Trai can play an important role by helping MNCs localise their operations

Increasing rural penetration of telecom services has been an explicit focus of various governments. The Telecom Regulatory Authority of India (Trai) has taken several steps in this direction. Within the NTP 99 framework, it was on Trai’s recommendations that the Universal Service Fund (USF), with 5% contribution from service providers, was set up under the administrator, Universal Fund. After an amendment to the Indian Telegraph Amendment Act, 2004, the USF became a non-lapsable fund.

This provision greatly facilitated the ability of the administrator to disburse funds for rural telecom services (RTS). At a per line disbursement of nearly Rs 17,000 that the USF provides for, the current Rs 5,000 crore would increase the rural teledensity by 0.3%. Actually, the number would be lower, as the USF also provides for operational costs of “qualifying” rural lines.

With double the investments available (as envisaged by the USF) over the next five years and decreasing telecom costs, one could envisage slightly higher rural telecom density and hope to reach a rural teledensity of 4 by 2008, two years earlier than the NTP 99 target. The question is: are these levels adequate? And what about the disparities in the rural and urban service provision?

While the rate of growth of telecom services to rural areas has increased, it has been slower than in urban areas. As of September 2004, while the national teledensity was around 8.68%, and urban teledensity was 23.3%, the rural teledensity was 1.8%. Trai’s consultation paper on rural services highlights the growing gap between urban and rural teledensities. While the widening gap is a concern, we need to note that teledensity figures include both fixed line and cellular connections. As of September 2004, there were 43.87 million fixed line, including WLL subscribers, and 42.99 mobile subscribers. A large number cellular connections have been in urban areas, initially mostly in households that already had fixed line coverage.

What is of concern is the slowdown in the rate of rural penetration, possibly due to BSNL’s focus on its more commercially lucrative businesses in urban and cellular segments consequent to its corporatisation. Despite this development, BSNL is the sole bidder for USF for the majority of bids. Of late, some private operators have shown some interest. However, lowered investments in rural penetration would be only one part of the story. We also need to understand whether there were any demand-related factors that could possibly contribute to slower off take of rural telecom services.

What about the quality of services (QOS)? A high QOS could lead to much higher demand. While Trai has been systematically disseminating the QOS parameters of various service providers, the current QOS report does not segregate urban and rural services. A focus on rural areas would help to highlight the state of services. As any management novice will say: “What gets measured gets done”. Of course, it is not as simple as this, but until all policy and regulatory initiatives focus on rural aspects, RTS will not become a key concern area, operationally.

Since BSNL is the dominant service provider (and in some areas the only one), a public sector operator totally funded by the government and the major recipient of USF, it is important that the state of RTS be also known from the viewpoint of information to citizens and public accountability.

Trai has suggested the concept of “niche” operators that can provide services in the short-distance charging areas that have a teledensity of less than 1%. Niche operators are exempted from paying an entry fee. They would need to connect to the fixed service operator and may provide services using wireline and/or fixed wireless access. While Trai’s moving away from a circle-wide licenses to smaller license areas indicates an understanding that possibly a commercially viable way of starting rural operations could be through local entrepreneurs that provision, operate, bill and possibly think of innovative financing and marketing ideas in the local context.

The importance of local contextualisation is a lesson that MNCs trying to tap the rural masses have learnt. An important role that Trai should play is to help these entrepreneurs to operationalise their interconnection agreements with BSNL or other service providers. They should also become eligible for USF and also funding for interconnection. It is important to recognise that these operators would neither have the legal, technical and commercial expertise to negotiate with the well established and formally organised operators. Trai’s role is in finding the levers that will drive RTS and applying them strategically