IN APRIL,Indian telecom experienced its highest ever monthly growth with the addition of 14 million subscribers.

Even though rural penetration is only 13%, one out of every two subscribers added in India today comes from a rural area. It may appear as if the issue of rural diffusion is a thing of the past and the goal of universal access is within reach. However, it is important to note that only 20%, or 60 million people in urban areas lack a cell phone. On the other hand 87%, i.e., 600 million people in rural areas lack cell phones. If despite having ten times greater unaccessed population, rural India is only able to achieve parity with urban India in terms of new subscribers, it is cold comfort and speaks of the continued inhospitability of the rural market for telecom services. In fact, the rural-rural divide is very much a reality in the pattern of telecom penetration. In January 2009, the top five states in terms of rural population, UP, Bihar, West Bengal, Maharashtra, and AP, did not figure in the top five states in terms of the diffusion of rural telecom services. The top performers were the usual suspects: HP, Kerala, Punjab, TN, and Haryana. HP had a penetration rate of 38% and Bihar only 8%. In other words rural diffusion is happening in relatively well-off pockets and once these pockets are covered, diffusion is likely to hit a roadblock unless new policy frameworks and business models are conceived. This article proposes a unified framework to view rural telecom. The elements of this framework are relevant applications, infrastructure, technology, and entrepreneurship (RITE). A holistic approach encapsulating these elements is particularly necessary in the context of the geographies which represent the next frontier of telecom diffusion.

Relevant applications:
Even with speeds provided by 2G, the mobile phone can be a cost effective platform for services like education, health, and banking. Linking the scheme for universal access to existing schemes that aim to provide basic services would result in a reduced cost of those schemes along with the achievement of the USO goal. Further, the diffusion of mobile phones offers an opportunity to empower the masses by making them aware of their rights and facilitating the exercise of those rights through an easy mobile interface. The relevant ministries must work together to identify mobile applications in local languages and develop public private partnership models.

The high dispersion of rural demand increases the infrastructure cost of operators and makes the provision of rural telephony unviable. The USO Fund needs to move away from granting subsidy based on bidding, which led to a winner¶s curse in Phase I, to a cost based subsidy that selects recipients on the basis of other factors like time to build. Moreover, the highly dispersed nature of the market, to an extent greater than the clusters covered in Phase I of the USO infrastructure scheme, makes a small tower approach more viable than a large tower approach. This also makes renewable energy sources attractive. Thus there is a happy coincidence of economic and environmental interests, and the government must capitalise on the opportunity by releasing specifications and mandating the use of small rural towers, wherever appropriate.

CURRENTLY seven lakh km of optical fibreare present across India of which almost six lakh km are controlled by the government operator. It is in the interest of economic efficiency that the existing infrastructure is made fully available to private operators at reasonable terms.

Prevailing standards yield a low cost of handset which is a prerequisite for the rural market. New technologies are being developed to reduce the cost of infrastructure and the carbon footprint. The policymaker needs to support these new approaches as it releases funds for infrastructure build-up. Further, it must catalyse R&D for commercial applications through seed funding of telecom product startups targeted to the rural sector.

Studies by the World Bank have shown that entrepreneurship is a powerful force driving the diffusion of rural telephony. The promotion of entrepreneurship includes the creation of a level playing field between the public and private operators, setting an equitable mobile termination rate for the use of the cell towers of other operators, and licensing the right number of operators. Moreover, the policymaker must work towards developing local entrepreneurs to act as franchisees of large operators. Local entrepreneurs are in touch with local needs, and understand local power structures. They can be selected on the basis of skills and economic status to act as franchisees of the telecom operators. The creation of such entrepreneurs would require training, and credit provisioning. An entrepreneurial environment will lead to the kinds of innovative business models that have boosted urban penetration like micro prepaid cards. The DoT should release specifications for small rural towers, and the USO administrator should invite operators to demonstrate coverage within a specified period of time. Up to three operators who are able to meet the requirements should be given subsidy, as a percentage of costs. This percentage would differ in clusters of differing market viability and based upon the number of successful operators meeting the coverage requirements. A new licence for a niche rural operator should be set up to allow telecom operators to adopt the franchisee model. A sample tripartite agreement between the telecom operator, the niche operator and the USO Fund should be drafted. The upper cap on rural tariffs should be fixed. As a long-term activity, an inter-ministerial task force should be created to plan the use of telecommunications access in facilitating the provision of basic services. The groundwork for the new approach should take no more than four months. The time taken to build should be about eight months. In a year¶s time the rural market will be ready for takeoff. Since the actions require the USO administrator to coordinate activities within different divisions of DoT and with different ministries, a new organisation structure for the USO Fund may need to be developed.

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