Telecom services in rural and remote regions often face unique challenges. The high costs associated with building infrastructure in these areas are compounded by lower revenue generation due to factors such as low population density, lower incomes and limited commercial activity. As a result, market forces alone are insufficient to ensure adequate connectivity in such regions. Recognising this imbalance, many countries have implemented policies to promote universal access to telecommunications, ensuring that even underserved areas receive essential connectivity.
In India, this led to the creation of the Universal Service Obligation Fund (USOF) in December 2003, established through an amendment to the Indian Telegraph Act of 1885. The USOF was designed to provide subsidy support, often in the form of viability gap funding to telecom service providers, incentivising them to expand services in commercially non-viable rural and remote areas.
Background
The USOF was set up with the ambitious goal of expanding telecom access across India, especially in rural regions. Telecom operators were required to contribute 5 per cent of their adjusted gross revenue (AGR) to this fund, which was then used to support infrastructure projects.
However, despite its vision, USOF encountered several challenges. One significant issue was the under-utilisation of the collected funds. Between 2017 and 2022, only Rs 302.13 billion, or 72 per cent of the Rs 417.4 billion contributed by telcos, was used by the government. Additionally, planned expenditures for 2022-23 were significantly reduced from Rs 90 billion to Rs 30.1 billion, largely due to delays in projects such as BharatNet, which aims to deliver fibre connectivity to villages across India.
Several USOF-funded projects also experienced setbacks, including delays, logistical issues and inadequate monitoring. This resulted in slow progress in rural connectivity enhancement, highlighting the need for a more streamlined and efficient mechanism. These shortcomings paved the way for a new initiative, Digital Bharat Nidhi (DBN).
Evolution of DBN
In response to the challenges faced by USOF, the Department of Telecommunications (DoT) introduced the Telecommunications (Administration of Digital Bharat Nidhi) Rules, 2024 recently. The USOF, initially established under the Indian Telegraph Act of 1885, has now been replaced by DBN under the Telecommunications Act of 2024.
DBN’s primary aim is to ensure equitable access to telecom services across both rural and urban areas, promoting technological growth and fostering economic development in underserved regions. Additionally, DBN aims to make telecom services in urban areas more affordable and secure. The initiative also places a greater emphasis on innovation, research and development, and the commercialisation of local technologies. The goal is to establish national and international standards for telecom services and encourage the growth of start-ups, while promoting sustainable and eco-friendly technologies in the sector.
This transition from USOF to DBN marks a shift towards a more focused, action-oriented approach to meet the increasing demand for digital infrastructure. The draft rules introduced by DoT outline clear roles and responsibilities for key stakeholders, such as “Administrator” and “Implementer,” ensuring better clarity in execution. This structured approach strengthens accountability and positions DBN to effectively meet India’s evolving digital infrastructure needs.
Broadening the scope with DBN
DBN will continue to be funded through a 5 per cent universal service levy on the AGR of telecom operators. The collected funds will first be credited to the Consolidated Fund of India, which is the government’s main repository for managing revenues. Funds will then be periodically allocated to DBN for various projects, ensuring their efficient and targeted utilisation.
Under the new framework, a government-appointed administrator will oversee the selection of “DBN implementers” through an open bidding process. The administrator will have the authority to decide on the funding mechanism for each project – whether it requires full funding, partial funding, co-funding or risk mitigation. This flexible approach ensures that each project receives the appropriate level of financial support based on its
unique requirements.
Furthermore, DBN implementers who receive funding will be required to offer their telecom networks and services on an open and non-discriminatory basis. This rule aims to promote fair competition and prevent monopolistic practices, ensuring that all players in the market have equal access to the benefits of these government-backed initiatives.
Ushering in a new era
The USOF did offer a partial solution, yet the scheme ultimately fell short of its potential. Now DBN represents a major shift in India’s strategy for improving telecom connectivity in rural and underserved areas. DBN aims to address past shortcomings in utilising contributions from the telecom industry to benefit society more broadly.
With its focus on inclusivity, innovation and targeted funding, this initiative is set to be a new lever for digital growth by making telecommunication services more accessible, affordable and technologically advanced. As such, DBN could well break the cycle of low incomes and poor teledensity.
Niha
