Internet/Broadband in India-So Important and Yet So Scarce

An article by Mr Manzar in the Mint  highlights at the end of 2012, internet users were only 10% of the population making it among the lowest in the world in internet and computer penetration.

Another article by him points to the sheer importance of internet in creating awareness about government services and entitlements among illiterate rural poor who otherwise remain ignorant and are duped by unscrupulous elements. This was in the context of Indias' MNREGA-a rural employment guarantee scheme.
 An inspiring  article on "'Enabling access to vocational training content on cellphones" tells us about "'SkillTrain" being run Mr Ganesh.B in the state of  Madhya Pradesh.

"The company records videos of the module that students can download on their mobile phones for free and learn from it.SkillTrain offers four courses—mobile repairing, electronics, computer science and computer hardware—that extend from 12 to 20 modules. It plans to extend it to wider subjects such as welding, two-wheeler and automobile mechanic, electrician, plumbing and tailoring next year." 

The article also states that,

 "It is estimated that about 15 million Indian students drop out of school every year. The gross enrollment ratio in higher education in India is at 17.9%, much below the the global average of 27%.
The government has set an ambitious target to train 500 million people by 2022 to help them acquire vocational skills and provide an efficient workforce for industry. There is a shortage of trained manpower and even the available talent does not match the requirements of industry.
School dropouts fail to go for mainstream education for several reasons, including ineligibility, the family’s financial conditions, academic pressures and regulatory requirements."

Learning on the mobile for a fees was found to be more economical by students rather than travelling long distances to a training centre.

All this goes to show the importance of broadband connectivity which India is struggling to provide to especially its rural population.Please also see previous posts on Mobile VAS and USOF India's Mobile VAS Scheme Sanchar Shakti..

BBNL and Competition Neutral Broadband Funding

The Economic Time reports that BBNL(NOFN) which is at present an infrastructure provider may acquire a unified license and become a service provider. This broadband network funded by USOF India was to provide OFC connectivity to 2.5 lakh village panchayats (local self government offices) up to block level as private operators were not likely to cater to this market segment.

It is reported that,

"The government is looking to "revise BBNL's mandate" as it wants it to directly deliver high-speed broadband services down to the district level to maximise utilisation of NOFN infrastructure, which is the communications ministry's biggest telecom venture.

The immediate plan is use the NOFN resources to build a "government-user overlay network" — akin to a virtual private network — for delivering a host of citizen-centric e-services to bridge the digital divide across rural India.

The DoT has proposed joint funding of the "proposed overlay network" by the Universal Services Obligation Fund (USOF) and the ministry of rural development. It wants USOF to handle the entire upfront capex payout — pegged at Rs 3,750 crore — and the rural development ministry to handle opex over a 10-year span - estimated at about .`1,860 crore a year - putting the total cost at Rs crore, excluding taxes."

In my previous posts on National Broadband Plans and incumbent centric, public funded Broadband Networks I have highlighted the importance of competition and avoidance of market distortions or recreation of monopolies. I believe that if BBNL were to complete roll out and the government was to focus on            e-government services (applications), a host of private and public sector telecom service providers would step in to provide last mile connectivity for broadband enabled services on commercial considerations.

In fact it has recently been reported that India has croseed the billion mark as far as e governance transactions go. Also that, "[w]ith more parts of the country getting connected through the National Optic Fibre Network, industry watchers expect more citizens to be accessing government services over the internet. ... The network has been launched in pockets of Rajasthan, Andhra Pradesh and Tripura, with some 80,500 transactions already recorded."

Mobiles for Medical Help in Rural Areas

In an article titled "Soon Medical Services through Phone"it is informed that

"Notwithstanding challenges like low bandwidth and internet penetration, health professionals feel that there is a huge market (900 million Indian cellphone owners) waiting to be tapped. A recent study conducted by Apollo Hospitals and Georgia State University , Atlanta, gives credence to this belief. The survey found that nearly 28% people in rural areas and 46% in urban areas owned smartphones. Conducted across a sample of 1,866 people spread in five states — Chhattisgarh, Andhra Pradesh, Gujarat, West Bengal and Tamil Nadu — it also found that one-third of those interviewed had not undergone a health check-up in five years with 55% saying they were open to accessing medical services through mobile phones."

Given the overall underdevelopment of rural areas, doctors are not easily available. Providing medical services through ICTs is the best bet in rural India. This underlines the importance of universal availability of high speed broadband.

Committing to Consumer Friendly Regulation in Africa

A news item about the  first conference of African telecoms regulators on consumer affairs in Lagos tells us that regulators from Nigeria, South Africa and Ghana etc. stressed upon protecting and promoting consumer interests.

The article states that the conference was attended by telecoms regulators from South Africa, Ghana, Zambia, Zimbabwe, Kenya, Cameroun, Liberia, Rwanda, Benin Republic, Malawi, Angola, Sudan, Uganda, among other African countries and [It acted ]as a platform to bring together, African telecoms regulators and subscribers, to discuss common regulatory interest that will further enhance telecoms growth across Africa...Major issues raised at the conference, were multiple taxation imposed by governments in the various African countries, as well as unsolicited promo text messages that hit the subscribers' phones every minute."

Interestingly the Ghana Regulator is quoted as follows,

"...good regulation promotes competition in the provision of electronic communications networks, services and associated facilities; contribute to the development of the internal market, the interests of consumers; apply objective, transparent, non-discriminatory and proportionate regulatory principles; and promote technological and service neutrality.........

....too much regulations amounted to a “hidden tax,” because the costs of conforming to the regulations were passed on to the consumer in terms of higher costs. he explained that too many regulations might inject uncertainty into the marketplace, making it harder to raise capital and create new businesses."

I could not agree more.

Basic Broadband Now Universally Available Across Europe

As per an EC press release, Europe has achieved 100% coverage as far as basic broadband goes.

"Vice President of the European Commission, Neelie Kroes, today welcomed the milestone achievement of one of the main goals of the Digital Agenda for Europe:

“My motto is Every European Digital – now every European genuinely has the opportunity. We have more to do to improve networks and equalise the opportunity, but the opportunity is there.”

"Thanks to the extra coverage provided by satellite broadband, we have achieved our 2013 target of broadband for all. That's a great result for European citizens.

How we got to 100 % coverage?
Fixed (ADSL, VDSL, cable, fibre, copper) 96.1%
Mobile (2G, 3G, 4G) 99.4%
Satellite 100%

By the end of 2012, 99.4% of EU household had access to basic fixed or mobile broadband coverage; including 96.1% of households in rural areas. But the final 0.6% (or roughly 3 million citizens) included many families and businesses in isolated or rural areas where fixed or mobile broadband rollout is more cumbersome and expensive."

Going further,

"The Digital Agenda for Europe (DAE), has set a goal to make every European digital and ensure Europe's competitiveness in the 21st century. Essential to this goal is fast connectivity and the DAE broadband targets:

basic broadband for all by 2013;[achieved]
Next Generation Networks (NGN) (30 Mbps or more) for all by 2020;

50% of households having 100 Mbps subscriptions or higher"

 It is true that public funding has played a major role in these achievements but it is noteworthy that the same is subject to careful ex ante scrutiny to avoid market distortions that can harm the sector in the long run. I am of the opinion that India has a lot to learn from the EU's regulations in this regard.

Broadband Market in India

It is reported that,

"BSNL [with 9.97 million broadband subscriber[s] with continues to lead the table of top five internet service providers followed by Bharti Airtel (1.43 million), MTNL (1.10 million), Hathway (0.37 million) and You Broadband (0.32 million) till the month of July.

According to the data released by  the Telecom Regulatory Authority of India (TRAI), total broadband subscriber base in the country has increased from 15.19 million at the end of June 2013 to 15.24 million at the end of July 2013.

“This is a monthly growth of 0.33%. Yearly growth in broadband subscribers is 3.79% during the last one year (July 2012 to July 2013)”, it said. "

That for a country of 1.2 billion this broadband penetration is negligible and that the market is far from competitive is evident. Please see my previous posts on this issue such as,

-There is More to Broadband than Physical Infrastructure,

-Avoiding the Recreation of Monopolies in the Age of Superfast Broadband,

-Continuously Declining Wire Lines in India,

-Access Regulation as Important as nationwide Backhaul

and many others under the labels USOF India and Broadband Networks

Relevant Markets of the Future

It is interesting to think of broadband which people like me have already likened to a bridge across infrastructural gaps as being treated as a substitute to transportation, not for purposes of competition  law jurisdiction as my title may suggest, but at least as a competitor for public funding. 

Thus, a post titled "Building railways not broadband is a ‘strategic mistake" quotes a Microsoft personnel as saying that "The UK government is making “a strategic mistake” investing billions of pounds into railways rather than broadband." The said executive has criticized  "the government for not investing into the technologies needed to make mobile working a reality for more, instead sticking with the traditional investments for the commute to work. “The one negative fact about the future is the current and previous governments think we need to build railways instead of broadband infrastructure and networks,” 

I am not sure that the two investments are mutually exclusive for a country like U.K, but certainly one can envisage that the future would be one where mobile work or tele-commuting predominates. One can quite easily stretch one's imagination to a scenario where the broadband becomes more important than the railways when it comes to interacting with co-workers.

In developing countries broadband already compensates for lack of roads, hospitals, schools, work opportunities, social services etc.  My articles on the subject can be seen here.

Technology and Universal Service

I have two pieces of information to share. Both of them are related to technology and  telecom penetration.

The first is the welcome initiative on the part of the  Reserve Bank of India (RBI) in exploring  the possibility of providing SMS-based mobile banking through a single application on all types of handsets.

It is reported that,

"A Technical Committee on Mobile Banking has been set up to "examine the options/alternatives including the feasibility of using encrypted SMS-based funds transfer using an application that can run on any type of handset for expansion of mobile banking in the country," the central bank said.The panel will conduct an in-depth study of the challenges faced by banks in taking mobile banking forward to the desired level. At the end of July, there were about 70 lakh users of mobile banking, which is currently offered by 78 banks.The panel will also examine "any other optimum solution" that would take mobile banking to every nook and corner of the country, in addition to drawing a road map for implementing the solutions or options recommended."

With mobile penetration outstripping land lines in India and smart phones becoming affordable, this measure could greatly address the yawning financial inclusion gap in the country. As an interesting aside, the promotion of mobile banking  is identified by the Economist as one possible way to reduce channelization of rural household savings into financially less productive assets such as cows, in India! The article is called Udder People's Money and makes for interesting reading. Please also see my previous post on mobile VAS.

The second is news about the use of  television and radio channels to transmit cellular signals when systems are pushed beyond capacity as during a disaster. "Mai Hassan, a PhD student has managed to [change] the shape of the wireless signal so she could transmit on channels that use radio or television frequencies. She then had to change the direction of transmission away from the original channel. Instead of using traditional antennas, which transmit signals in all directions , she used smart antennas in mobile phones. Smart antennas transmit signals in a single direction and can steer the beam to any direction. By manipulating the direction of the cellular signals, Hassan was able to transmit calls and texts to a receiver while avoiding any interference with the original radio and televisions signals."

Please see my previous posts on disaster communications. I am of the view that keeping the public (rather than only official first responders) connected is of critical importance during disasters.

National Broadband Plans-The Largely Un-examined Competition Debate

I recently came across a very interesting post on the subject of competition in OFC roll outs. This well written post by Paul Budde argues that (in the Australian context but extrapolating through examples to the international context) either we do not really need infrastructure competition in OFC infrastructure or at least it is not a very practical possibility. He cites USA and Europe as examples of lack of nation-wide fixed line competition.

It would take much more than a blog post to analyse his arguments but I would like to make one simple counter argument. Why must we have a nation wide network? In vast countries like India, USA and Australia even regional or sub regional fixed networks would be a feasible option. In non viable areas, competitive service provision may be seeded by Universal service funding. Please see my post on the Indian USOF model at Broadband Networks through the Infrastructure Sharing Route. This model did succeed in creating potential competition to the incumbent with USOF subsidy even in a remote region of the country. Other posts on infrastructure sharing could also be viewed. 

Perhaps the inability to fathom such a model comes from historical reasons wherein in almost every country the incumbent managed to protect its monopoly by harping on the economies of scale issue and the best option with the state was to regulate prices etc. Regulating monopolies cannot solve inefficiency and lack of drive to innovate that plagues all monopoly service provision. Readers are invited to read my previous posts on NBN and NOFN. Today both networks are delayed and mired in roll out problems. There is a news item about NOFN planning to impose heavy penalties on its vendors who are delaying roll out. Need I say more. I have written earlier cautioning against the faddish nature of national broadband plans and the fact that they are likely to recreate monopolies with the usual set of associated problems.

Also, unlike Mr Budde, I am not so sure that mobile networks can ever be considered perfect substitutes for fixed lines. European regulators seem to agree with me.  

I do agree that service level competition is very critical, but as far as competition in broadband goes, if it is there at every level-all the better. 

Fixing the Market Efficiency Gap in India

I had mentioned in my post titled, "Regulate in Haste Repent at Leisure" about TRAI's recent recommendation in favour of  a considerable reduction in reserve price of spectrum and those relating to permitting spectrum trading. I had stressed that what is important is that all regulation must be based on sound economic analysis placing consumer interests above all. The latter includes a healthy, viable and competitive telecom sector. Another related post is "Regulate in Haste Repent at Leisure-Comments from EU and India" These are all under the labels Telecom Regulation & Competition

A lot has been said about the regulatory deficit in India. A recent article by Sanjeev Aga literally agonsies about this issue in relation to the Department of Telecommunications processing of TRAI's above mentioned recommendations.

A long quote from this article is added here as the writer is interesting and eloquent in his anguish:

"But let us even assume this Trai exercise eventually ends well. Would that address sector issues? Unfortunately, no. Consider policies that allow intra-circle roaming before an auction, and disallow it afterwards. Or those that confer technology-neutrality in 1999 and withdraw it in 2012 in the name of unliberalised-spectrum. For the jargon-challenged reader, spectrum liberalisation and technology neutrality mean the same thing (the Danish Business Authority website offers a clear explanation of this). Such ad-hocisms abound because policies are not supported by robust policy institutions. The better type of investors watch policy, but they derive confidence only from the quality of institutions behind the policy.

Planning Commission member Arun Maira worries that since we are not fixing institutions, India is falling apart. A complex, high growth, trillion-dollar economy, with money power sloshing around, has outgrown the governance model of the 1950s. Among the handful of quality policy institutions we have is the Reserve Bank of India, and that is a product of the Raj. The notion that ministers and ministry departments should run sectors such as hydrocarbons, aviation, telecom, power, or railways is anachronistic. The DoT has capable Indian Telecom Service officers who ran fixed line operations in Bharatiya Sanchar Nigam Ltd's earlier avatar. A quirk of fate finds them designing policy for mobile telephony of tomorrow for which they have been provided neither exposure nor training. With no symmetry between authority and consequence, between work and appreciation, self-respecting people must resent being reduced to their present pass. When spewing out penalty notices becomes a defence mechanism, you sense that these people may be present physically but they have seceded emotionally! What is true of telecom is equally true of several other sectors. The old is dying and the new cannot be born!

Having two policy institutions for telecom, DoT and Trai, was always a crazy idea, an outcome of confused intention and timid disposition. Like in every advanced international jurisdiction, telecom policy formulation should have been tasked to the regulator from its inception. Now, better late than never! But for this Trai will have to step up its game. Amending the Trai Act is a mere first step. The regulator would be tested on its sector knowledge, in widening the talent pool to attract the best, in the quality of its output, in the confidence inspired in investors, in the moral authority exerted, and in the thought leadership provided to India and to the world.

India is at a juncture where the absence of quality governance institutions is strangling growth. This has been the single biggest cause of the economic downturn. Second-generation reforms are not about mindlessly repeating what was done 20 years ago. They require dismantling mental blocks and building quality governance institutions for at least half-a-dozen sectors, of which telecom is one. This fond wish must now await any new government. Meanwhile, the Telecom Commission and the Empowered Group of Ministers should rally in support of the Trai recommendations."

I have written about a possible way forward-Providing a competition policy framework to our regulation. The article is titled "Of Airwaves, Incumbents & Good Governance-The Urgent Need for A Robust Competition Policy Framework"

Access Regulation as Important as Nationwide Backhaul

I have been repeatedly stressing on the importance of competition as a means to ensure not only universal service and access to telecommunications but also sustained growth of the telecommunications sector.  Even in situations where there is  platform competition, due attention needs to be paid to competition is copper line access networks. 

As reported in a news item from Telecomputer.com 

"Access regulation remains a necessity in the Netherlands to ensure effective competition between fixed networks, according to a report from Ecorys for Tele2. Most EU countries have just one national access network, based on copper. Regulation is aimed at creating a 'ladder of investment', providing alternative operators various ways to deliver services. The tariffs and conditions should be structured in such a way to encourage alternative operators to invest in their own networks and equipment, allowing them to differentiate their offering, according to the report. The last step on the ladder is deploying a competitive local loop. 

In the Netherlands, the country benefits from DSL, cable and FTTH infrastructure for broadband. The roll-out of fibre will mean an eventual end to the use of the copper network. The telecom regulator has always found that "two is not enough" with the copper and cable networks and supported third-party providers with wholesale access regulation. The report concludes that access regulation will remain necessary to support this in future and during the transition to fibre. "

For the market to remain competitive, competition on copper must continue, and the position of alternative DSL providers such as Tele2 and Online must be protected. This should include access to a regulated virtual local access service and a continuation of subloop unbundling.

Competition in  last mile connectivity is particularly important in developing countries like India where platform competition is very limited. The Indian situation is that unbundling is not mandated and has not taken place and 3G wireless services are largely unavailable in rural and remote areas. USOF  India's wireless broadband scheme that would have introduced competitive provision of the same in rural areas was criticized by the regulator as being premature and in conflict with 3G roll out obligations and never took off. This is one of the major reasons for the minimal wire line broadband penetration in India. 

Please also see my previous posts on Wire Lines in India, Broadband Networks, National Broadband Plans and Competition

The Problems of Monitoring certain USF schemes

I am always wary of USF schemes that pose too heavy a burden in terms of monitoring. USOF India had a scheme for rural household connections which posed exactly such a burden and has thankfully been discontinued.

Even with its presumably more advanced regulatory and administrative abilities, FCC seems to find it hard to keep fraudulent claims out of its similar lifeline programme. A recent news item speaks about penalties being imposed for claiming  ineligible connections and for fraudulent duplication in claims . It is said that,

"FCC Commissioner Ajit Pai said federal Lifeline reimbursements to phone companies grew to $2.2 billion in 2012, up from $817 million in 2008. He said a "significant amount" of that growth was due to increased waste, fraud and abuse."

I would have thought that FCC would consider closing this programme or redesigning it altogether.

Please see previous posts on (Reforming) U.S.A's Universal Service programme. Also readers may like to view my article "Monitoring for Effective service Delivery-The case of USO Funded Schemes"

News for USOF India

Apart from its Scheme for its scheme for subsidised Mobile Phones and tablets, USOF India has been in the news lately on two counts.

This is first on account of the telecoms regulator's (TRAI) recent recommendations on improving connectivity in the North Eastern states of India. It is reported that based on Department of Telecom's request, TRAI has suggested inter alia that:

(i) A 2 per cent discount be provided in licence fee, charged annually, of those telecom operators who cover at least 80 per cent of the habitations with a population of 250 and subsidies for installation of solar power units at telecom towers.

(ii) Providing seamless connectivity across National Highways in the North East region covering Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.

(iii) Providing subsidy from Universal Services Obligation fund for bandwidth charges through satellite connectivity.

Also [t]he regulator has asked state governments in North East to address issues raised by the telecom operators on priority so that they are encouraged to roll-out services faster, provide land, government building, power for mobile towers, single-window clearance system for all telecom related issues among others.

My comments are that this is a welcome initiative. However, I do not find merit in a roll out based discount.  Past experience has shown that roll out is very difficult to establish conclusively. It also tends to encourage fraudulent coverage claims. I would prefer output based subsidy for clearly targeted interventions.

The second news item states that USOF has been asked by DoT for its views on viability gap funding required for achieving DoTs green telecom targets. It is reported that USOF, "is likely to advice the government based on findings of Indian Council for Research on International Economic Relations (ICRIER) on this issue."

Also that, 

"The telecom department plans to urge Asian Development Bank to extend long-term soft loans to India's cash-strapped telecom sector which has been clamouring for viability gap funding (VGF) as a precondition to invest in capex-intensive green energy technologies mandated by the government. ....Discussions on incentivising green energy were triggered by DoT's refusal to ease targets linked to renewable energy deployment for running towers sites. The green policy requires telcos to migrate 50% of all cell towers in rural areas and 20% in urban areas to hybrid power by 2015. By 2020, operators will need to run 75% and 33% of cell towers in rural and urban zones, respectively, on hybrid supplies. Hybrid power has been defined as a mix of grid supplies and renewable energy based on solar, wind, biomass or fuel cells."

USOF has previously encouraged use of solar and solar-wind hybrid renewable energy in its subsidised mobile infrastructure project but the scheme remained in pilot phase. It also liaised with the Ministry of New and renewable Energy in this regard. There is a DoT report on this subject titled "Hybrid Wind/Solar Power for Rural Telephony- Green Solution to Power Problems"