Ashwini Vaishnaw, union minister of communications, electronics and information technology, and railways, recently announced that the government is prepared to invest considerably more in the BharatNet project, for which it has already spent a large sum.
The union cabinet has approved an additional outlay of Rs 1.39 trillion (approximately $16 billion) for the BharatNet project, to provide last-mile optical fibre-based connectivity to all villages. This reaffirms the policy commitment to the multi-year mega-project, which aims to connect all of India’s villages through optic fibre cable (OFC).
Expenditure on BharatNet has already crossed the equivalent of around $8.5 billion. The project has connected over 197,000 villages through OFC, and it looks to connect all 640,000 villages and 250,000 gram panchayats (GPs) in the next 30 months.
BharatNet is probably the world’s biggest rural telecom project, with the ambition of providing last-mile broadband connectivity to every village. It will enable mobile operators, internet service providers, cable TV operators, content providers, etc. to launch services. It will also enable the government to directly provide e-services to citizens, improving e-health, e-education and e-governance in the hinterland. Digitisation of public services will make it easy to pay property and water taxes, process building permissions, etc.
The project was initially approved by the UPA II cabinet in October 2011. It is being executed by a special purpose vehicle, the Bharat Broadband Network Limited (BBNL), which was incorporated in 2012 under the Indian Companies Act 1956. The centre holds 99.9 per cent of BBNL’s paid-up equity, which amounts to Rs 600 million (with shares having a face value of Rs 10 each). The three public sector undertakings (PSUs) – Bharat Sanchar Nigam Limited (BSNL), Powergrid Corporation of India Limited (Powergrid) and RailTel Corporation (RailTel) – hold one token equity share each.
Phase I
The project is to be implemented in three phases. The objective in Phase I was to provide broadband connectivity at the GP level by connecting the block headquarters (BHQs) to GPs by using the existing OFC of central PSUs (CPSUs) such as BSNL, RailTel and Powergrid; and laying incremental fibre where needed to bridge connectivity gaps with GPs. The government owns the incremental OFC, and the older, existing fibre continues to be held by the CPSUs in question.
Last-mile connectivity for broadband or internet services is to be provided through Wi-Fi in public places, or by any other suitable broadband technology, including fibre-to-the-home (FTTH) setups at local government institutions such as schools, hospitals, post offices, anganwadis and police stations.
Under Phase I, by December 2017, over 100,000 GPs had been connected. Its scope was then expanded to cover 125, 000 GPs, as approved by the cabinet in July 2017. As of mid-August 2023, 206,932 GPs have been connected and 653,990 km of OFC has been laid. In addition, 601,026 FTTH connections have been commissioned, and 104,674 Wi-Fi hotspots have been installed to ensure last-mile connectivity. A total of 197,954 GPs have reportedly been made service-ready across Phases I and II.
Phase II
Phase II envisages connecting around 142,000 GPs (this number excludes BHQs and includes GPs connected over satellite). New OFC is to be installed from BHQs to GPs, with life-time maintenance of the network to be undertaken by dedicated fibre-providers for GPs.
The cabinet has approved a modified strategy for Phase II, drawing on the experience gleaned from Phase I. This aligns BharatNet with the broader vision of “Digital India”. The new strategy is more flexible, and envisions an optimal mix of media (OFC, radio and satellite) being utilised to connect GPs. Also, under Phase II, GPs may be connected through different implementing models, such as a state-led model, a private sector model and a CPSU model.
The total funding for the first two phases, as approved by the cabinet in 2017, was Rs 420.68 billion (exclusive of GST, octroi and local taxes). Far more has been sanctioned and spent since, as the project expanded in scope.
Phase II is at various stages of implementation across India. Various states are being covered under different models. The state-led model is being implemented in eight states, including Chhattisgarh, Gujarat, Jharkhand, Andhra Pradesh, Maharashtra, Odisha and Telangana.
The CPSU-led model is being utilised by BSNL in four states and union territories. These projects are at various stages of implementation. The private-led model is being used in Punjab and Bihar. Connectivity by satellite is being separately implemented by BBNL and BSNL. BSNL is implementing this in 1,408 GPs and BBNL is implementing it in 3,753 GPs. Over 343,000 km of OFC has been laid. The implementation process is underway in over 139,000 GPs, with work completed in over 73,000 GPs.
BSNL-BBNL merger
In July 2022, a key policy decision was taken to accelerate the pace of work and improve the maintenance standards of the network. The merger of BSNL and BBNL was approved. Today, more than 90 per cent of BSNL’s customer onboarding at the GP level occurs through the digital know-your-customer (KYC) process, via its local FTTH partners.
The BharatNet WiFi/FTTH network carries over 65,900 TB of monthly data (as of June 2023) – a huge leap from the 926 TB it was carrying a year ago. Alongside BharatNet’s roll-out of wired broadband through OFC, another $4.8 billion has been allocated to ensure the long-delayed 4G network roll-out for BSNL. The synergies between BBNL and BSNL should enable BharatNet and the 4G rural roll-out to be speeded up.
The merger should facilitate the monetisation of dark fibre. BSNL is managing the bulk of the operations and maintenance (O&M) of BBNL’s OFC network. Moreover, the integration of the BharatNet OFC network with BSNL’s network should reduce duplication of effort. Ideally, the merger should accelerate the BharatNet roll-out, with synergies leading to reduced costs.
It may be noted that BharatNet has also missed many targets. The policy envisaged a connection speed of 1 Gbps for every GP by 2020, to be upgraded to 10 Gbps by 2022. The project is now looking at 2025 or 2026 for completion of this target. In terms of connectivity ratio, which measures the number of villages connected in a given region versus the total number of villages, less than a third (just under 200,000 out of a total of 640,000) are service-ready.
The project has connected over 197,000 villages through OFC, and it looks to connect all 640,000 villages and 250,000 GPs in the next 30 months.
There are widespread complaints about the quality of service, given frequent line faults and outages, and tardy responses to complaints. BBNL estimates that it has an uptime of 95 per cent, whereas an uptime of 99 per cent is considered to be the minimum acceptable rate.
BSNL itself is financially stressed and loss-making, and dependent on government bailouts. BBNL depends heavily on BSNL to provide connectivity and bandwidth. There has reportedly been friction on these grounds. Maybe a merger would help to cement the relationship.
Phase III
Phase III would encompass upgrades of the network to meet future requirements. O&M of the network to ensure 99 per cent uptime and high utilisation, as well as financing the necessary upgrades, will be ongoing challenges for years to come.
In July 2021, the Cabinet approved a revised strategy for implementation (including connectivity with villages), upgradation, operation and maintenance, and utilisation of BharatNet in 16 states, covering about 361,000 villages (including 137,000 GPs), through a public-private partnership model with a viability gap funding of Rs 190 billion.
O&M in remote, rural areas presents acute problems, including challenging terrain and vast distances, poor and uncertain power supplies, risk of theft, weather-related damage, etc. In addition, BBNL suffers from coordination challenges, since it has to work with multiple partners.
Financial sustainability
Rural areas yield low revenues since population density and ARPU are both low, and it costs more to onboard a new subscriber. This is why private telecom service providers are hesitant about rural roll-outs.
The revenue generated by BBNL prior to its merger with BSNL was on account of bandwidth charges, fibre lease charges and other sources of income (mainly interest). Ignoring capital expenditure for the moment, BBNL’s operational revenue collections may not be enough to cover all necessary expenses. In financial year 2021-22 (the last year for which accounts are available, as financial year 2022-23 will see accounts being recast to reflect the merger), BBNL had operational revenues of around Rs 407 million, and a net loss of Rs 25 million.
By enabling broadband connectivity, B2B connections, etc., BharatNet will definitely provide a significant impetus to economic activity in rural areas and enable cost-effective, efficient provision of many services, including public services. This should, in turn, lead to higher employment and better tax collections as commercial activity increases in remote regions serviced by the network. The positive externalities provide a powerful incentive for the government to continue providing full policy support, and sanctioning such future funding as may be necessary.
In that sense, BharatNet is somewhat analogous to metro rail systems. A metro transport system itself may not be profitable (most metros are not, when capital expenditure is considered). But it enables a great deal of commercial activity, which, in turn, generates revenues, employment and taxes. BharatNet could have the same positive impact across the entire rural hinterland.
The company is attempting to streamline O&M while increasing uptime. The O&M of the entire network has been divided into 13 packages and outsourced to different agencies. A geographical information system (GIS) has been developed and implemented. A mobile app has been developed to enable field teams to update the GIS.
The scope of BharatNet has been extended to all inhabited villages. The implementation will thus involve 28 states and six union territories, covering about 638,000 villages. Private sector partners will be responsible for the creation, upgradation, O&M and utilisation of the network from the BHQ up to the village level on a long-term basis, along with the right to use existing BharatNet infrastructure.
BharatNet is somewhat analogous to metro rail systems. A metro transport system itself may not be profita ble, but it enables a great deal of commercial activity.
Phase II of BharatNet is still work in progress. Despite a low connectivity ratio and poor quality of service (QoS), Bharatnet is already making a positive difference, going by the surge in rural data consumption. By 2026, Phase II should be completed, hooking up every village with high-speed broadband. This is central to the Digital India vision.
The merged entity may, in its totality, be more efficient and financially viable than BSNL and BBNL as standalone entities. But the network must also to be maintained and upgraded in Phase III. It needs to achieve better QoS to fully leverage its potential to enable rural activity. This is a policy imperative, and successive governments will have to recognise this and follow through.
