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Service Enabler: CII-KPMG report examines NOFN’s role in driving rural broadband uptake

August 21, 2013
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The Confederation of Indian Industry (CII) and KPMG have released the “Creating Viable Business Models for Inclusive Growth through the National Optical Fibre Network (NOFN)” report, which highlights the role of the NOFN project in developing business models to offer e-services in the areas of education, health care, banking and agriculture in a public-private-panchayat ecosystem.

Current status of internet usage in India

Over the past six years, India has witnessed significant growth in telecom connectivity, with the teledensity increasing from 17.2 per cent in December 2006 to 73.3 per cent in December 2012. The internet and broadband segment, however, still has a long way to go. The current internet penetration level is 10.1 users per 100 people. Also, the broadband user base stood at 15 million in January 2013 (as per the Telecom Regulatory Authority of India).

Further, there is a major gap between internet penetration in urban and rural India. As per a study by the Internet and Mobile Association of India and the Indian Market Research Bureau in 2012, active internet users represented only 5 per cent of the rural customer base as against 25 per cent in urban India.

As per the report, internet usage in the country’s rural areas can be encouraged by focusing on availability, accessibility, affordability and acceptability of services.

Considering the potential of information and communications technology (ICT) in achieving inclusive growth targets, the central government has provided an impetus to broadband connectivity under the National Telecom Policy, 2012. A key step in this direction is the NOFN project.

The NOFN project

Through the NOFN project, the government is aiming to extend fibre connectivity from the block to the panchayat level by linking 250,000 gram panchayats. The special purpose vehicle for the project is Bharat Broadband Nigam Limited (BBNL).

As of April 2013, 22 states and four union territories had signed tripartite agreements with the Department of Telecommunications (DoT) and BBNL for right of way. BBNL has launched several pilot projects to test the feasibility of laying fibre in various regions.

While the NOFN project is expected to build a strong middle-mile infrastructure, there are several issues pertaining to building sustainable business models centred on delivering relevant e-services to rural customers, the network core and last mile connectivity.

Future-proofing the core

The NOFN is expected to enable access to and drive the use of e-services for health care, education, financial services, agriculture, e-governance and entertainment. The planned provisioning of 100 Mbps bandwidth through the NOFN at the gram panchayat level translates into a demand of 60 Gbps per state headquarter. Further, as per Cisco, data growth is expected to increase by five times over the next five years. The current core capacities of service providers may not be adequate to cater to this demand. A parallel upgradation of core capacities may, therefore, be considered along with rolling out the NOFN.

Clarity on last mile connectivity

Last mile access would be critical for realising the policy objectives of technology inclusion and universal access, and for establishing viable business models for delivering e-services in rural areas. Middle mile fibre layout enables affordable delivery of critical services at the panchayat level through community-based services. However, efficient and viable delivery of some of these services would necessitate extending connectivity to the last mile. This would require collaboration between the government and private enterprises for preparing strategies that make the proposition viable for all stakeholders.

Emerging opportunities

The NOFN, with its potential to provide 100 Mbps internet connectivity, can be leveraged to provide services related to education, health care, banking and agriculture in rural areas.


In several states, the teacher-to-pupil ratio in government-run rural schools is lower than the Right to Education Act-mandated 1:40. The NOFN can be used to provide online vocational training courses and information on schools and universities.

Proposed business model – Private enterprises establish ICT centres in rural government schools

This model involves setting up ICT centres or digital classrooms in rural government schools. This would entail providing facilities such as audio-visual modules, animation and remote learning. In this context, the high speed broadband connectivity provided by the NOFN will play a major role.

Under this model, the contract for the supply, installation and maintenance of IT infrastructure and supply of content can be awarded to private education service providers on a build-own-operate-transfer basis. Private players that have an established delivery model in urban areas could be involved to provide such turnkey solutions.

The beneficiary school will reimburse the per student fee to the private education service provider, as part of a monthly contract. This could be brought under the ambit of education schemes sponsored by the government.


Nearly 70 per cent of the Indian population resides in rural areas, and about 61 per cent of the rural population remains unbanked. As of March 2012, 120,355 banking outlets in villages were being served by business correspondents. In this context, the NOFN can be used to provide banking services and information related to loans and insurance.

Proposed business model – Banks tie up with ICT-enabled post offices

This model leverages post offices in rural India to drive ICT-enabled financial inclusion. For example, India Post has 154,822 post offices, of which about 90 per cent are in rural areas. This medium can be used to offer banking services to provide a fillip to the government’s financial inclusion initiatives.

Under this model, agents appointed by the bank in villages access the closest post offices (as against bank branches) to undertake cash transactions. The post offices carry out settlements with banks (for which they would require a banking licence). This model would use fibre connectivity through the NOFN project. Last mile connectivity would be provided between the banking agents’ hardware and the banking terminal located at the post offices. In terms of equipment, this model could deploy hand-held point-of-transaction terminals and biometric smart cards for authentication. These could be replaced by Aadhar cards or other smart cards issued by state governments.

Need for a sustainable ecosystem

While the NOFN infrastructure can be used to deliver relevant e-services, collaboration between various stakeholders is required to operationalise these services. The need of the hour is ensuring the availability of cost-effective devices, vernacular content and low-cost applications relevant to local users. In this context, an ideal NOFN ecosystem is one that will involve the central and state governments, the providers of enabling products and services (both public and private), as well as local governing bodies to drive and monitor these services at the grass-roots level. Gram panchayats, in particular, need to be actively involved in the project.

The way forward

The report proposes the setting up of a CII-government working group to oversee the development of viable business models and plan the delivery of various broadband-based services.

The working group could comprise the following functional blocks:

Strategy and programme management group

Technology and infrastructure group

Business model and financing group

Each functional block could include members from government bodies and private enterprises. The core of the working group would include permanent representatives from DoT, BBNL and CII, private players and experts from various fields. The strategic council, in consultation with the programme management group, may also appoint transient members (from both public and private companies) to the functional teams.

The functions of the proposed working group would include:

Ensuring a coordinated and consistent approach to broadband infrastructure management and addressing urban and regional issues. This would include promoting the delivery of services in key sectors such as education, health care, banking and agriculture, and areas like governance and economic development through the high speed fibre network provided by the NOFN.

Driving investments as well as competition in the development of optic fibre infrastructure.

Facilitating and encouraging the development of relevant regional content in vernacular languages to maximise the benefits that next-generation applications and services will deliver over the NOFN platform.

Addressing issues related to the physical roll-out of the optic fibre network and facilitating the development of broadband-enabled content, applications and services.

Working with carriers to promote and improve services and cost competitiveness of broadband services.

Partnering with BBNL to ensure the NOFN’s readiness and develop programmes to drive service uptake.

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