The development of rural infrastructure and private participation has not been along the lines envisioned at the beginning of the liberalisation of the telecom sector. While telecom penetration in the metros and the more populated areas has increased over the years, rural penetration has not been able to match the pace of the rest of the country.
Rural Infrastructure Needs – Evolving a viable business model
Today, we have a rural teledensity of only 13-15 per cent. However, the coverage that is currently available for rural India is close to 70 per cent. The rural population provides a mass market waiting to be tapped, which can contribute to the top line and bottom line of operators.Since about 70 per cent of India lives in the rural areas, a different business model needs to be evolved for these regions. It will not work if a conventional model is forced in such a situation.
From an operator’s perspective, success has always been associated with numbers. The bigger the subscriber base, the greater the success. However, in spite of the golden era of customer acquisition coming to an end and the rural market presenting the only option of increasing the subscriber base, operators are uncertain about giving greater focus to rural infrastructure. This is primarily due to the lack of a viable financial model for them.
Support is available from the Universal Service Obligation (USO) Fund. But this is still not sufficient to make rural penetration sustainable for operators who do not have any business case for it. Therefore, there is a need to re-evaluate the entire issue. Unless the operators are brought together with governmental or private support and the other beneficiaries of the sector also get into a collaborative mode, not much progress can be made on the rural infrastructure front.
Infrastructure providers (IPs), on the other hand, are open to larger rural penetration despite the construction difficulty in these remote parts. For them, the business model of sharing infrastructure with more than one operator and having a higher tenancy ratio makes business sense.
Active infrastructure sharing has been allowed for both infrastructure providers and telecom operators. Over the years, the scope of infrastructure providers has enlarged from a licensing perspective as has the scope of operators. However, the IP industry has not done much in this area though active infrastructure sharing was the one area of licensing in which the government was ahead of the industry. It has failed since it was busy servicing the growth of the newer telecom operators and did not have the time to venture into this domain.
Another issue pertains to the subsidies given in the rural areas ?? for fertilisers, power, etc. Here again, there is a need to evolve a different model, to be driven by the union and state governments, wherein the payments made by people are deferred or SIM cards given to them at low prices for a certain period of time. The USO Fund or the government may provide subsidy to the infrastructure providers or the original equipment makers, but if the end-user doesn’t have the capability to pay for the services, the subsidy will not be of any use to the subscriber. This is the prime reason why, despite having the necessary infrastructure and coverage in the rural areas, the industry is not able to garner adequate subscribers. Therefore, a different model needs to be evolved to make this viable.
Lastly, in spite of having the backbone (towers, ATMs, kiosks) and the infrastructure available, the state governments are not able to use them in an efficient manner. This can be seen in the fact that separate contracts are awarded by the government for e-governance services, which could have been easily provided using the available infrastructure in these areas.
While an operator’s core mission is to get subscribers, an infrastructure provider’s core mission is to render services.Therefore, there is a need for greater cohesiveness and partnership between the private operators, infrastructure providers, and the regulators, and between the state governments and the union government to make the infrastructure viable.
Rupinder S. Ahluwalia, President, Business Development, GTL Infrastructure, and B. Ramanand, Chief Operating Officer, TTIL
