No phones for Bharat

One of the professed aims of the telecom policy is to increase the access to telephones in rural India. This plan has come a cropper, if the latest available numbers are any indication.

The number of new village public telephones fell dramatically from over 46,000 last year to around 8,000 in the first six months of this year. As for rural phones, the numbers this year are half that of last year. There are many reasons for this. Once the government decided to monetise the penalties for not providing rural and village telephony, private operators chose to pay up rather than invest in uneconomical phone lines.

With the shift to unified licensing, even this obligation went out of the window. It was not possible to ask fixed line players to take on obligations that the mobile companies didn't have.

To deal with this, the government set up a Universal Service Obligation (USO) fund, which operators could tap for setting up rural and village phones.

Under the plan, bidders offering the lowest cost for phones were to get paid from the USO, but at the last auction there were no bids at all. The fund is currently sitting on over Rs 3,000 crore of USO funds with no takers for the money.

In the case of BSNL, which is the only operator with a deep enough all-India footprint to connect rural areas, it gets money from the Access Deficit Charge (ADC) that all users of phones pay, including on international calls. So even BSNL doesn't bother about the USO any more!

Part of the reason for this is that the USO fund is badly designed and rigidly administered. For one, instead of just an open bid, the fund specifies ceiling rates (usually perceived to be uneconomic) and asks for all manner of paperwork and data on costs.

Until recently, the money was not even paid up front; payments were spread over a period of time. TRAI, the telecom regulator, has now come up with the concept of "niche players" who might want to provide rural and village phones and has recommended that they be exempted from paying a one-time entry fee.

While that's a good suggestion, such players also need to be exempted from paying an annual revenue share since rural phones generate very little money.

One way is to specify that phones in rural areas below a certain tele-density level will be exempt from licence fees. Alternatively, the government could specify the revenue levels below which the exemption will apply.

A major problem that anyone trying to install rural phones will face is that of interconnection. For rural phones to be of any use to anyone, they have to receive calls from (and make calls to) other areas.

Till date, however, BSNL's record in providing interconnect facilities has been poor, and the telecom regulator will have to ensure that it begins doing something about this. Meanwhile, large areas of Bharat will continue to live without a dial-tone.