Messing up the Market Efficiency Gap in a Hope to Address the Actual Access Gap

Readers may please refer to my earliest posts about the Market Efficiency Gap and my recent one titled "Going around in Circles"

Somewhere along the past decade, USOF India has lost its way and we have come back full circle to thinking of relying on roll out obligations to achieve desired levels of rural teledensity. The proposition of Department of Telecommunications (DoT) that future spectrum auctions be designed to include  rural roll out obligations (as per a news item in Economic Times ) displays a complete lack of appreciation of the concept of USFs and the failure of roll out obligations in the past. All we will achieve is distortions in the spectrum allocation process. 

How exactly are the operators to find funds to fulfill the mandatory roll out obligations in areas which are obviously not commercially viable? Were they waiting only for a diktat from DoT all this while? What if they bid lower for spectrum to compensate for this additional cost and then circumvent roll out as in the past? Why should only spectrum winners (of this future auction) be considered as prospective suppliers of services to meet the gap?Well designed USOF schemes can provide the required (financial) incentive to any operator without creating unnecessary market distortions. This thinking by DoT is perhaps indicative of the inability of USOF India to fulfill its mandate and this malady has been the subject matter of many of my previous posts.

Self Help in rural areas-How Long can They Wait for Internet

An inspiring and at the same time saddening news item in the Times of India today describes how NGOs are helping rural folk especially in remote parts of the country like the state of Jharkhand connect to the internet. This involves training locals to rig up and maintain local networks. The connectivity is not very high speed and relatively expensive, but it is working and helping local businesses.

The sad part is that  USOF India has not been able to utilize its sizable resources to empower those who want to and can provide rural broadband like these niche operators, but instead is channelizing all its efforts and funds into huge incumbent centric projects broadband which are either under performing or not performing. A USOF wire line broadband project has rolled out less than a third of mandated number of connections. The connections under this project were to be available to rural pubic at a fraction of the cost of the locally set up networks described above, thanks to USOF subsidy. Also public access broadband facilities have not been set up properly / at all defeating the purpose of the project. Optic fibre connectivity through NOFN / BBNL is badly delayed. There has been a very apparent move away from bidding which is required by the USOF Rules to handing over projects on nomination basis. Curiously, this problem seems to arise from bureaucratic  fear of the implications of dealing with private sector (on account of vigilantism by vested interests) rather than on a sound socioeconomic basis including public good.

Its time for USOF to rescue itself from such distortions. As it is, there have been several demands from industry to scrap the Fund which is based on contributions portion of license fee) of operators. A more thorough ex ante policy / programme analysis including competition related vetting is the need of the hour.