By all accounts, the telecom sector has been the most visible beneficiary of the public-private partnership (PPP) model in the country?s liberalisation process. Combining public and private resources has made the country the fastest-growing market for telecom services, making it second only to China in overall size.
However, the success story has been limited to telephony services where the country has more than 900 million subscribers already, serviced by around 10-12 operators in each circle. Around 6-7 million subscribers sign up every month and even then, around 20% of the market remains unpenetrated, offering scope for growth.
However, what is needed now is an appropriate PPP model for repeating the same success in broadband where the subscriber number is a meagre 14.3 million. Analysts agree that broadband is the future ? not only in terms of the revenue models of mobile operators but also considering the untapped potential of telephony health, medicine, education, entertainment, etc.
However, it?s easier said than done. The government is yet to take the requisite steps to make the PPP model work in broadband. The new national telecom policy that was approved by the Cabinet last month recognised broadband as a focus area for growth. The objective is to provide affordable and reliable broadband on demand by 2015 and to achieve 175 million broadband connections by 2017 and 600 million by 2020 at minimum 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand.
There are several hurdles to growth, but the main one is the lack of copper connectivity. Only state-owned BSNL has an optic fibre network criss-crossing the country, but it has refused to share the same with private operators. The company feels no need to share its network ? which it feels is its competitive advantage ? with rivals. The private sector argues that BSNL was a monopoly when the network was built by public money; so the same should be shared. However, with the department of telecommunications throwing its weight behind the company, the matter got settled in BSNL?s favour.
When it comes to putting up an optic fibre cable network for broadband, the private sector?s priority is to focus on urban areas which house enterprises. This is understandable since it gets paying subscribers right from the start. Even if operators start digging for laying a nation-wide network, they would run into trouble getting several local clearances from local authorities.
Says Prashant Singhal, telecom analysts with E&Y: ?There is slow uptake of broadband because of the investment it requires. When telecom companies buy spectrum at steep prices, they are left with very little room to invest in such projects.?
Sensing the problem, the government has hit upon a project to set up a national optic fibre network, which can be used by private operators to provide broadband services across the country. The optic fibre network of other state utilities like railways, GAIL and PowerGrid also will form part of the project. Since the project will cost around Rs 20,000 crore, the government has decided to dip into the universal service obligation fund, which has around the same amount lying un-utilised. Utilising this fund itself is a good example of a government-industry partnership because every operator pays 5% of their adjusted gross revenue every year to the government. This fund is meant for taking telecom to rural areas as part of social service objectives.
The project has been welcomed by analysts. Said Hemant Joshi, partner, Haskins and Sells: ?It is a very important project for the growth of the country. It will facilitate connecting 6 lakh villages virtually. Since we haven?t been able to provide physical infrastructure in terms of schools, hospitals, banks etc, this will help us provide all those services in the quickest possible way.?
Joshi said that across the world, governments have played a vital role in the success of information highways. ?Our model is a bit different from the one followed in the US, Singapore, Australia and the UK,? Joshi said.
While agreeing, Singhal cautions that the government cannot expect to charge very high tariffs if the objective is a broadband revolution. ?It will be interesting to see how the government prices the fibre network. The intention seems to provide broadband connectivity, but one will have to wait and watch,? he said.
