Ringing in rural connectivity

The first lesson of mobile and internet markets is in the way players have responded to user demand. The drastic fall in prices, introduction of innumerable mobile value-added services and the expansion of broadband have come without a regulator demanding it. There continues to be barriers to fair competition in the internet market. The market would deliver much more if BSNL was to share its copper lines with competitors and cheap internet telephony was not restricted to fixed and mobile access providers. If the regulator and government can act to remove barriers to competition, the markets will do the rest.

Where working telecommunication markets are absent, like in rural areas, agencies like the USOF perform the important function of creating them. In other countries, it is quite common for this function to be given to the regulators themselves and not to separate agencies such as India8217;s USOF. Both models exist. Well-designed USOF policies can help markets, whereas arbitrary or populist rules can hurt markets and consumers. The USOF must recognise that market experience and, importantly, its own limited expertise as a bureaucracy, are sufficient reasons for avoiding an overly interventionist approach. It must concentrate on ensuring that rural users have services comparable to urban users.

When fixed and mobile services were unified through the creation of the Unified Access Service Licence, basic operators who were earlier allowed to provide only fixed line services, moved en masse to offer mobile telephony. Any operator with a licence to provide both only provides mobile services, because only those have a large enough market to justify the investment in the network. So keeping USOF subsidies open to all 8212; fixed and mobile service providers 8212; will change little in the short run but will make the subsidy regime flexible.

Similarly, a well-meaning attempt to require operators bidding for a subsidy to meet high benchmarks for bandwidth for broadband connections in rural areas could be counterproductive. As in urban areas, rural markets will ensure that their investments in greater bandwidth offerings will keep pace with user demand as well as new content. A high benchmark 8212; like 2 Mbps, which is often discussed in official circles 8212; can only hurt in the long run by limiting players and technologies. Few operators will find it cost effective to deploy wire line services to end-users in rural areas, so wireless will be the only option. However, hardly any wireless technology today could claim to offer the proposed benchmark speeds to a userbase or at a price so obvious for it to be singled out for subsidy.

Wireless broadband is a competitive area. As most practitioners know, a coarse measure of peak speeds reached is a poor measure of a technology8217;s prowess. An operator considering deployment will undoubtedly care about its range, number of subscribers, cost, stability and vendor support. An important issue in wireless is the relative value that users place on bandwidth and mobility. To some, either mobility or broadband could be sacrificed to the other. Some might be willing to incur the expense of subscribing to separate networks to obtain both services. To others, a mix of both might be the only way. Users will base their decisions on their needs and market, both of which will change as technologies and prices evolve.

A subsidy regime can serve an important role by kick-starting less mature markets. But being overly selective in who can compete for such subsidies can distort the very markets one wishes to seed. Only markets can and should choose winners. Government agencies will keep risks of market failure to the minimum if they work towards making that happen.

The writer is a consultant