In a move that should hasten the rollout of rural services and help create telecom infrastructure, the government has agreed to fund private telecom companies from the Universal Service Obligation (USO) Fund for setting up mobile telephony infrastructure in rural areas.
In line with the government’s focus on rural telephony, financial support will be extended for both passive (land, tower and power back-up) and active (BTS, antennae and a portion of the backhaul) infrastructure, which would then have to be shared between operators. However, bids for the two will be separate and are expected to come in by end-February 2006.
With only Rs 18 billion of the USO Fund used so far, against the collected non-lapsable sum of over Rs 80 billion, the government is keen to attract private as well as public participation in the sector. “Only effective disbursement of the USO Fund can accelerate the pace of growth of telecom services in rural and remote areas,” says a senior official at the Telecom Regulatory Authority of India (TRAI). The regulator had, in mid-2005, given its recommendations to promote rural telecom growth.
As of now, the details are being finalised. The current thinking is that apart from service providers, infrastructure providers should also be eligible for subsidy from the fund.
As has been the practice, all service providers contribute 5 per cent of their revenue towards the USO Fund, which is used to provide subsidy support for public telecom services, including household telephones in rural and remote areas. Under this fund, operators are awarded contracts to set up rural telecom infrastructure on the basis of competitive bidding.
According to the new thinking, the government is planning to allow standalone infrastructure providers to also bid, but only for setting up passive infrastructure.
However, access providers bidding to set up passive infrastructure will also necessarily have to bid for active infrastructure. Under the agreement, if an access service provider is the lowest bidder for passive infrastructure, it will get the opportunity to start commercial services at L-1 rates for active infrastructure, irrespective of its position in the bids for active infrastructure.
Thereafter, it will have to share its passive infrastructure with the lowest bidder for active infrastructure. But, if the access service provider is the lowest bidder for both, its passive infrastructure will have to be shared with the next lowest bidder (L2) and subsidy will be extended to both companies at L-1 rates.
In the case of standalone infrastructure providers, if he is the lowest bidder for passive infrastructure, then the two lowest bidders for the active infrastructure will be given an opportunity to share the infrastructure. In any case, the government has stipulated that companies that share the infrastructure will have to arrive at a mutually agreed amount for its maintenance.
This is a big step forward as both the Department of Telecommunications (DoT) and the Ministry of Communications were in two minds about allowing infrastructure sharing as recommended by TRAI.
However, recognising the fact that there is an urgent need to push rural telephony, DoT has decided to take this stand. By end-February, it is planning to receive bids for both active and passive infrastructure for every secondary switching area on a per-tower basis.
In the first phase, it is reportedly looking to cover bids for around 100 of the 323 short distance calling areas in the country. The towers and the land will be jointly owned by the government and the successful bidder, and the infrastructure cannot be sold, alienated or leased without prior permission from the USO Fund administrator.
The prospects for rural telephony seem to be finally looking up. “By end2006, all the 5,200 towns and 300,000 viLlages will be covered,” says T.V. Ramachandran, director-general of the Cellular Operators Association of India, optimistically. At the moment, 4,000 towns and up to a third of India’s more than 600,000 viLlages are connected by wireless services.
The Prime Minister’s Office too is eager to see that the urban-rural teledensity divide is bridged. It has expressed interest, through the joint working committee constituted to resolve telecom-related issues, to explore the use of alternative technologies such as CorDect and Wi-Fi to hasten the rollout of rural telephony and replicate the “success of television” in rural areas many years ago.
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