Rural teledensity currently stands at 17 er cent compared to urban teledenity at 76-77 per cent. Nonetheless, the rural telecom market is growing at a faster pace (albeit on a smaller base) vis-? – vis the urban market which is witnessing some plateauing of growth.
The growth potential in the rural regions comes with a whole set of challenges. For instance, while the ARPUs of new customers is decreasing, the incremental capex is rising. Incremental opex is also high due to the complete lack of or erratic power supply, difficult terrain and greater logistic challenges in taking diesel to far-flung remote areas, etc. Moreover, the rural market is not homogeneous. While most of the lucrative markets have already been tapped, operators now need to roll out networks in the remaining less lucrative areas with low population densities and fewer economic opportunities.
Operators have a daunting task ahead of them as they determine the economic viability of rolling out networks in these regions. However, they will be aided, in large measure, by subsidies from the Universal Service Obligation (USO) Fund.
The fund was set up in 2002 to provide basic services. It is funded by a 5 per cent universal access levy on service providers’ revenues. The levy amount is first credited to the Consolidated Fund of India and made available to the USO Fund after due appropriation by Parliament.
In December 2006, an amendment in the Indian Telegraph Act led to a widening in the scope of the fund, whereby all telecom services were brought under its ambit. Activities of shared infrastructure, mobile services, broadband connectivity and general infrastructure like optic fibre communications augmentation were included.
Support is currently being provided for about 558,000 existing village public telephones (VPTs) including VPTs under the Bharat Nirman scheme. The remaining villages are likely to be provided with VPTs by February 2011.
The fund has recently completed the first phase of the mobile infrastructure project, in which villages with a population of more than 2,000 were covered. Approximately 7,440 towers have been set up in 27 states in over 500 villages. There has been capacity creation of about 24 million lines that can also be used for providing wireless broadband services.
Forthcoming schemes
Broadband: With the government setting a broadband target of 20 million subscribers, the fund now intends to provide subsidy support for broadband services in rural regions. In the first phase, the fund will extend wireline broadband services and has signed an agreement with Bharat Sanchar Nigam Limited (BSNL) in January this year to provide 900,000 broadband connections from its 28,000 rural exchanges. The fund will also provide subsidy for wireless broadband connections to approximately 200,000 villages in 5,000 blocks.
Second phase of shared mobile infrastructure scheme: The USO Fund will float a tender for the second phase of the mobile infrastructure scheme, which will provide mobile coverage in villages with a population of more than 500 people.The scheme envisages the setting up of about 10,000 towers. The duration of the scheme is likely to be about two years. A key learning from the first phase of the scheme was the commissioning time.While the first phase of the scheme was rather ambitious, with the commissioning time for setting up towers being set at one year, there were threeto four-month time overruns in most cases. In the second phase, the timeline for completion has been extended to two years.
Pilots to demonstrate the applicability of new technologies: The fund will provide subsidies for new technologies. For instance, in the second phase of the project, rooftop and pole-mounted base transceiver stations (BTSs) will be used. These BTSs are of lower capacity, consume less power and are powered by solar energy.
Optic fibre connectivity: Optic fibre connectivity is essential for carrying large volumes of data and backhaul and will be heavily supported by the USO Fund.Backhaul, in turn, is critical for providing mobile and wireless broadband services.Currently, about 550,000 km of optic fibre is owned by BSNL and about 200,000 km is owned by private operators throughout the country. Fibre connectivity will initially be implemented in Assam at a cost of Rs 1.5 billion. This project is expected to be launched in the next few months. The fund has commissioned TCIL to identify coverage gaps in the state. The project will later be extended to other parts of the country.
Renewable energy pilots: Renewable energy is the only option for extending connectivity services in these regions.While the opex for renewable energy is low, the capex is very high. For instance, the cost per kilowatt for a solar voltaic is approximately Rs 350,000 per kW. The cost of the solar panel may be more than the cost of the entire site. Therefore, the fund is currently providing subsidy support for 20 pilots in large states and is keeping a provision for the use of renewable energy in all its sites in the second phase of the mobile infrastructure scheme.Currently, solar and wind energy are the two types of renewable energy sources being evaluated for the projects.
Other projects: The fund will also support submarine connectivity for islands like the Andamans and Lakshadweep, and provide broadband connectivity on satellite for the really remote regions.
