Digital India – Indian Competition and Anti-Trust Blog

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At the very outset, in all fairness, India as on date does not have a program similar to the “Lifeline Program” of the F.C.C., but it doesn’t hurt to put out a pre-emptive rant to make sure they never even consider one in the future.

BACKGROUND

As per the website of the F.C.C., the Lifeline Program for Low Income Consumers has since 1985, provided a discount on phone service for qualifying low-income consumers to ensure that all Americans have the opportunities and security that phone service brings, including being able to connect to jobs, family and emergency services. Lifeline is part of the Universal Service Fund. The Lifeline program is available to eligible low-income consumers in every state, territory, commonwealth, and on Tribal lands. The Lifeline program is administered by the Universal Service Administrative Company (U.S.A.C.). The U.S.A.C. is responsible for data collection and maintenance, support calculation, and disbursement for the low-income program. Cellphone subscriptions were included in 2005. Furthermore, On 31st March, 2016, the F.C.C. adopted a comprehensive reform and modernization of the Lifeline program. In the 2016 Lifeline Modernization Order, the Commission included broadband as a support service in the Lifeline program. The Commission also set out minimum service standards for Lifeline-supported services to ensure maximum value for the universal service dollar, and established a National Eligibility Verifier to make independent subscriber eligibility determinations.

PROBLEMS

The program is definitely a laudable initiative, and considering the high cost of mobile service in the U.S., probably a much needed initiative which recognises digital communication service as an essential service. Maybe it even implies it as a human right, though the same is no where expressly mentioned. However, the pitfalls of the program have led to severe criticism against it, with the current dispensation more than happy to cut its budget and probably let it die a slow death.

The problems with the Lifeline program are the same which so many government subsidy programmes and poverty alleviation programmes In India suffer from: inflated costs, allegations of fraud, lack of access to key systems and data to weed out inefficiences and fake enrollments. and the hard reality is, the deficiencies in such a program can never be fully eradicated. All one can constantly focus on is the benefits out weighting the costs. But the core reason why the program suffers from so many issues because it chooses to focus on individual benefits rather than provide macro solutions to the problem of affordable access.

UNIVERSAL SERVICE OBLIGATION IN INDIA: THE WAY TO CONTINUE ONWARDS

This is where we in India are fortunately doing a better job under the Universal Service Obligation Fund.

The Universal Service Obligation Fund (U.S.O.F.) is the primary scheme administering spread of broadband connectivity in rural areas. According to the Department of Telecommunications (D.o.T.), “…apart from the higher capital cost of providing telecom services in rural and remote areas, these areas also generate lower revenue due to lower population density, low income and lack of commercial activity. Thus normal market forces alone would not direct the telecom sector to adequately serve backward and rural areas. Keeping in mind the inadequacy of the market mechanism to serve rural and inaccessible areas on one hand and the importance of providing vital telecom connectivity on the other, the New Telecom Policy – 1999 (NTP’99) provided that the resources for meeting the Universal Service Obligation (USO) would be raised through a ‘Universal Access Levy (UAL)’, which would be a percentage of the revenue earned by the operators under various licenses. The Universal Service Support Policy came into effect from 01.04.2002. The Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF) was passed by both Houses of Parliament in December 2003. The Rules for administration of the Fund known as Indian Telegraph (Amendment) Rules, 2004 were notified on 26.03.2004. As per the Indian Telegraph Act 1885 (as amended in 2003, 2006 and 2008), the Fund is to be utilized exclusively for meeting the Universal Service Obligation.” In summary, the U.S.O.F. uses

The recently cabinet approved National Digital Communications Policy, 2018 further pushes four initiatives to be funded by USOF:

(i) BharatNet: Providing 1 Gbps to Gram Panchayats upgradeable to 10 Gbps
(ii) GramNet: Connecting all key rural development institutions with 10 Mbps upgradeable to 100 Mbps
(iii) NagarNet: Establishing 1 Million public Wi-Fi Hotspots in urban areas
(iv) JanWiFi: Establishing 2 Million Wi-Fi Hotspots in rural areas

These targets are ambitious, and they may not even be achieved during the duration of this policy at all, but achieving even fifty percent of this target would be a fantastic growth in internet access to the underprivileged.

The Government’s latest initiative of “Digital India” has been heavily propaganded throughout the country as a game changer initiative to modernise bureaucratic services and enable the growth and development of the Country through universal digital access to every corner of every state. The programme has received its share of praise and dismissive snorts of derision alike, with the opposition considering it another overhyped un-implementable scheme of the present political dispensation.

Parallel to the debate on Digital India is another debate presently in progress on Network Neutrality. The Government has on multiple occasions emphasised its support for Network Neutrality and Shri. Ravi Shanker Prasad, Minister for Communications and Information Technology, has on a number of occasions stated both inside and outside Parliament that under no circumstances will the government allow the violation of the principles of Network Neutrality. To this end, the Ministry constituted a Committee under its supervision (commonly referred to as the DoT Committee) to look into the issue and come out with recommendations to implement the same. The merits of the recommendations notwithstanding, what became evident on a perusal of the Report was that the one of the foremost concerns of the government was to ensure that any enforcement mechanism for Network Neutrality did not compromise on “Digital India”, and it is perhaps safe to assume that if the executive was forced to choose between ensuring Network Neutrality and Digital India a success, it would in all probability choose to encourage the latter at the cost of the former.

Which brings us to certain significant questions: Does Network Neutrality need to be sacrificed as the cost for Digital India? Is it possible for both to not only be enforced and developed together, but also complement each other?

Some of the major pillars of the Digital India Programme are creating broadband highways, public internet access programmes and universal access to mobile connectivity. To this extent, Digital India is merely a merger (with an expanded outlook and ambition) of previous government initiatives of National Optical Fibre Network (N.O.F.N.) and the National Knowledge Network (N.K.N.). The major (and the most obvious) problem with achieving these goals is the lack of infrastructure prevalent not only in rural areas but also in the metropolitan cities of the Country. This glaring weakness is openly expressed by many for what will be the programme’s ultimate downfall.

At the same time, coming to Network Neutrality, one of the primary arguments against Network Neutrality has been that Telecom Service Providers have had to spend a financial bomb on developing infrastructure, and will have to continue to do so in the future, and disruptive OTT services significantly eat into their revenue, thus making the business and investment unviable.

Both concerns raised by their respective parties can together provide the perfect complementary solution to each other, provided the Digital India Programme is tweaked a bit. Digital India can in fact become the perfect platform for developing broadband and mobile connectivity infrastructure, while at the same time be used to lower the cost of development of the said infrastructure by providing various incentives under the Digital India Programme to develop the same. Reducing cost, thus consequently reducing the return on investment required, can burn a gaping hole in the shroud that has been developed against Network Neutrality.

Take for example the erstwhile NOFN scheme. It was and still is far behind its schedule and in its present format there is very little chance of this changing. A report has even gone so far as to state that sixty seven percent of the NOFN points are not functional. One of the main reasons for this has been the over reliance on the recurring loss making and inept public sector enterprise B.S.N.L., which has allowed a lot of fibre laid at excessive cost to go waste and render them unusable today. But by allowing the private sector to invest, the government can aid in boosting the speed of laying down of fibre by providing long term tax exemptions to these companies, and also exempt Right of Way (RoW) charges raised by Municipal bodies, which are excessive, while at the same time also fast track clearances and set aside encumbrances which have been seriously detrimental to telecom growth by bringing the same under the umbrella of the Digital India programme. According to some estimates, RoW charges are five to twenty times of the cost of the fibre being laid!

True, there would still be a lot of work to be done. For starters, the spectrum issue is the metaphorical white elephant in the room and needs to be addressed on an immediate basis. It is well documented that Indian telecom service providers need to provide their ever growing and ever in demand services with only forty percent of the spectrum available to foreign telecom service providers, and spectrum sharing has been universally panned as being too insignificant and too economically unattractive. At the same time, the private sector will have to bite the bullet on its presently substantial debt and be willing to invest at the above mentioned favourable terms and conditions. But allowing the private sector to do what it is willing to do at a reasonable cost would be a major long lasting solution to ensure network neutrality for the consumer and financial benefit to the service provider to the consumer.

(First published here)