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Connecting India: Fresh impetus to rural telephony under USO Fund

June 29, 2011
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With three-quarters of India’s population living in rural and semi-urban areas, it is vital that the telecom success story includes this section as well. The rural teledensity has, no doubt, improved with operators increasingly shifting their focus to these areas in the wake of the fast-saturating urban market. Still, a lot remains to be achieved in terms of rural telecom penetration in a country where urban teledensity has already crossed 100 per cent.

The rural emphasis is important for the government as it believes that the telecom sector can serve as a medium to bridge the rural-urban divide. With the mobile phone penetrating remote corners of the country, the government expects it to be the future vehicle for taking banking services, education, health care and other facilities to rural areas.

However, rolling out networks in rural regions has its own set of challenges such as insufficient power supply, difficult terrain, land acquisition issues and the high cost of transporting diesel. All these lead to higher operating costs for service providers. To overcome these challenges and increase rural connectivity, the government has come up with several initiatives.

In 2002, the Universal Service Obligation (USO) Fund was established to provide an impetus to rural telephony. Its objective was to give people living in rural and remote areas access to telecom services at affordable prices. The corpus of the fund is raised by the government through a universal service levy, which is currently fixed at 5 per cent of the adjusted gross revenue of telecom operators.

Initially, as per the Indian Telegraph Rules, 2004, the USO Fund administration was permitted to provide public and individual access to only basic services. However, given the exponential growth of urban mobile telephony in India, a need was felt to support rural mobile telephony as well, so as to enable faster penetration of services into the rural areas. Accordingly, the Department of Telecommunications initiated action to bring mobile services within the ambit of the USO Fund’s activities.

In 2006, an amendment to the Indian Telegraph Act widened the scope of the fund to include all telecom services including shared infrastructure, mobile services, broadband and optic fibre networks.

The fund has covered substantial ground in providing rural telephony. One of its more successful schemes has been the village public telephone (VPT) project. The programme mandates the presence of at least one VPT in every village. The fund has covered 96 per cent of the villages under this scheme. India currently has 570,000 VPTs. There also exists a second category of public telephones in rural areas known as rural community phones (RCPs). These telephone connections have been made available in comparatively larger villages and at present, there are around 40,694 RCPs across India.

The fund has also launched a scheme under which residential direct exchange lines (RDELs) have been set up for low-income households in the villages. The scheme has helped telecom penetration into the poorest of households. Between 2005 and 2010, the fund helped set up 9 million RDELs.

Under the USO Fund’s mobile infrastructure scheme, mobile coverage was taken to areas that did not have any wireless connectivity. The scheme mandated that three wireless operators share one telecom tower. Such shared infrastructure sites have now spread to over 500 districts and cover approximately 2 million villages. The fund’s rural infrastructure initiatives have resulted in capacity creation of approximately 24 million lines. Moreover, 7,276 of the planned 7,363 towers have been commissioned.

Under the second phase of the scheme, about 10,000 towers will be built with support from the fund to provide mobile services in uncovered villages with a population of over 5,000.

Recent initiatives 

Having achieved a certain level of success in its rural endeavour, the USO Fund has now started identifying  the gaps that need to be filled. However, there are a number of issues that need to be dealt with. The first is that though most areas in the country have been covered by optic fibre cable (OFC), there still exist some pockets that do not have OFC connectivity. Second, there is an urgent need to take broadband connectivity to the villages, more specifically to the panchayats. This has also been mandated by the government. There are, moreover, 40,000 villages that do not have wireless coverage.

To address these challenges, the fund has launched various schemes and defined an action plan. For instance, for these 40,000 villages, the fund plans to launch a project to provide both voice and data coverage simultaneously.

One of the USO Fund’s key recent initiatives has been in the broadband segment on both the wireline and wireless platforms. The fund has introduced a wireline broadband scheme to capitalise on the existing infrastructure and launched a wireless broadband scheme to reach remote rural areas. A scheme providing fibre to village panchayats is also currently being considered.

Under the OFC initiative, the fund has rolled out intra-city OFC in Assam, and bids have been invited for setting up an OFC network in the North East-I (NE-1) and North East-II (NE-II) regions. The operator winning the bid will set up the network and share it with other service providers on non-discriminatory terms. At least 70 per cent of the bandwidth has to be shared with other operators at a fairly high discount. Bharat Sanchar Nigam Limited (BSNL) has won the contract for the project in Assam while RailTel will be rolling out OFC in the NE-I and NE-II regions.

For the Assam circle, 269 blocks have been identified for broadband connectivity and a subsidy of Rs 988.9 million has been provided. Similarly, for the NE-I and NE-II regions, subsidies of Rs 895 million and Rs 2.98 billion respectively have been sanctioned.

Another initiative of the USO Fund has been the pan-Indian wireline broadband scheme. The fund has signed an agreement with BSNL for the same as it is the only operator with extensive pan-Indian network coverage. Under this scheme, 28,672 rural wireline exchanges have been identified and connected with OFC. These exchanges will now be provided with broadband connectivity. Also, one broadband kiosk per telephone exchange, which serves a minimum speed of 512 kbps, will be set up in rural areas. The fund has provided subsidy worth Rs 15 billion for expanding broadband reach, and 261,413 connections had been provided as of January 2011 under this scheme. It also offers low-cost tariff plans and provides subsidy on customer premises equipment and computers to encourage faster adoption of broadband services.

As an adjunct to the wireline broadband scheme, a pilot scheme for subsidy support for broadband-enabled rural public service terminals (RPSTs) is under consideration. The subsidised RPSTs are expected to enable self-help groups in selected districts to provide secure banking services and various value-added services to the rural populace.

The fund has recently launched a pan-Indian wireless broadband scheme. A draft tender has been floated and industry comments have been invited on the same. The scheme aims to provide seamless mobile wireless broadband coverage to about 550,000 villages at a minimum speed of 512 kbps. Subsidy for rolling out this scheme will be provided to two operators per service area. While one slot will be open to bidding, the second will be reserved for BSNL at the lowest rate. As these areas already have voice coverage, the subsidy will be provided for active infrastructure, backhaul and power needs.

A special initiative has been taken by the fund to promote the use of renewable energy in telecom. The renewable scheme subsidises up to 75 per cent of the cost of renewable energy installations at 28 shared mobile infrastructure sites spread across the country. Solar or wind hybrids have been established at these sites and studies are being conducted to establish the financial viability and technical feasibility of these projects in actual rural settings. The initiative has been launched through a joint technical and financial effort of the fund and the Ministry of New and Renewable Energy (MNRE).

In the same direction, a scheme to subsidise the setting up of rural solar mobile charging facilities has been launched. It is being undertaken in coordination with The Energy and Resources Institute’s  Lighting a Billion Lives programme, and aims to cover 5,000 villages going forward. Under the programme, community charging centres will be set up and a nominal fee will have to be paid for charging mobile phones. Also, all new VPTs based on fixed wireless terminals (FWTs), which are being supported by the fund, are being provided with solar chargers. Moreover, about 50,000 existing CDMA FWT-based VPTs are being provided (through joint support by the fund and the MNRE) with subsidised solar chargers, with the aim of ensuring sustained and effective functioning.

Going forward, the USO Fund administration is looking to support new schemes that facilitate the use of new and renewable energy in rural telecommunications, providing fibre to villages, and upgrading rural telecom infrastructure to next-generation networks. 

In all, though several projects and schemes are being undertaken and executed by the fund to facilitate rural telephony, a number of issues still need to be resolved before telecom services can reach the remotest regions of the country. Key among them is the need for increasing private participation in rural schemes.

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