver stations in semi-rural and rural areas is one of the major hindrances in tapping the potential of the rural market. Tower operators have to bear a huge initial fixed cost to enter rural service areas. Most of the tower companies have currently put their infrastructure roll-out plans on hold due to their distressed balance sheets. Indus Towers, the largest telecom tower company in India, is not looking to roll out fresh sites unless required. It is a similar case with other companies like ATC, Viom Networks and GTL Infrastructure.

Further, as many rural areas in India lack basic facilities including roads and power, developing telecom infrastructure in these regions would involve greater logistical risks and increase the time taken to roll out telecom services. The lack of trained personnel to operate and maintain cellular infrastructure, especially passive infrastructure such as towers, in rural areas is also seen as a hurdle in extending these services to the underpenetrated rural segment.

Another major challenge faced by operators in these regions is the dismal state of rural electrification and poor quality of power. Conventional grid power is not available in most rural areas and in some cases the grid is some distance away from the telecom sites. Furthermore, wherever grid supply is available, the quality of power is poor and erratic. This is mainly due to supply interruptions and voltage fluctuations. This causes data loss and data errors in communications network equipment.

Given these issues and challenges, operators are struggling to make a business case of their rural operations.

The way forward

Today, access to telecom services has thrown up several socio-economic opportunities for the rural population. The people – whether it is women, farmers, landless labourers or small-scale industry players – are increasingly benefiting from telecom services. The industry has created employment opportunities through income generation activities like selling recharge coupons and prepaid cards, offering battery-charging facilities and renting out mobile phones. Many of these activities are carried out by women, thus opening up avenues for additional family income.

While the growth in telecom services in these regions has slowed for the time being, there is huge opportunity for future growth. As the overall regulatory environment improves and government initiatives like the NOFN take off, the rural-urban telecom gap is likely to diminish.


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