important to have a seamless process of subsidy disbursement, which would not only help operators take initiatives to increase rural telephony, but also make it a success. While the existing process is good, it leaves a lot more to be desired –? the disbursement only happens on the submission of an audited certificate, which by itself is a fairly long-drawn project for companies.

Further, the issues on the front-ended subsidy are whether or not the operator would be operating the DELs for a five-year period or not operate the DELs once the subsidy is disbursed to them. With the intention of working on different models to achieve the rural telephony targets, the method needs to be far friendlier.

Mahesh UppalThe auction of subsidies to those who bid the least is seen by markets as a transparent method of identifying recipients. But this may not be enough. The USO Fund has not been a runaway success till now.

This would imply that the subsidies, or the accompanying terms, still do not provide investors with the required confidence to connect rural areas effectively.

Should more telecom players and services be subsidised?
Archana Sassan The underlying philosophy behind the NTP, 1999 was to allow free play of market forces by not restricting the number of operators in almost all segments, subject to certain prescribed entry conditions.

This was to ensure that only serious players with financial strength would make a market entry, and not rent seekers in a restricted licensing regime primarily interested in trading of licences. The entry conditions were also reasonable and rational, and did not pose any undue initial financial burden.

Contrast the aforesaid free market objective of the NTP, 1999 with the statistics that have emerged from the USO subsidy auctions. Out of all the players submitting bids for the USO subsidy auctions, BSNL was the winner in the largest number of territories.

Private sector players won few territories in comparison to BSNL. Though the auction mechanism was transparent, concerns have been voiced that BSNL being the incumbent operator had inbuilt strategic advantages to win these auctions. BSNL’s existing large rural network (built over many years with public funds) meant that its only cost, relevant to the bids, was the last mile cost. However, for new private sector entrants the cost of building a rural network amounted to a major component of their bid-related costs and adversely affected their ability to compete in the subsidy auction. To add to this is BSNL’s reluctance to share its existing rural infrastructure with private players which would have resulted in a lowering of costs for private players. The aforesaid has resulted in a strategic imbalance between BSNL and the private players in the rural telecom market. This has precluded private players (with potentially innovative and affordable technologies and products) from entering the rural telecom market on the scale envisaged in the NTP, 1999. Therefore, there is an argument in favour of providing incentives to private players with a view to overcoming the disadvantages faced by them and increasing the scale of their participation in providing rural telecom services.

Currently, USO funds are restricted to supporting the provision of specified fixed line services only, such as VPTs and household phones. Since alternative technologies like broadband, wireless, etc. are available, the USO Fund should be made available to any service provider who can fulfil the basic standards of rural telecom services, irrespective of the technology used.

It is pertinent to mention here that there have been recommendations by TRAI for providing support from the USO Fund to “niche operators”. In terms of these recommendations, niche operators may be given support from the USO Fund in specific circumstances, such as if the licensees fail to meet the benchmarked price in the subsidy auctions. However, DoT is still silent on the concept.

Rajat Sharma The services will have to be subsidised further in remote areas to ensure that the real value of telephony coverage is understood and later adopted. However, the actual potential lies in subsidising players who form an essential part of the active and passive infrastructure providers’ value chain. Encouraging local business set-ups to be a part of the broader telecom ecosystem will raise the economic performance indicators for a region.

Prashant Singhal The USO Fund, as in other countries, should also target some of the other segments and ensure that they have the fundamental right to communication. In Chile, Australia and the UK for example, the USO Fund ensures that phones are available for physically handicapped people, low-income groups (in urban areas) and/or there are enough public telephony booths. The above are only a few of the countries and subsidies that the USO Fund provides, but the ambit of the fund is fairly large across nations. Clearly, for India to grow and ensure that all segments and strata of society grow, the USO Fund should play a very important and active role. At the end of the day, communication is the first step towards change and telephony is one of the most popular methods of communication, which kills distances with the speed of voice and data transfer.

Mahesh UppalYes, we need a USO Fund regime which can be accessed by all genuine risk-takers and investors in rural telecommunications services. “The USO Fund has not been a runaway success.

This would imply that the subsidies or their terms do not provide investors with the confidence to connect rural areas effectively.”

Mahesh Uppal