DoT Finalised Business Models to Build Broadband Network

The Department of telecommunication (DoT) in January 2011 identified three business models to build a national broadband network to take high-speed Internet to the hinterlands. The business models will include
•    Funding existing operators to expand their data networks to rural India,
•    Creating a special purpose vehicle that will be supported by the government to roll out this initiative and
•    Subsidising the state-owned telco BSNL to build this infrastructure.

The DoT is of the opinion that funding existing operators model will be the fastest towards executing its broadband initiative. However the DoT fears that private telecom companies which get support may not offer a level playing field to competitors. Under the special purpose vehicle model, state-owned telecommunication companies will have a 49% stake with the remaining being owned by private companies, where the maximum holding by a single firm is limited to 26%. The advantages for this model include level playing field and private players bringing in best industry practices. The department held that the model related to handing the task to BSNL, which in turn will outsource the rollout, will be the most optimal solution in terms of new fibre needed, as the state-owned company already runs the most extensive network in the country.

It will be possible to execute all three business models will be executed only with support from the Universal Service Obligation Fund. Mobile phone companies contribute 5% of their annual revenues towards Universal Service Obligation Fund, which is used to support rural telephony.

According to a recent study by the Confederation of Indian Industry (CII), India will require over Rs 40000 crore investments to build infrastructure to provide 214 million broadband connections by 2014 that can reach a base of over 700 million.