The Hindu Business Line : Call of the village

TELEPHONE CONNECTIONS allow migrant workers and members of the household to consult their families before taking important investment and production decisions, points out NCAER.

One of the key chapters in the recently released `India Rural Infrastructure Report' of the NCAER (National Council of Applied Economic Research), from Sage (www.indiasage.com) is about telecom.

"The demand for telecommunication services is surging across rural India, as middle and upper classes are growing in most villages. Yet, the gap between demand and supply is wide," begins the chapter.

How wide? In 2004, teledensity was 1.67 in rural areas, meaning that there were fewer than two telephone lines per 100 residents. In comparison, teledensity in our cities was more than 25, and the average was 8.6. Rural penetration is `only 2 per cent of the rate in the US,' rues the report.

If you wonder if phones can help the villagers, here is a case study, about Puri Ben, a member of SEWA (Self-Employed Women's Association). In her village, Banaskantha in Gujarat, `the residents have almost no skills but the women take up embroidery work on a daily wage basis'. They travel to nearby towns to collect orders and to deliver the work when completed, one learns.

Read on: "The village of 4,000 families had only 30 telephones four years ago when she decided to invest in a telephone line. She now receives orders for work by telephone, saving travel, time and money. She is also able to complete her orders on time by staying in touch on the telephone. Her average monthly telephone bill is Rs 150 to Rs 200." And here is an ironical twist to the tale: "At any given time, usually half the village phones are out of order."

Telephone connections allow migrant workers and members of the household to consult their families before taking important investment and production decisions, points out NCAER.

"Even when an average user makes only a few calls a month or even in a year, benefits still greatly exceed costs," it observes. This is because the composition of rural calls is different from the urban ones. For instance, a study in Africa showed that nearly 60-65 per cent of urban pay phone calls were for social reasons, while 30-35 per cent related to business and 5-10 per cent dealt with family emergencies.

In contrast, nearly half the calls were related to business or other money transactions, in rural Malawi, notes the report. "10 per cent were for family and personal reasons, and almost 25 per cent were made to arrange visits and travel." The degree of importance assigned to calls is a function of the distance that the callers have to travel to make a call. In the studies cited in the report, almost one in two sampled callers travelled more than 5 km to make a call - "an experience that is shared by rural users in most developing countries."

VPTs or village public telephones bear an annual subsidy of around Rs 31,000. As against a recurring expenditure of Rs 32,000 per annum, revenues are less than Rs 1,000. With a total number of 5.5 lakh VPTs to service, the subsidy bill in 2002 ran to Rs 1,715 crore, informs the report.

"Most rural dwellers report their basic objective of phone ownership is to receive incoming calls. For outgoing calls, they mostly prefer using the public call office (PCO) usually located in a nearby town." Why so? "The underlying reasons for their preference are the poor quality of service and the high sunk cost of a village phone. Most rural persons are not willing to lock up their meagre funds into deposits and rentals."

One way to expand the rural markets for telecom services is to provide micro credit, suggests the report. "Loans can also be made available by local (consumer or agricultural) credit societies to own a telephone. These, in turn, could be supported through soft loans." Yet another suggestion is that credit societies float a deposit mobilisation scheme - in which depositors get a free phone and part of the interest on the deposit is recovered to pay for the telephone!

The NCAER proposes three models that can be used for providing telephone services to previously uncovered areas. The first, `costing' model, envisages that potential providers conduct a comprehensive costing exercise for rolling out new services and submit the same to the regulator `under a guarantee of confidentiality'. The provider with the lowest cost may be selected to offer the services.

The second model can be `proxy' that regulators adopt, in the form of `certain assumption of technology-use demand and quality of service' for fixing cost of providing new services. "The provider who is willing to accept these costs is awarded the contract to provide the services."

The third model is `forward-looking', described as follows: "This is a competitive option where the regulator does the costing and demands calculation, and sets a benchmark level of maximum subsidy. The provider conducts a detailed costing and risk assumption study. The firm that requires the least amount of subsidy to provide new services is awarded the contract. Best practices dictate that the incumbent sets prices and costs."

A boxed snippet in the publication is about PPP (public-private partnership) in West Bengal for franchising telecommunication. "The DoT (Department of Telecommunication) has converted the entire rural West Bengal into a wireless zone. The Grameen Sanchar Society has provided wireless phone services to the rural population through its mobile vendors," explains the report.

For people, there is the assurance of easy and affordable connectivity. "A fixed percentage of the revenues is paid to the Government for providing the wireless facilities, and the rest goes to Grameen Sanchar Society." The society, called GRASSO, is "an apolitical, unbiased organisation run by culturally open-ended and non-ethnic group of professionals from varied background," states www.grassoportal.com.

In a section titled `franchising services in rural areas', the NCAER suggests that to improve the quality of services, it will be necessary to make additional investment in `demand-based microplanning, establishing the baseline of consumer consumption profiles and other efficiency measures.'

Convergence among services is another proposition that the research body makes. "Multiutility providers who can integrate different services will be more likely to have the capacity to raise funds. For example, a telephone franchisee with a switch, which also offers power and small transport services, would attract better private capital."

Insightful read.

Tailpiece

"He screamed when the bill came for ice-cream!"

"What did he order? Butterscotch or strawberry?"

"Neither. He'd asked for a BlackBerry!"