Satellite internet subsidy bid runs into a ₹1.7 tn hurdle

The government’s ₹1.73 trillion commitment to bridge the country’s digital divide—including the revamped BharatNet programme and 4G connectivity for villages—has left little room in the Digital Bharat Nidhi (DBN) fund, the officials said, speaking on the condition of anonymity.

Other reasons include the lack of a mechanism for direct benefit transfers (DBT) from the fund and potential overlap with existing initiatives already covered under the Digital Bharat Nidhi, such as the 4G saturation project and other targeted schemes aimed at expanding mobile connectivity in villages, they said.

No subsidy means either users will have to bear the cost of satellite terminals, priced around ₹1 lakh on average for each unit or the companies will have to absorb the costs. Starlink, Eutelsat OneWeb, Jio Satellite and Amazon's Kuiper, which are preparing to launch satellite internet services in India, have been urging the government to provide subsidies to connect the underserved or unserved rural areas with satellite internet where it is commercially unviable.

Queries emailed to DoT and Trai did not elicit a response until press time.

On 9 May, as part of its recommendations on the assignment of spectrum for satellite internet services in the country, Trai told DoT that for targeted subscribers in unserved or underserved regions in rural and remote areas, the government can consider a subsidy for each fixed user terminal. The appropriate amount may be decided by the government, Trai had said, adding that the government can give the subsidy either through DBT to eligible subscribers or to the operators through the Digital Bharat Nidhi fund.

In its 12 November response to Trai’s suggestions, the department of telecommunications (DoT) has cited multiple reasons for not accepting the regulator’s proposal on subsidy for satellite internet services and equipment for users, the first official cited earlier said. One of the reasons is that there is limited space for sanctioning new projects under the Digital Bharat Nidhi fund, which has an available amount of ₹90,900 crore but has a committed liability of ₹1.73 trillion.

“DoT has communicated reasons to Trai on not accepting its recommendations on satellite internet subsidy. The DBN does not handle direct benefit transfers (DBT), and no mechanism has been established for this purpose," the second official said, adding that DBN rules allow an area-wise targeted approach to bridge the digital divide. The present approach for subsidy, recommended by Trai for satellite internet, is the individual approach, which will mean providing a schematic subsidy to already covered areas, the official said.

“DoT is not aligned with Trai's proposal for giving area-wise subsidy as the approach will raise the issue of adverse selection and could result in inefficient targeting," the third official said.

Trai is preparing its response to comments by DoT, said a fourth official, without sharing details.

The Digital Bharat Nidhi (DBN) or the erstwhile Universal Services Obligation Fund (USOF) was set up to fund and implement projects that bridge the digital divide across India, especially in rural and remote areas. The fund currently subsidizes telecom operators for providing services where commercial viability is low. Operators contribute a 5% levy on their adjusted gross revenue (AGR) to the DBN.

At a press conference last month, communications minister Jyotiraditya Scindia said, “The way I understand is that the erstwhile USOF (DBN) is for capital expenditure. It is not for subsidizing a service. DBN can only subsidise the tower that is being put up there, the capital structure that has been put up. You cannot subsidise the variable cost of a service".

However, the Broadband India Forum (BIF), representing satellite communication companies such as Hughes, OneWeb and Nelco, among others, argued that DBN can subsidize satellite internet.

“One of the main purposes of the DBN charter is to provide sustainable connectivity for rural and remote areas and promote new technologies and services. Satcom based on HTS- GSO/NGSOs (high‑throughput satellite- Geostationary Satellite Orbit/Non‑Geostationary Satellite Orbit) is already a new technology and service," TV Ramachandran, president of BIF said in a letter to DoT last month. “Therefore, using DBN funds for supporting satcom services and ultra-high cost satcom consumer broadband terminals (in the average range of ₹1 lakh) falls clearly within its remit."

According to Ramachandran, Trai’s recommendations in this respect are both lawful and necessary. The sector is in such a nascent stage and satellite operators face low revenue potential in the disadvantaged markets–unserved and underserved regions–that they are required to serve, he added.

After Trai’s recommendations in May, the telecom operators, represented by the Cellular Operators Association of India (COAI), had pushed back against subsidies for satellite internet services from DBN.

“The additional proposal to subsidize user terminals or satellite operators through the DBN fund further tilts the level playing field against the terrestrial operator, especially given that a majority of the DBN levy is contributed by competing terrestrial operators," S.P. Kochhar, director general of COAI, said in a letter to the government.

On 17 November, Mint reported that the government is considering 1% discount on the spectrum usage charge for satellite internet companies if a section of their users lives in hard-to-connect areas such as borders, hills, islands, and those notified by the government.