Ajay Bhattacharya, Administrator, USO Fund

Ajay Bhattacharya, administrator, Universal Service Obligation (USO) Fund, is confident that the vast potential of the rural telecom segment will elicit significant operator interest and spur the next phase of growth. Meanwhile, the USO Fund will continue to provide funds and facilitate the rollout of mobile and broadband services in the rural areas. Excerpts from an interview with tele.net...

What has been the USO Fund's role in expediting rural rollout in the past few years?

Till 2006, the USO Fund used to handle requirements related to basic telecom services. After the rules were amended in 2006, we started supporting mobile infrastructure and the entire gamut of rural telecom services. We are now associated with the funding of shared mobile infrastructure.Under the first phase of this scheme, about 7,800 shared mobile towers are being put up in the rural areas. The project is going well. There has been a slight delay of two to three months, but we expect most of the towers to be up this year, except those in areas where insurgency and other problems exist. We are in the process of launching the second phase of the shared mobile infrastructure scheme, under which more than 11,000 towers will be put up. This phase is expected to commence over the next two to three months.

Under the first phase, we are ensuring that the larger centres of population in the country are covered. In the second phase, we will try to cover smaller habitations of 500 or more people in all parts of the country.

The USO Fund supports all telecom activities to provide coverage in uncovered areas. Till 2006, we were looking after basic telecom services, trying to put a village public telephone in every village and providing support for individual connections in remote areas. In very remote locations, we also support satellite telephony. This covers the entire gamut of basic services.

In addition to mobile services, we are looking to roll out and support broadband services in the rural areas. We are supporting projects that will ensure that all block headquarters are connected through an optic fibre network. The specific issues that need to be resolved in the case of remote locations are being looked at. For instance, we are considering giving support for laying an undersea optic fibre cable for Lakshadweep and the Andaman and Nicobar Islands.

There have not been any problems concerning the allocation of funds, and there is no shortage of funds either. We expect the requirement for funds to increase as the telecom activities supported by the USO Fund pick up.

The disbursal of funds has not actually decreased. This has to be seen in context. In the first phase of the mobile infrastructure scheme, we had targeted over Rs 40 billion as outflow, but as the parties asked for lower subsidies than we expected, the outflow ended up being only Rs 5.5 billion. We have to follow a transparent procedure and it should be a matter of satisfaction that companies are asking for lesser subsidy than expected.

How has private participation in the rural telephony segment increased over the past few years? What is likely to be the future competitive landscape of rural India?

Private participation has definitely increased in the rural telephony segment. While participation in basic services has been limited, private companies play a much greater role in the mobile infrastructure segment. Infrastructure players have come in in a very big way. Almost every service provider is represented as well. So, the private sector is very much into it now. While the involvement in the past was not much, it is picking up now.

Broadband has perhaps not picked up to the level we expected, but in the overall context, whatever the reasons are for the slow uptake of broadband across the country these hold even more strongly for the rural areas. Low PC penetration and lack of relevant content may be some of the issues. But what should help in the acceptance and penetration of broadband services in rural areas is the common service centre (CSC) scheme, undertaken by the Department of Information Technology, under which 100,000 CSCs are being set up in the rural areas of the country. Just as PCOs helped people access telecom services in the past, CSCs should help people access broadband and e-governance services.

Under the CSC project, rural exchanges are being upgraded to offer broadband services. The very fact that broadband services are available would certainly accelerate the use of broadband.Until the recent past, broadband services were not available even to those few people who wanted it. Now, with the various e-governance initiatives, this is set to change. Under the USO Fund, we are planning to extend wireless broadband in rural areas, which should also help in rolling out broadband services and increasing broadband uptake.

The demand for broadband is often latent. But once services are available from the connectivity and content side, and when PC penetration increases, broadband uptake is likely to increase as well.

What are the challenges associated with increasing teledensity in the semi-urban and rural areas?

First, in remote locations, capital expenditures are high, much higher than in urban areas. Second, for the same capex, the number of users that can be serviced in rural areas is lower than that in urban areas. Third, the average revenue per user is much lower and, fourth, there are associated problems such as higher operating expenditures, lack of power, longer running of DG sets, insurgency, and lack of roads.

However, I think many of these issues are being addressed. What shows the potential of rural areas is that rural teledensity has crossed 10 per cent and that the monthly subscriber addition in rural areas is about 2.5 million. What adds to the rural potential is that many of the urban areas are bound to reach a plateau sooner or later. Teledensity has reached almost 100 per cent in some urban areas.So, future growth has to come mostly from rural India. Perhaps we underestimate the capacity of the rural areas-some of the rural markets are really expanding fast.

The USO Fund provides financial assistance for extending telecom services to the rural areas. The philosophy of the USO Fund is that some amount of subsidy acts as a sweetener and makes an economic proposition out of a project that would otherwise not have made market sense. Rural teledensity will also increase through the competition being promoted by the government, which will bring down tariffs.

With penetration rates being very low in the rural areas, is it possible to achieve the ambitious broadband targets set by the government? What initiatives have been taken to expedite broadband growth?

Given the lack of pace in the past, some people believe that the broadband targets set by the government are overambitious. I do not think so. Some of the pieces are falling into place, such as the USO Fund extending support for broadband rollout in the rural areas.

Infrastructure sharing helps bring down capex and opex. Now, the concept of sharing has permeated the industry, and many players have promoted infrastructure companies. Reducing capex and opex is very important because towers are very expensive and, with competition being what it is, it is necessary to cut costs wherever possible.

With regard to broadband and mobile services, growth in the rural sector has been surprising in the past and will continue to be so in the future. We should not underestimate the potential of these areas.