New Delhi: In an attempt to increase the number of fixed-line phones in rural India, the department of telecommunications (DoT), the telecom policy-making body, has decided to waive licence fees payable on revenue earned from such phones. The villages account for just 11% of the country’s nearly 39 million fixed-line phones, seen as critical in Internet delivery.
A top executive at a leading phone firm and telecom experts, however, said this incentive alone will not help expand rural phone networks; they suggested that policymakers examine allowing phone firms to use state-owned Bharat Sanchar Nigam Ltd’s (BSNL) “last mile” copper lines to customer premises to deliver fixed-line services.
Opportunity calls: Vishu Sahu, a Chhattisgarh villager with a wireless phone in his shop. Villages account for just 11% of the country’s nearly 39 million fixed-line phones. Photo: Maitreyee Handique / Mint
A DoT notification on Monday said fixed-line phone revenue from customers in villages and other rural areas would be exempt from a revenue percentage share payment ranging from 2% to 7% to the government as licence fees from 1 October.
The Union government’s decision comes in the wake of a decline in the number of fixed-line phone connections. The total number of such phones was 38.76 million as of July, about 3% less than 39.89 million a year earlier, according to the latest data from the Telecom Regulatory Authority of India (Trai).
BSNL, which accounts for most of the fixed-line phones installed, was granted this waiver in a policy change announced on 7 August. The firm was also extended annual support of Rs2,000 crore from a government fund (called the universal service obligation fund) set up with the aim of financing rural network roll-out.
Among telcom firms that have fixed-line phone services in the country, Mahanagar Telephone Nigam Ltd has 3.6 million customers; Bharti Airtel Ltd 2.4 million; Reliance Communications Ltd some 900,000 and Tata Teleservices Ltd about 700,000.
Phone companies said the effort was not enough and what the industry calls ‘unbundling’ was the way forward. Unbundling allows phone service providers access to the so-called last mile, or final leg of delivering connectivity to a customer, using BSNL’s broadband-compatible copper lines.
“Local loop unbundling (of the copper infrastructure) is necessary for making rural landline penetration commercially viable. This is a severe reason for networks not being rolled out. We need a very strong landline infrastructure not for voice, but for broadband penetration,” Atul Bindal, president of telemedia services at Bharti Airtel, had said in a recent interview.
As Bindal sees it, private phone firms will lease usage rights on the copper lines running into BSNL customer homes and offices and pay the state-run firm for such use. Internet and data applications such as education and electronic governance services will get a boost.
Evidence from Europe — phone operators in countries such as Germany, France, Norway, the Netherlands and Spain have allowed competitors access to their local networks — suggests clear benefits. Europe added 3.9 million new broadband lines in the first quarter of this year and a further 2.3 percentage points in household penetration.
“The main losers were wholesale operators, which lost one percentage point market share in aggregate, while unbundlers were the winners,” international financial brokerage Merill Lynch and Co. wrote in a May report this year.
A local telecom consultant said unbundling benefits from opening up of last-mile infrastructure at BSNL would not hurt the government-run firm if the local access was priced right.
“Unbundling of the local loops is clearly a fair and justified demand by the private operators; it is an infrastructure created by using public funds...and (there is) no reason to assume that it will hurt BSNL,” said Mahesh Uppal, director of Com First Pvt. Ltd.