Date:30/09/2005 URL: http://www.thehindubusinessline.com/2005/09/30/stories/2005093002860100.htm

Back To bring down USO subsidy by over 65 pc — TRAI favours rural connectivity through mobile infrastructure

Thomas K. Thomas

New Delhi , Sept. 29

IN a move that would bring down the subsidy for the Universal Services Obligation (USO) fund from Rs 21,000 crore to Rs 6,500 crore over the next five years, the Telecom Regulatory Authority of India may propose a change in the way the fund is being disbursed by shifting focus from supporting individual fixed line phones at present to setting up mobile infrastructure in rural areas.

The recommendations are expected to be announced in the next few days.

A reduction in the total kitty would mean lower burden on the operators who contribute 5 per cent of their annual revenues towards the USO fund. That in turn could result in lower tariffs for consumers.

Increasing teledensity: The telecom regulator has estimated that if the present regime of disbursing the USO fund is continued then the Government will have to fork out Rs 21,000 crore by 2010 to achieve the targets of reaching phones to the villages. This includes Rs 3,600 crore for rural community phones, Rs 10,000 crore for setting up 6.6 million rural household phones by 2007 and another Rs 8,000 crore for phones set up between 2002 and 2005. Even with these investments, it may barely reach 4 per cent rural teledensity by 2010, TRAI has estimated.

Exploring an alternative method, the telecom regulator has estimated that 70 to 80 per cent of the rural population in the country can be covered with 15,000 mobile base stations at a cost of about Rs 10,500 crore. The regulator may look at using the USO fund to part fund this investment through a one-time support to cover the capital expenditure and annual recurring support for operational expenditure.

The one-time support may be pegged at Rs 10 lakh to each operator and Rs 10,000 per base station for a period of five years. TRAI may suggest infrastructure sharing in rural areas to bring down the cost of providing services with the objective of changing the emphasis from the present Village Public Telephones and individual rural telephones to infrastructure empowering subsidy.