The Telecommunications Regulatory Authority of India has issued a 148 page proposal that calls for the setting up of a new government entity to build a US$13.34 billion national fibre network that will total more than 2.5 million kilometres.
Citing the lack of advancement in the broadband market in India which only has 10 million sub-scribers– 10 million short of a previous policy target set in 2004, TRAI is now proposing that a new 100% government¬owned entity, to be called National Optical Fibre Agency (NOFA), be set up to take over the roll out of the country’s fibre infrastructure.
While NOFA will be directly responsible for rolling out the fibre network in 63 cities, TRAI further recommends that each state set up its own entity, called State Optical Fibre Agency (SOFA) to work with NOFA. SOFA will owned 49% of the projects while NOFA will own 51%. The entire project, esti-mated to cost Rs 60,000 crore, or over US$13 billion, will be funded by the country’s USO fund and possible loans from the government.
According to the initial summary of the plan, the new infrastructure will be offered on an open ac-cess model to the country’s operators with TRAI setting the access pricing. What it doesn’t cover is any detail in terms of how operators will be able to access that network, what services they can provide over it and how much can they expect to pay for access.
In its full report however, TRAI does acknowledged it has had discussions with industry stakeholders of alternative funding models, such as public-private partnerships. But having taken those discussions into account, TRAI decided to stick with the recommendation for a 100% government owned plan any-way, which effectively cuts the private sector out of a big chunk of the broadband equation. TRAI esti-mates that NOFA and SOFA will generate an annual revenue of Rs 26,000 crore (US$5.7bn).
TRAI argued that public private partnerships don’t guarantee a high level of investment from the private sector, who “may not perceive the business as lucrative,” hence resulting in low bids for tenders. “The bid amounts may be low and it may be difficult to carry out the work in the amount of funds made available,” TRAI said.
“There is an urgent need to facilitate rapid growth of broadband,” TRAI asserted. That urgency trans-lates to a two phase plan that will see an optical fibre network connecting all habitations with population of 500 and above in the country by the end of 2013 – or in a little over 3 years time.
TWO PHASE PLAN: The first phase of the plan will cover all cities, urban areas and Gram Panchayats – areas under a town government, with optical fibre by the year 2012 while a subsequent phase will see the network extended to all villages with a population of more than 500. In terms of bandwidth, the network will offer 10Mbps downloads in 63 Metro and large cities, 4Mbps in 352 cities, and 2Mbps for villages and towns by 2014, the TRAI plan said. On top of that, a full national backhaul network is called for that can support all the fibre access networks.
“The National Broadband Plan envisages provision of 75 million broadband connections (17 million DSL, 30 million cable and 28 million wireless broadband) bythe year 2012 and 160 million broadband connections (22 million DSL, 78 million cable and 60 million wireless broadband) by the year 2014,” TRAI said.
To further ensure that even NOFA and SOFA don’t have problems with ROW, TRAI also recom-mends that rights¬of¬way “will be issued to the executing agency without delay and without any charges.”
At the same time, TRAI also called for the government to review its duties levied for customer premise equipment required to roll out the plan, suggesting that the government consider allowing 100% depre-ciation of CPE equipment, including modem and routes, in the first year.
Considering the size and population of India, the TRAI proposal is an extremely aggressively one, both in terms of timeline – which calls for the setting up of NOFA as early as February 2011, as well as its demand for government support. Basically, TRAI wantsgovernment ownership of the whole fibre infrastructure while also demanding operating privileges (free ROWs and lower cost CPEs) to roll it out and operate it.
TRAI’s premisefor its proposal? Studies that have indicated a 10% increase in broadband penetration accounts for 1.38% increase in the per capita GDP growth in developing economies.