With rural teledensity at 2, the government is in a hurry to push rowth in this sector. In line with this, the Universal Service Obligation (USO) Fund administration, under DoT recently invited expressions of interest for appointment of financial and technical consultants (national or international) to expedite and streamline the subsidy process in connection with infrastructure sharing for mobile services in rural areas.

The USO Fund administration has proposed providing subsidy support for infrastructure sharing for passive components comprising land, tower and power back-up as well as for active components comprising base transceiver stations (BTS) with associated antennas and a portion of the backhaul. This is expected to benefit operators and encourage them to roll out services in rural areas, which is a far less lucrative segment.

Disbursements from the USO Fund have been much less than the collection in the last three years. At the end of 2004-05, the balance amount in the USO Fund was Rs 54.39 billion (see table).

To change this situation, DoT, along with the USO Fund administration, has met with prospective consultants and operator associations to outline some of the areas that need attention. Though the final draft of its guidelines on the bidding and subsidy process is yet to be formalised, some of the areas that are expected to be covered are as follows:

  • The USO Fund administration has appointed C-DOT as the technical consultant and the selection process for the financial consultant is on.
  • Subsidy support would be provided only in those rural areas (villages) where there is no existing infrastructure and no mobile signal, called a “dark spot”.
    Digital mapping will be carried out by NIC of all the cellular towers in consultation with the WPC regarding data on towers, etc. The mapping will first identify the dark spots. Thereafter, it will map the existing radiating tower coverage by assuming the rough coverage distance of radio signals from the towers in order to identify the villages being covered by at least radio signals.
  • The tender invited by the USO Fund administrator would only be to cover the dark spots, as identified by digital mapping. The tender/bidding process would be revenue district-wise only for dark spots. The sharing of a tower is likely to include only three service providers.

    • Bidding process
    The bidding will be in two parts. Part A would cover infrastructure, namely, land, tower, electric supply, power back-up and cabin for security personnel. Part B will consist of the BTS tower including antenna and feeder cable. Bids will be accepted only for outdoor BTSs. The administrator has clarified that no shelter would be eligible for subsidy as the BTSs are outdoors.

    Part A can be bid for by telecom service providers and shortlisted infrastructure providers. Part B can be bid for only by telecom service providers.

    Subsidy for Part A would be provided directly to the infrastructure providers. Part A bidding would be in two parts ?? a lumpsum amount (a benchmark being fixed by the USO Fund) or rental to be charged by the infrastructure provider for five years, which may include capex, etc. For rental bidding, no yearly escalation would be permitted.

    Part B bidding would comprise outdoor BTSs with antenna plus the cost of part of the backhaul. The battery would be part of the outdoor BTS with no cabin. A benchmark is likely for the backhaul. Any transmission technology would be permitted for the backhaul. There would be no waiver of microwave charges or spectrum usage charges for transmission media. Nor would a second subsidy be given.

    A multi-stage bidding subsidy model for rural DELs on a descending bid system has been decided on. The tender document would mention the village where bidding is required and the number of required towers in the area. Further, if there is an infrastructure provider bidding for Part A and not Part B, the bidding would be cancelled. However, in the case of telecom service providers who bid for Part B and not Part A, they would be permitted to provide infrastructure.

    Details on subsidy payment
    The details regarding the quantum and timing of subsidy payment are still being worked out. The tentative plan is as follows:

    Subsidy payment to service providers ?? 70 per cent at the time of commencing service and 30 per cent after 100 connections have been provided or three months from start of service, whichever is earlier. Rollout of service would be expected within two months of the commissioning of the tower and subsidy would be decided accordingly. There would be an added incentive for more difficult terrain.

    These are the broad lines along which the final guidelines will be formulated. While this is an important first step in increasing the teledensity of the country, what is also needed is a pragmatic review of the objectives of rural telephony and greater clarity in policy issues.