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USO Fund Initiatives: Progress of key projects and implementation challenges

July 03, 2014

Over the years, government initiatives have played a key role in facilitating telecom growth in India. Its efforts to promote telecom services in rural areas in particular are noteworthy. With the lack of active participation from private operators in extending telecom services to rural areas due to the high cost of service provisioning and low revenues, the government has taken up the responsibility of extending coverage to these areas. To this end, it has taken several policy initiatives to provide universal access to telecom services to the rural population.

One of the key initiatives to encourage the provision of basic telephony and broadband services in rural areas has been the establishment of the Universal Service Obligation (USO) Fund in 2002. The USO Fund was set up with the twin objectives of increasing rural teledensity and providing broadband connectivity in rural areas. The fund receives about Rs 60 billion per annum in levies from telecom service providers, and these funds are partly assigned to various infrastructure projects. The major activities supported by the USO Fund include setting up telecom towers, providing incentives to private operators for expanding telecom infrastructure in rural areas and formulating subsidised tariff plans for rural users.

With the launch of the National Telecom Policy, 2012, the USO Fund has also been entrusted with the task of delivering affordable broadband services to rural areas. To achieve this goal, the USO Fund is playing a key role in the implementation of the National Optical Fibre Network (NOFN) project, which is expected to drive telecom and broadband service expansion in these areas.

tele.net takes a look at the key projects and schemes being supported by the USO Fund to expand telecom services in rural and remote areas…

Telecom access through VPTs

The USO Fund provides financial support for offering basic telecom services in rural areas through the installation of village public telephones (VPTs). As of August 31, 2013, a total of 582,187 VPTs had been installed, covering 98 per cent of the inhabited villages (identified as per the 2001 census) across the country. The USO Fund is currently working towards establishing VPTs in the remaining inhabited villages.

Further, the USO Fund has been providing subsidy to the state-owned operator Bharat Sanchar Nigam Limited (BSNL) for providing VPTs in rural areas. As of August 31, 2013, BSNL had installed about 578,101 VPTs covering 593,801 villages.

Mobile infrastructure sharing

With subsidy support from the USO Fund, the government has been promoting mobile infrastructure sharing in rural and remote areas. The infrastructure thus created is being shared by three operators for providing telecom services. As of November 30, 2013, about 7,317 towers had been set up, while a total of 16,254 base transceiver stations had been commissioned at these tower sites as of August 31, 2013.

Rural Wireline Broadband Scheme

With the aim to provide broadband connectivity to rural and remote areas, the USO Fund signed an agreement with BSNL on January 20, 2009 to implement the Rural Wireline Broadband Scheme. The scheme is aimed at providing wireline broadband connectivity, with a speed of at least 512 kbps, to rural and remote areas by leveraging BSNL’s existing rural exchange infrastructure and copper wireline network. The scheme is supported by the USO Fund through subsidy disbursement for broadband connections, customer premises equipment, computers/ computing devices and setting up of kiosks for broadband access. As of October 31, 2013, about 547,328 broadband connections had been provided and 12,784 kiosks set up in rural areas.

Broadband connectivity through NOFN

One of the key projects being funded by the USO Fund is the $4 billion NOFN, which is being implemented by Bharat Broadband Network Limited, a special purpose vehicle of the Government of India. The project will provide broadband access to 600,000 villages, covering 250,000 gram panchayats, at a connectivity speed of 100 Mbps. In order to avoid duplication of infrastructure, the government plans to lease the existing fibre and core network owned by operators and lay additional 500,000 km of cables required for providing broadband services.

The project, which was scheduled for completion by December 2013, is still under implementation. Three pilot projects covering 60 gram panchayats across Rajasthan, Tripura and Andhra Pradesh were completed as of October 2012. These pilot projects were undertaken with a view to gain insights regarding the challenges involved in project implementation and key learnings for scaling up the project. BSNL, Power Grid Corporation of India Limited and RailTel have faced significant challenges while executing such a large-scale project in the stipulated time. For instance, BSNL, which has the largest fibre network in the country, has a capacity to lay up to 60,000 km of fibre per annum. However, under the NOFN, it is required to roll out about 300,000 km of cable within a period of two years. Struggling to meet the fibre roll-out targets, the government has revised the project timelines and now plans to execute it in three phases. Under Phase I, 100,000 gram panchayats are expected to be covered by end-March 2015; under Phase II, another 100,000 panchayats will be covered by end-March 2016; and under Phase III, the remaining panchayats will be covered by end-December 2016.

At present, right-of-way agreements have been signed with all states and union territories except Tamil Nadu and Lakshadweep. Surveys have been completed in about 70 per cent of gram panchayats and tenders are likely to be issued soon. With an aim to enhance the scope of the NOFN project, an overlay, in the form of a government-user network, has been proposed to provide community Wi-Fi services, 10 Mbps connectivity to deliver e-panchayat services and 10 Mbps connectivity to a school and a dispensary (or anganwadi) to promote e-education and e-health in each gram panchayat.

Establishment of intra-district OFC networks in the Northeast

•Scheme for Assam: The initiative is aimed at addressing the non-availability of adequate backhaul capacity to integrate voice and data traffic from the access network in rural areas to the core network. At present, optic fibre cable (OFC) connectivity between the states’ block headquarters and district headquarters (DHQs) is being strengthened. In Assam, BSNL has been entrusted with the task of building a robust OFC network on a build-operate-own basis. All locations will be connected through physical OFC ring routes with the DHQ node ensuring a ring capacity of at least 2.5 Gbps, which has the capability to transport various protocols, including time division multiplexing, the internet and frame relay, for integrated delivery of voice, data and video services. Under the scheme, BSNL is responsible for connecting 354 locations in the state through an OFC network. As of January 31, 2013, the operator had connected 280 of the targeted 354 locations with the OFC network.

•Scheme for Northeast I and Northeast II circles: Under the scheme, RailTel is responsible for establishing OFC connectivity in the Northeast I and Northeast II circles. In the Northeast I circle, the company will cover Meghalaya, Mizoram and Tripura and provide connectivity to 188 locations in 19 districts. In the Northeast II circle, it will connect 407 locations in 30 districts across Arunachal Pradesh, Manipur and Nagaland.

Challenges and the way forward

In addition to these existing schemes, the USO Fund is gearing up to undertake other critical projects to enhance mobile coverage in areas affected by left-wing extremism (LWE) as well as in the north-eastern region. It is undertaking a project in the LWE areas, which entails rolling out 2,200 towers, of which about 1,600 will be greenfield and the remaining will be provided by BSNL. Further, the USO Fund, along with Telecom Consultants of India Limited, has prepared a detailed project report (DPR) to extend mobile coverage in inhospitable areas in the north-eastern region. A similar project for far-flung areas in the rest of the country has been proposed and the Centre for Development of Telematics has been appointed for preparing the DPRs.

Aside from the implementation challenges faced in rolling out OFC networks due to difficult terrain and the massive scale of the project, there are issues related to underutilisation of infrastructure. Pilot projects undertaken by the state

utilities for rolling out OFC networks witnessed limited participation from private operators. The government has underlined that the USO Fund is merely a tool for extending telecom services and making “broadband for all” a reality. It has also highlighted that for successful implementation of these projects, greater participation is required from key industry stakeholders such as telecom operators and internet service providers.


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