Strategies to bridge digital divide between urban and rural India

Abstract

Since independence the telecom growth in India was not substantial due to Government monopoly. With the liberalization of economy in 1991 the stage was set for the liberalization of telecom sector also. The Government announced National Telecom Policy 1994 followed by NTP 99 and allowed private sector to provide mobile services and value added services like radio paging etc. Both the policy initiatives have contributed towards increased overall tele-density. But the gap between urban and rural tele-density continued to increase causing increased digital divide. In respect of telecom services network coverage depend on population density. If population density is high then network rollout costs will be low and Average Revenue Per user will be high. Rural networks will not be profitable due to low population density and high geographical spread. Because of this there is always a huge gap between urban and rural penetration. The rollout obligations mentioned in the as part of license terms and conditions are urban centric with the requirement that 10% of District HQs have to be covered within one year and 50% within three years. Because of urban centric initiatives rural telecom connectivity has suffered over the years. Realizing the importance of rural connectivity for economic development and inclusive growth, all service providers are mandated to contribute 5% of their Adjusted Gross Revenue (AGR) towards universal Access Levy. This amount goes to Universal Service Obligation Fund (USOF). These funds are utilized for improving rural connectivity.This policy memo analyses the successes and failures of various policies initiated by Government to bridge the digital divide between urban and rural India and suggest policy alternatives to bridge the divide at faster pace.National Telecom policy 2012 envisages to achieve 70% rural tele-density by 2017 and 100% by 2020. As on 31.12.2014 the rural tele-density stands at 46.09. The analysis of disbursements made from USO till January 2015 shows that only 30% of funds were utilized (INR 19,735 Crores out of INR 62,284 Crores). Out of the funds utilized 85% funds are used only for extending wired line services to rural areas. If we look at the tele-density figures as on 31.12.2014 out of overall tele-density of 77.58, the contribution of wireline is only 2.16. It means in order to achieve the 100% rural tele-density target of NTP 2012 by 2020, there is an urgent need to use USO fund judiciously and expeditiouslyIt is suggested that the USOF administration has to be restructured by establishing a board/authority with a secretary level chairman as head and other four members having expertise in Telecom, management, Finance and economics. The board should have autonomy to devise the schemes and procedures which enable faster rollout of telecom network in rural areas. The funds should be utilized not only to address supply side constraints, they also should be utilized to address demand side constraints by extending subsidy support for development of vernacular content, digital awareness programs for rural masses etc.By utilizing funds of USOF all 2.5 lakh Gram Panchayats will be connected with optical Fibre through National Optical Fibre Network (NOFN) to provide 100 Mbps bandwidth to these Panchayats. A Special Purpose Vehicle called BBNL is formed to establish and maintain this network. The fibre will be made available to all service providers on nondiscriminatory basis extend services to rural villages from the panchayats. This initial target of 2014 to complete this project is already slipped. Now the new target is December 2016. Three PSUs viz. BSNL, Railtel and PGCIL are awarded this work by BBNL. These works are moving at a slower pace. Out of 2.5 lakh Panchayats, only the phase 1 works of 1.03 lakh Panchayats are in progress. Phase 2 and Phase 3 works are yet to be started. 0.5 Million KMs of cable has to be laid. At present on 500 KMs of cable is being laid per month against the requirement of 30,000 KMs per month. The main bottle neck seems to be the delay in getting the RoW (Right of Way) permissions to lay the cable. The expeditious execution of this project is crucial for the penetration of rural connectivityand for the success of national e-governance project. This network acts as a catalyst for increasing rural tele-density as well as for increasing broadband penetration. Hence it is suggested that BBNL should ward the phase 2 and phase3 works on EPC turnkey basis through international competitive bidding and ensure that this project is completed expeditiously. Another suggestion that is made in this policy memo is provide incentives to service providers for rural network rollout by reducing universal access levy to 4%, 3%, 2% and 1% as when they cover 50%, 75%, 90% and 95% of rural SDCAs in a LSA respectively.These three alternatives are ranked with respect to their impact on the four objectives viz. rural tele-density, broadband penetration, accessibility and affordability of ICT enabled services and promoting ICT enabled services. Based on the consequences and trade-offs it was concluded that the two alternatives i.e. restructuring of USOF and expediting NOFN will be the effective alternatives to bridge the digital divide at a faster pace.