Well-intentioned

The telecom regulator’s (Trai) latest consultation paper on increasing teledensity in rural areas is welcome. It points out that, in the period since the private sector was allowed into this area, urban tele-density has shot up from four to 20, while that for rural areas has gone up from 0.3 to just 1.7.

Trai is candid enough to admit that all policies to prevent this disparity have failed. The policy of low rentals for rural areas hasn’t worked since private firms met just 12 per cent of their village phone commitments (before these were scrapped).

And barely Rs 500 crore has been given out of the Universal Service Obligation (USO) fund to operators to set up village phones, despite the government collecting around Rs 3,000 crore a year for this purpose.

Indeed, even the policy of reimbursing BSNL’s licence fee commitments (of Rs 2,300 crore) hasn’t worked.

Trai’s paper implicitly admits that the yearly addition of village phones has declined in the last two years—from 60,000 in 2001-02 to 15,000 in 2003-04—while new direct exchange lines in the rural areas fell from 2.25 million to 1.25 million.

Trai’s suggestion, to offer lower-cost or even free spectrum for providing such phones by “niche” operators (anyone who sets up phones in areas that have a tele-density of under 1 per cent) is a good one in principle.

But Trai has stuck to the same definition of a niche operator as in its unified licence draft recommendations some months ago, according to which niche operators were specifically prohibited from providing mobile services.

But Trai itself has maintained on various occasions that fixed lines cost three times more than mobile ones. Trai needs to come out with a clear statement, because the paper talks of “wireless” technologies all the time.

Is the niche operator to be allowed to instal mobile phones, or is this concession only for fixed-wireless phones?

Another area of concern is that the fixed-line operators got spectrum in 1997 at no extra charge, and still didn’t meet their rural obligations. So why should they meet them now? Because of support from the USO fund?

The truth is that hardly anyone has wanted to use the USO fund so far, as Trai itself admits. The solution to the rural problem could lie in two or three areas.

One, ever since BSNL found easy money from the ADC regime, it has neglected rural phones—so any solution without taking a fresh look at the ADC and making it more transparent will not work.

Second, come out with a more creative inter-connection regime whereby rural phone operators are allowed to charge a higher fee every time calls are made to their networks—since most incoming calls into these networks are long-distance, this is surely possible.

Third, the USO fund’s rules must be revised to make it more attractive and easier to access.