USO Fund For Rural Telephony

The government’s role in funding telecom infrastructure will be crucial to the growth and spread of telephony in rural India. This is because operators will increasingly look for support from the Universal Service Obligation Fund (USOF) for setting up tens of thousands of telecom towers in rural India over the next three years, especially in areas where it would not be viable for them to invest in launching commercial telephony.

Besides, subsidies from the USOF will also be vital if telcos are to take broadband and Internet services to rural India. (Telecom companies pay 5% of their adjusted gross revenues towards the USOF, which is used for funding telecom infrastructure in rural India. As per the department of telecom’s (DoT) own admission, unutilised USO fund has already crossed Rs 10,000 crore.

DoT took the first step towards this earlier this year when it invited bids from telecom operators and 22 standalone tower companies for setting up about 8,000 telecom towers across the country at an estimated cost of Rs 2,500 crore. This project is estimated to help provide about 50 million mobile connections in rural India.

More importantly, after finalising the contracts for setting up for this tender, DoT will soon issue a subsequent tender for setting up additional 10,000 towers in rural India. With the tender rules mandating that a minimum of three operators share a tower, rural India will also have a choice of service providers.

At the same time, DoT has also kickstarted discussions with both private and state-owned telecom operators to utilise the USOF for broadband rollout in rural India through a bidding process. DoT’s plans include providing broadband connections within a 10 km radius of all block headquarters in the country. It envisages a minimum speed of 512 kbps, where the network connects community centres, primary schools, banks, health centres, panchayats and police stations located close to all block Hqs.

The project also proposes that users are charged only annual rentals with the subscriptions being provided free of cost. In a bid to ensure that the broadband infrastructure created with USO support is utilised to the hilt, DoT has decided to rope in various other government agencies such as panchayati raj, health, agriculture and education to jointly evolve a strategy for it.

With more tenders in the pipeline, rural India looks set to keep its date of having 150 million telehone users by 2010 from less then 20 million currently.