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Teledata

Tele Data

Mobile Subscribers Yearwise comparision

Specialised Services: Need for customised content for rural segment to increase uptake

July 13, 2015

Despite the growth potential presented by India’s rural telecom market, operators have been progressing rather slowly in these areas in terms of expansion. As of March 2015, rural teledensity stood at 48.37 per cent, even though the National Telecom Policy, 2012 had envisaged it to be 100 per cent by 2020. This shows that the industry is way off the mark. By contrast, teledensity in urban areas stood at a massive 148.61 per cent as of March 2015, indicating the significant gap in telecom service uptake in rural and urban areas. While the lack of operator interest can be cited as a key reason for the low rural teledensity, there are also demand-side and supply-side challenges hindering the growth of telecom services among rural consumers.

tele.net takes a look at the issues and challenges impeding the growth of rural telecom penetration in the country…

Supply-side challenges

Industry experts and analysts believe that rural telephony will ultimately define the core strength of the telecom industry because of the sheer volume of potential consumers. However, operator interest in the segment has remained low due to the following supply-side challenges:

Lack of incentives: The primary hurdle to the spread of telecom services in rural areas is the lack of incentives for operators. Despite the fact that it is growing, the rural telecom space still does not present a satisfactory business case as low minutes of usage and MBs of data translate into lower revenues and profits. This has compelled operators to continue focusing on high-ARPU regions like metros and Category A circles. Even when an operator plans to expand services, it looks to Tier I and Tier II cities where it is not only more cost-efficient to roll out infrastructure compared to rural areas, but even service uptake is more promising.

Access issues: The cost of providing services in rural areas is generally high and magnified by the challenges involved in laying fibre and cables. While the process is typically capital intensive, the uneven and rough terrain in rural areas further increases costs. In addition, the lack of skilled personnel for maintaining this infrastructure often adds to the opex of infrastructure providers, thereby limiting the capability of network expansion.

Energy challenges: While energy constitutes a large part of operational costs at tower sites, large parts of rural India are still not served by power from the grid. This forces operators to resort to alternative power for meeting power needs at rural telecom sites, which in most cases means diesel generators. The high diesel costs, along with transportation challenges, lead to an almost fourfold cost escalation when compared to the expenditure incurred at tower sites in regions with adequate grid power supply.

Apart from posing a cost barrier to the telecom industry’s growth in rural areas, excessive dependence on diesel leads to carbon emissions. To control this, the government has imposed green mandates on telecom service providers, as per which they must power half their telecom towers in rural areas using hybrid power sources, such as a mix of grid power and renewable energy. However, given the huge capex required to set up towers on hybrid power, the demand for these solutions among the operator community has remained low.

Marketing challenges: Even as the demand for telecom services rises in rural areas, it remains largely unmet because most operators lack a robust distribution network for selling recharge vouchers, handsets, etc. in rural areas. Reaching out to rural customers and educating them about the latest technology and services is a challenge also because of the poor infrastructure and transportation difficulties.

Demand-side challenges

The fall in wireless telephony prices over the past five years has led to an increased demand for these services in rural areas too. However, the demand has remained limited on account of the factors enumerated below.

Underdeveloped VAS ecosystem: While operator offerings have gone from being based on voice to high speed internet over the years, there is still a need to justify providing broadband services to rural consumers. Rural India is characterised by language diversity, but the lack of localised internet content has led to limited demand. Relevant content pertaining to agriculture and e-governance, for instance, can drive service uptake in a region but the value-added services (VAS) ecosystem is still at a nascent stage. It is therefore imperative to create applications and services that are relevant for the local population at affordable costs. However, such a process is often slow and varies from area to area. It also depends on an area’s state of economic development as well as the extent of awareness generated about information and communications technology.

Socio-economic barriers: The low levels of literacy and income in rural areas have also presented obstacles to telecom service adoption. The lack of basic literacy and unfamiliarity with devices and technology discourage residents of these areas from using mobile phones and broadband services. Moreover, for a significant proportion of the population, the cost of mobile devices is too high, another stumbling block when it comes to large-scale broadband uptake.

Other issues

The potential of rural telephony has been acknowledged by the government, with the launch of initiatives like the Universal Service Obligation Fund (USOF) and the National Optical Fibre Network (NOFN) project for supporting the industry. However, these programmes have not yielded the desired results, mainly on account of poor implementation. The USOF was initiated with a view to facilitate financial support for network roll-outs in rural areas, but the fund remains largely unutilised, with only 27.6 per cent of the collected amount being allocated in 2014-15. In fact, since its inception in 2002, only 30.3 per cent of the total collected funds have been allocated towards rural telecom expansion.

The NOFN project, meanwhile, has been facing time and cost overruns. In May 2015, a committee on the NOFN, which aims to provide 250,000 gram panchayats with broadband connectivity, has estimated a more than threefold increase in project costs from Rs 200 billion to Rs 727.78 billion. The committee has come up with several changes to the NOFN project’s existing framework and scope. It has suggested reducing the broadband speed to 20 Mbps from the earlier speed of 100 Mbps that was planned to be delivered across all gram panchayats. It has also proposed renaming the modified version of the NOFN project as BharatNet, the roll-out of which can be completed by December 2017, a year after the NOFN project’s scheduled deadline of December 2016. The project’s poor implementation has led to time overruns and delays in the provisioning of development-centric services, thus affecting the growth of rural telephony.

Steps required

The rural market is still underserved in terms of telecom connectivity but it is imperative to correct this situation to drive the government’s Digital India vision. Operators will need to find newer ways of addressing the above challenges and offer services that are at par with what is offered in urban areas. Industry experts believe that service provisioning in the hinterland is going to be a market development exercise and operators who are willing and able to invest in developing the rural telecom market will stand to gain immensely. The government, on its part, must remain committed to the Digital India goal and speed up the NOFN project to ensure connectivity for rural areas.

 
 

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