LIRNEasia » rural telephony

India: Finance Ministry nixes reduction of universal service fee

Rohan Samarajiva — Thu, 26 Mar 2009 13:03:02 +0000

As those who have followed the discussion on universal service fees on this blog know, universal service fees are usually charged from a company (actually the company collects the money from customers and gives it to the government). The payments go to dedicated fund, from which it is disbursed (or not, for the most part) to connect more people to the network.

India has one of the highest universal service fees in the world–5% of total revenues. We were hopeful, after years of presenting evidence to the government, that this would be reduced (though our preference is for its complete phasing out). The reduction of the rate from 5% to 3% was almost done, but suddenly it has been halted due to Finance Ministry objections.

If it had gone through it would amounted to an INR 2000 crore (roughlly USD 400 million) injection of funds into the industry. And the irony is that the money does go into the consolidated fund of the government to be used for everyday purposes. It will just sit in a dedicated account: poor people’s money, doing nothing for poor people, on a whim. And how much is sitting there now: over USD 4 billion, growing by the day!)

Interestingly, the licence fee cut would not have impacted the exchequer as DoT had planned to reduce telcos’ contribution to the Universal Service Obligation Fund (USOF) for rural telephony, which is paid out of their licence fee, and which is flushed with funds.

Coverage for LIRNEasia book

Rohan Samarajiva — Mon, 31 Dec 2007 11:10:31 +0000

Click on the links to see the full articles covering LIRNEasia’s book, ICT Infrastructure in Emerging Asia: Policy and Regulatory Roadblocks.

‘BSNL’s monopoly over infrastructure a hindrance to growth’ – Financial Express (India)

Rural connectivity is now the focus of every telecommunication player in the country. Almost all stakeholders, from handset manufacturers to service providers, believe that the next wave of growth is in the rural areas.”However, India’s roll out (of telecom services) in rural areas has been slow. BSNL has the backbone infrastructure but is not yet ready to share it with private players,” he added.

BSNL should be made to share its fibre and access networks, Samarajiva said. With shared infrastructure and innovation in marketing, costs can be brought down further, he said. Moreover, telecom companies should also shift their focus from calculating average revenue per user (Arpu) to average margin per user (Ampu), he added.

Also at: http://asia.tmcnet.com/news/2007/12/26/3184529.htm
http://in.news.yahoo.com/071226/203/6ovtq.html
http://in.biz.yahoo.com/071226/203/6ovva.html

Book also discussed at Yahoo Tech Group forum.

‘Fact or fiction: Telecommunications in Asia By Liffy Thomas’ – Ergo (the Hindu, India)

At a time when GSM operators, Telecom Regulatory Authority of India (TRAI) and the Department of Telecommunications (DoT) are at an imbroglio over spectrum allocation, Prof Rohan Samarajiva’s book, “ICT Infrastructure in Emerging Asia: Policy and Regulatory Roadblocks”, makes for a timely read. In Chennai for the launch of the book, Samarajiva, Executive Director of LIRNEasia and former Director General of Telecommunications in Sri Lanka, spoke to Liffy Thomas.

BOOK EXTRACT: ‘Subsidising The Smart Way’ – Business World Magazine (India)The Latin American experience holds lessons for the development of rural telephony in Asia, says Harsha De Silva

The supply of telephony has traditionally been skewed towards the urban affluent as opposed to the rural poor. The literature describes this bias as having been caused by a ‘market efficiency gap’ and an ‘access gap’. The market efficiency gap is the difference between what markets achieve under existing conditions and what they can achieve if barriers are removed. This gap can be bridged through effective competition, private provision of services, and market-oriented policies and regulations that create a level playing field for new entrants. The access gap refers to people and places that remain beyond limits of the market due to inadequate income levels or its skewed distribution. Bridging this gap needs subsidies to encourage service providers to enter these areas.

‘Policies for ICT’ – New India Express (Chennai, India)

WHILE the common perception remains that India has the lowest mobile phone tariffs, other countries like Pakistan, Bangladesh and Sri Lanka have lower tariffs than India, Rohan Samarajiva, executive director, Lirne Asia, said on Tuesday.

Talking about his new book ICT Infrastructure in Emerging Asia – Policy and Regulatory Roadblocks, he said, when compared to all these countries, India’s cost is much higher.

The Deccan Chronicle, Chennai, 16.12.07:

Policies and regulations are the main bottlenecks blocking the development of Information and Communication Technology (ICT) infrastructure in India, according to Prof Ashok Jhujhunwala, Telecom and Networks (TeNet) Group, IIT, Madras.

Releasing the book ‘ICT Infrastructure in Emerging Asia: Policy and Regulatory Roadblocks’, a collection of articles edited by Rohan Samarajiva and Ayesha Zainudeen, ICT experts, here on Sunday, Prof Jhunjhunwala said any technological problems associated with ICT could be sorted out by scientists within two to three years. “But the policy-makers and regulators fail to move ahead with the times. We are living in an era when things which were socially desirable once have become commercial to the core,” the professor said. He pointed out that ICT has the potential of helping developing countries tackle a wide range of health, social, and economic problems.

“While urban India is marching rapidly ahead, rural India is being left behind. We have to use ICT to accelerate the growth of rural India,” said Dr Jhunjhunwala. Elaborating on the pace of growth of ICT, Dr Jhunjhunwala said the next two years will see payments through mobile phones catching up all over the country.

“Instead of going to ATM centres or Banks, you can have cash transactions through your mobile phones,” he said. Dr Samarajiva said the book was a step forward in identifying the reasons for under-connectivity in emerging Asia. “The book itself is an introduction, not a conclusion. It reports the findings of a cutting edge demand-side survey of telecom use at the ‘bottom of a pyramid’ in India and Sri Lanka,” said Dr Samarajiva, a former director general of Sri lanka Telecommunications.

He said there is enough scope to bring down telecom charges. “It is the outdated policies of the governments in the region which are playing havoc with the communication revolution. This is aggravating the digital divide which will lead to major catastrophe,” he said.

The publication of the book was co-funded by the IDRC and Social Science Research Council (SSRC).

More information on the book can be found on the book page.

May 20 Colloquium: Diversifying Participation in Network Development

Divakar Goswami — Tue, 10 May 2005 04:11:39 +0000

LIRNEasia‘s next colloquium is on May 20th at 6:00PM SL Time/2:00PM Copenhagen/10:00PM Canberra/Singapore 8:00PM/5:30PM India/6:00PM Bangladesh/09:00AM Montevideo at LIRNEasia’s premises (SLIDA Campus, 28/10 Malasekera Mawatha) and via live blogging on this web site.

Payal Malik & Harsha De Silva will present their progress on the research project titled Diversifying Participation in Network Development: Moving Beyond the Market which is being conducted under this year’s WDR theme–Diversifying Participation in Network Development. The researchers will present their preliminary findings from their review of the current subsidy mechanism for expansion of rural telephony in India. This mechanism is implemented through two instruments:

(a)Access Deficit Charge (ADC), which is a surcharge on Interconnection fees to compensate the [primarily] the incumbent for below cost regulated tariffs in the rural areas and;

(b) Universal Service Fund (USF), a fund created through a statute to finance network expansion in net high cost rural areas. The disbursement from this fund is made through a competitive least-cost subsidy mechanism.

Research questions, methodology and other details of the project can be found in the attached document below.

Diversifying Participation in Network Development

USO fund may finance rural mobile telephony

Payal Malik — Mon, 18 Apr 2005 15:03:39 +0000

NEW DELHI, APRIL 13: The government is in the process of amending the Indian Telegraph Act to extend the Universal Service Obligation (USO) fund support to cellular mobile services (both GSM and CDMA).
As of today, the government is giving USO fund support to only the fixed line operators offering services in the rural areas.

“We are looking at amending the Telegraph Act to accommodate the cellular services and CDMA-based services to reach the rural areas. We are looking at sharing of the passive infrastructure with the cellular service providers,” communications and information technology (C&IT) minister Dayanidhi Maran told reporters.

Besides covering the villages, the minister is of the opinion that the wireless services should also provide connectivity to the Railways and highways especially in rural areas. When asked about the time frame for amending the Act, Mr Maran said, “We have just started the process.”

Cellular Operators Association of India (COAI) welcomed the Wednesdays announcement. COAI director general TV Ramachandaran said, “This will make the expansion into the rural and semi-urban areas by cellular operators economically viable. We need more cash surplus to fund capital expenditure in rural areas.”

So far, the state-owned Bharat Sanchar Nigam Limited (BSNL) has received the lions share of the USO fund as it has covered around 80% of the villages in the country by offering fixed line services. The private operators share in offering rural connectivity has been low in the past.

But if the Telegraph Act is amended then the private sector could play a major role in offering wireless services in rural areas. This is largely because the private players have a stronger presence in wireless services than in fixed services. Also while the urban areas getting saturated in terms of telecom coverage, the rural areas present a largely untapped market. Around Rs 1,814 crore have been made available to the operators for rural telephony of which Rs 1,314.50 crore have been provided during 2004-05. For the year 2005-06, a provision of Rs 1,200 crore has been made available for the USO support.

The minister on Wednesday announced that India has crossed 100 million phones. “The US, Japan and Germany have almost 100% tele-density, while China has a tele-density of 55%. India, with a tele-density of about 9%, is bound to surpass the growth in these countries by a wide margin over the next 4-5 years,” he said.
The minister said the country was likely to have 250 million phones by 2007 with a tele-density of 22%.
“Of the additional 150 million that would be added by 2007, almost 80 million will be done by BSNl and MTNL alone,” he said. On the present access deficit charges (ADC) regime, Mr Maran said the ADC regime will continue for at least another two years. “There is no rush to abolish the ADC. ADC will be reduced with the passing of time and the benefit would be passed on the users,” the minister said.

http://www.financialexpress.com/fearchive_frame.php

India’s Budget Impact on Universal Service Obligation

Payal Malik — Tue, 01 Mar 2005 12:29:00 +0000

By Payal Malik

In his budget speech the Finance Minister of India promised a release of Rs. 1,200 crores (USD 275 million) for the Universal Service Fund. While it is heartening that the funds are being released and are not being gobbled by the Contingency Fund of India, what is however disheartening is that competition and liberalisation has not achieved its full potential in bridging the rural urban divde and like in the monopoly era one has to wait for budgetary pronouncements for rural telephony to jumpstart. An extract from his speech:

Telecommunication is the best way to provide connectivity in urban and rural India. By the end of January 2005, we had achieved a tele-density of 8.75 per cent. However, we are concerned with the low tele-density in rural areas. So far, Government has released Rs.1,700 crore to the Universal Service Obligation (USO) Fund, which has been fully utilized. A provision of Rs.1,200 crore has been made for 2005-06. 1,687 subdivisions will get support under the USO Fund for rural household telephones. 5.20 lakh village public telephones (VPTs) have been installed so far, and BSNL has undertaken to provide VPTs in the next three years to the remaining 66,822 revenue villages