Revising rural broadband schemes may be a good idea
The broadband segment has been on the government’s radar for some time now. After several failed targets, DoT plans to invite bids from operators to provide broadband services to over 60,000 villages across the country. DoT is likely to come out with a tender for rural wireless broadband through the Universal Service Obligation (USO) Fund by end-March 2011.
Till January 31, 2011, a total of 261,413 broadband connections and 2,506 kiosks had been provided under the rural wireline broadband scheme launched by the USO Fund, against a target of 888,832 connections and 28,762 kiosks by 2014.
Today, with wireless broadband projects also being financed by the USO Fund, the number of connected villages is likely to increase significantly.
Realising the importance of broadband, the finance minister has, in the Budget 2011-12, finalised a plan to provide rural broadband connectivity to all 250,000 panchayats in the country within three years.
The problem, however, is that extending rural telephony and broadband connectivity is not financially viable for most operators. Two leading operators, RCOM and Bharti airtel, have already approached the government to prematurely exit from the rural telephony scheme under the USO subsidy. They have not managed to fulfil the commitments made when winning the bids in 2007. RCOM, for instance, has less than 500 active base stations of the about 8,000 committed by them.
The operator has stated that it wants to exit some of the regions as the revenues generated there do not allow operations to be financially viable. Bharti airtel has also been facing issues in many areas where passive infrastructure was not available on time and the operator had to build its own infrastructure. It is reported that the company would like to exit around 180 of the 1,174 sites assigned to it.
Meanwhile, BSNL has asked the government for an extension of the Rs 20 billion subsidy it receives annually to sustain its loss-making rural operations. The company has stated that it would be impossible for BSNL to sustain its bleeding wireline business across rural India if the USO subsidy is withdrawn after July 2011.
While Bharti airtel and RCOM’s exit requests have been turned down, there is no decision on whether any penalty or liquidated damages would be levied on the non-performing service providers.
DoT is believed to be framing an exit policy for operators. However, with the USO Fund sitting on an estimated unutilised amount of about Rs 250 billion, it may be a good idea to review some of the schemes, whereby the opex and capex are minimised for operators. Only then will rural teledensity and broadband penetration pick up.