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Connecting the Dots: USO Fund schemes for improving rural telephony

June 01, 2012

As per the Census 2011, 61.35 per cent of the Indian population lives in about 638,000 villages, and the remaining 27.8 per cent lives in over 5,100 towns and 380 urban agglomerations. However, mobile penetration in rural areas stands at 39.22 per cent as against an urban teledensity of 169.55 per cent. This huge gap exists primarily on account of low income, low usage of information and communications technology, lack of industrial customers, difficult terrain and limited civic amenities like roads and power in rural areas.

The government believes that mobile phones are the platform through which services like banking, education and health care can be extended to rural areas. As a result, there have been several government initiatives over the years that are targeted at the rural areas. For instance, in 2002, the Universal Service Obligation (USO) Fund was established to provide an impetus to rural telephony. The aim was to incentivise telecom operators to venture into rural areas and facilitate infrastructure roll-outs by extending subsidy support to them, encourage infrastructure sharing as well as devise unique and highly subsidised tariff plans for target beneficiaries to bring about connectivity and affordable access in rural areas.

Under the aegis of the USO Fund, various schemes have been launched in areas such as public access (village public telephones and rural community phones), individual access (rural household direct exchange lines), mobile infrastructure, broadband connectivity (wireline and rural public service terminals), optic fibre cable (OFC) connectivity and solar mobile charging facilities (SMCFs).

The corpus of the fund is raised by the government through a universal service levy (USL), which, at present, is fixed at 5 per cent of the adjusted gross revenue of telecom operators. The fund has, since its inception, collected a total of Rs 439.47 billion from operators in the form of USL. Of this, Rs 151.59 billion has been disbursed till date towards various activities and schemes. At present, Rs 218.39 billion is available with the USO Fund.

A look at some of the recent USO Fund schemes…

Mobile Infrastructure (Phase I)

The USO Fund has provided subsidy support to tower companies and operators for setting up and managing 7,353 infrastructure sites in 500 districts across India. The scheme, launched in May 2007, aims to provide mobile coverage in about 200,000 villages. It further aims at building a capacity of around 24 million telephone lines. The initiative also involves sharing of the subsidised passive infrastructure amongst telecom service providers for providing mobile services. However, the subsidised active infrastructure involved in service roll-out must be owned by telecom operators individually. Of the 7,353 tower sites planned, 7,306 had been commissioned as of March 2012.

The USO Fund has earmarked substantial subsidy towards facilitating successful commissioning and roll-out of mobile services in rural areas. During 2011-12, Rs 0.87 billion was disbursed for the development of mobile infrastructure. As of March 2012, the government had spent a total of Rs 2.34 billion towards this scheme. Further, it has been proposed to roll out Phase II of the scheme soon, whereby about 10,000 towers will be set up with USO Fund support to provide mobile services in villages or clusters of villages with a population of over 500.

Wireline Broadband Scheme

In January 2009, the USO Fund entered into an agreement with Bharat Sanchar Nigam Limited (BSNL) for providing 861,459 wireline broadband connections to individual and institutional users in rural and remote areas by 2014, through BSNL’s existing rural wireline exchanges. As of March 2012, Rs 1.98 billion had been spent towards the scheme’s implementation. The scheme provides two subsidised tariff plans, of Rs 99 and Rs 150 per month, which offer free data download of up to 400 MB and 1 GB respectively. As of April 2012, a total of 360,966 broadband connections had been provided across various rural exchanges in different parts of the country.

Pilot project for SMCFs

This scheme, effective since April 2010, aims to subsidise SMCFs in 5,000 villages. Launched in coordination with The Energy and Resources Institute, the scheme will continue till April 2014.

Augmentation, creation and management of intra-district OFC network in Assam

This initiative has been taken to address the non-availability of sufficient backhaul capacity in the state for integrating voice and data traffic from the access network in rural areas to the core network. During its initial phase, the scheme will provide OFC connectivity between block headquarters and district headquarters in the state. This OFC scheme has been undertaken on the build-operate-own model, wherein BSNL will build, operate, own and manage the equipment and infrastructure for the OFC transport network. All districts will be connected through physical OFC ring routes to ensure cable route diversity and a ring capacity of at least 2.5 Gbps and to efficiently transport various protocols, including time division multiplexing, IP, frame relay and asynchronous transfer mode for integrated voice, data and video signals.

Apart from Assam, a similar project is being implemented in the Northeast I and Northeast II circles, comprising Meghalaya, Manipur, Tripura, Mizoram, Arunachal Pradesh and Nagaland. RailTel Corporation of India Limited emerged as the successful bidder for the project and an agreement was signed in January 2012. The project has a validity period of eight years. RailTel will share at least 70 per cent of the bandwidth created under the scheme with licensed service providers in the north-eastern circles.

Pilot project scheme

This scheme aims to induct new technologies on a pilot basis. All pilot projects under this scheme will be tripartite efforts between the technology provider, the operator and the USO Fund administrator. Subsidies will be provided to technology developers for demonstrating new technologies through pilot projects in the fields of broadband, fixed/wireless telephony, transmission media, hybrid power, customer premises equipment, etc. The upper limit of USO Fund assistance per project is Rs 0.5 million.

Besides, the USO Fund is also financing the National Optical Fibre Network (NOFN) project. The NOFN is a Rs 200 billion project envisaging OFC connectivity across 250,000 gram panchayats by 2014. People in rural areas would be able to avail of broadband services at speeds of up to 100 Mbps once the network is established.

Further, there are several other schemes being planned, including Phase II of the Mobile Infrastructure Scheme; schemes for wireless broadband connectivity and for broadband connectivity on satellite media for remote areas, where terrestrial connectivity is not possible; and the extension of the OFC scheme to West Bengal, and the north-eastern states in a phased manner. The USO Fund administration is planning to further incentivise the penetration of public access facilities, and mobile and broadband infrastructure into remote areas/ smaller villages.

The advent of next-generation technologies and new developments in the Indian telecom sector will further increase the need for better connectivity in remote areas. USO Fund initiatives, along with private player participation, will go a long way in improving rural telephony in India.


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