Digital Bharat Nidhi (DBN), a reworked version of the Universal Service Obligation (USO) Fund, is focused on accelerating the provision of rural teleconnectivity. It has a broader scope than the USO Fund. Improving teleconnectivity in rural areas remains an urgent necessity. While urban teledensity is around 130 per cent, rural teledensity is only 59 per cent. Moreover, the quality of service in rural areas is lower. Rural citizens lack quick, reliable access to a host of digitised government services, net-banking and other financial services, and private services that rely on telecom networks. This, in turn, impacts economic activity, resulting in slower growth for rural incomes.
Like the USO Fund, DBN will promote delivery of telecom services in underserved rural and remote areas, as well as underserved urban areas, which is a new addition. It will also fund research and development of telecommunication services, technologies and products, support pilot projects and consultancy, and offer advisory support to improve connectivity. Addressing the rural-urban divide remains the primary concern. However, the expanded scope of DBN could, if funds are adequately utilised, lead to improved quality of service across both rural and urban areas, providing reliable, basic voice and data connectivity with better uptimes and speeds, low latency, etc.
As per the draft rules issued by DoT, the centre will appoint an “administrator” to select “DBN implementers” through “bidding” or invitation of applications from eligible persons. The administrator will determine the modalities of funding for DBN implementers on a case-by-case basis, with choices including full funding, partial funding, co-funding, market risk mitigation and risk capital.
Implementation will be key. While DBN envisages an allocated of Rs 800 billion, one of the issues with the USO Fund has been the underutilisation of resources. Between 2017 and 2022, only 72 per cent of the Rs 417 billion collected under the fund was used. In fact, its funding has never been fully utilised since the USO Fund was conceptualised in 2003. The expanded scope of DBN may provide opportunities to utilise these earmarked funds.
If the DBN improves the efficiency of disbursals, that in itself could lead to the acceleration of rural roll-outs. Another issue that has proved intractable is the underperformance of BSNL, which is often the only service provider present in such areas.
The public sector telecom service provider’s problems are too well-known to require detailed discussion. But DBN, or any roll-out that relies on a government push, needs to take BSNL’s underperformance into account. The draft rules suggest that the administrator can look for alternative DBN implementers, but the reality is that, in many instances, another implementer may not be available, or BSNL will make the lowest bid for a given project. Ensuring that the PSU delivers on time and provides adequate quality of service will be a challenge in such instances.
The USO Fund was created when the government realised that private service providers do not wish to roll out in rural areas, due to sub-optimal returns on investment. This is a chicken and egg situation. Rural incomes will not improve unless there are reliable telecom services, but telecom service providers will not receive acceptable ARPUs until rural incomes improve. The USO Fund provided a partial solution, but the scheme never lived up to its promise. Perhaps DBN can provide a break from this cycle of low incomes and poor teledensity.
