The Hindu Business Line : Fighting shy of the call

The `urban-rural divide' is a matter of increasingly greater interest to Indian industry, of course not the least because there is a vast population out there that constitutes future customers.

And the telecommunications industry is no exception.

As recently as in June 2006, the Telecommunications Minister, Dayanidhi Maran, noted that rural teledensity still languished at around 1.9 per cent. The country cannot move forward unless it carried along the 70 per cent who live in rural India, he said.

The concern appears to be as intense for the corporate telecom sector too, going by the comments made by CEOs at a recent CII round table discussion on the topic. But who will bell the cat, is the question, and, as a public sector official noted, the refrain frequently returned to the comment that `government' must do something, either by way of connectivity initiatives of its own or through policy moves.

Dot is already planning on setting up passive cellular infrastructure in rural areas with support from the Universal Services Obligations (USO) Fund and has short-listed 21 companies for the project. Passive infrastructure in a mobile network essentially involves acquiring land, setting up towers and electrical and civil works that need to be in place before operators can install the active infrastructure such as wireless radio equipment, which brings mobile services to the consumers.

DoT had earlier decided that support from USO for its rural mobile project would be given in two parts. The first part will subsidise companies that which set up the passive infrastructure. The second part subsidise operators who offer the mobile services. This will make rural telephony a more viable business case for telephony operators.

Industry hopes that the USO project will be a sustainable one, said a senior official with a private sector company. Providing infrastructure is one thing. The cost of rolling out technology, maintaining and providing services would itself be high, especially for a scattered population. Creating models for operating a $2 ARPU would be key. For that, one would need to hope for volumes. And that would be a little like putting the cart before the horse, he said.

Making a business case

Overall teledensity in India was 16 per cent, as of October 2006, with rural teledensity at 2 per cent. From a wireless telephony point of view, when your rural revenue per user (ARPU) can be as low as $2 (blended ARPU - postpaid and prepaid - is currently a little less than $10 in India) how does the operator make a business case for himself, was the question.

And many agree that wireless telephony is the yardstick, and looks likely to be the first introduction to a rural person of any form of computerisation or connectivity.

With an estimated rural monthly average revenue per user of around $2 (Rs 90), there is no business case for companies to connect the unconnected; today's technology does not allow it, said Suryanarayana Valluri, Vice-President, Telecom Service Provider business, Wipro Technologies.

However, he also did imply that India is one country that can think about achieving such a thing. "In India we are used to providing scale without spending too much. We are used to giving something efficiently at a low cost." But, more than anything else, it is a policy-driven issue, he said.

N.Venkaswamy, Managing Director, Juniper Networks India, has said that what the Indian telecom industry needs to do is to build on what already exists. "The Government is very much ahead. There are networks created for the Panchayati Raj, there are networks created by bank ATMs (PSUs)." The retail industry is also creating networks, he said.

There is enough of optical fibre network in the country, said Shirish Purohit, Chief Executive Officer, Midas Communications, which designs and develops products for communications, many of them in the economical range. "Today, in 85 per cent of the country geographically, a fibre head is just 20 km away. The last mile is the question." And, he says, there is enough technology too that can take care of this last mile. Of course, is there a business case? That is a question that Shirish too agreed. "Today I am an operator. I need a certain amount as operating expenditure, a certain amount as capital expenditure. We have to invent a model to make a business case."

The demand question

Some wondered whether there was a viability case, and not just from the financial point of view but from the demand point of view too. "In most villages, people don't go beyond a range of 10 km in daily life," noted Pankaj Manglik, president and COO, Proxim Wireless Corporation, a wireless products company.

The question then is, would villagers require connectivity (of any kind) in the volumes that would make for a viable model for an operator? Demand will come when there are applications that a customer will want to use, he said, pointing out that there is no shortage of demand for cable television.

"We need to show applications that are important. It (taking up of telecom services) is not going to happen on its own." But several countries around the world have done it, supported by private companies, he said. You have to think about network as a utility, a large role has to be played by government also, he said.

Asim Ghosh, Managing Director, Hutchison Essar, did not agree that telephony services have to be `pushed' to the rural population. It did not need any telling for the villager to figure out that the two-wheeler is faster than walking. Indians are smart adopters of technology, he said.

The Post and Telegraph department could be used to distribute telephony services, said Firdose Vandrevala, Chairman, Motorola India. "A phone can be sold to a post office and the cost can be collected in instalments by an operator," he said. The post office can, in turn, provide telephony services to the population in its area.

The Government needs to provide infrastructure and play a leading role in driving rural telecom penetration, said Ravi Chauhan, Managing Director, Nortel India.

According to Ghosh, more rural penetration may have happened than India is credited for. A village of under 5,000 people is what constitutes a rural area, according to the census department. But a big chunk of what is classified as urban is actually rural, he said.

The Telecom Regulatory Authority of India (TRAI) had recommended zero licence fees for rural service providers as well as a 10-year moratorium on licence fees for spectrum, said Venkaswamy.

But these things have not happened, he said, emphasising that policy would be a major driver for rural telephony penetration. On the broadband front, everyone agrees that it will require some waiting. PC penetration is a problem that compounds it. And not until the Microsofts and Intels of the world reduce costs is this going to happen, said Venkaswamy.

kripram@thehindu.co.in

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