Universal Service Obligation

Before I go any further, let me warn the reader that the title is a technical term used for the obligation in India of the telecom license holders to provide services in the rural areas. I would also like to clarify, if it is not yet clear to anyone who has read my blog entries, that I like to write on things I know nothing about [sometimes in business this habit is petulantly termed as lateral thinking and sometimes it is called thinking out of the box].
So here I am writing about the Universal Service Obligation of Indian Telcos and I begin my story with not mobile phones but with electricity. In the 1960s, the government of many states had this crusaders' mentality [like they have now for telecom]. It was thought and genuinely believed in policy circles that electricity could change people's live.. some even believed that electricity in villages could actually cut down on the birth rate [I am sure u can figure out how and why. I will give u a hint, in my high school economics book one of the reasons given for high birth rates in rural India was supposed to be "lack of entertainment" in rural India!].
Be that as it may, the various state governments started pushing for ambitious electrification programmes. In Bihar this is how it happened: in the '60 wooden electric poles were erected, in the 70s these poles were completed eroded by the rains and were replaced by concrete poles, in the '80s poles had wires which were not live, in the '90s poles became live... but the last mile [that is connecinting homes with live electricity] was still not complete. That was the time I left Bihar for greener pastures and have not returned.
The fun on the entire process was that no one lost out. How? the electricity boards got huge money for ambitious plans, poles wallas got their money, the wire wallas made their money and the villagers did not have to adopt to something they were not sure about as yet. So the story ended in a happy note.
Somewhat similar is the story of the Universal Service Obligation Fund for telcos. This is how it works at present [ I may be wrong since as I said I write about things I do not know about]: the government [which is now very keen to earn money from anyone who makes money] takes 6 per cent of all revenues of telcos, puts it in the consolidated fund of India and promises that any telco which will wire up rural India, will be subsidised from this fund.
Do you see the uncanny similarity between the old electricity story and the new telcom story? How do you think this is going to end? As they say, more things change more they remain the same! I can clearly see that the telcos will start building towers, the wirewallas will supply the wires, the switch wallas will supply the switches and [god forbid] the rural folks will be saved from the mobile phones. So evey one will be a winner just as in the case of electricity.
What is the way forward? I think it's easy..... and the best way forward is to make a lose lose situation for everyone. But How? Simple, dont start from the telcos... start from the consumers and reverse the the flow of subsidies. Here is how the flow chart would look:
1. Pay Rs 1,000 to anyone in the rural areas to buy a handphone [one per family only]
2. Handset manufacturers will start making handsets for 800 Rs and set up shops in rural areas
3. Tower companies will start setting up the towers since people are waiting with handsets
4. Wire companies will quickly wire up the towers [or is it wireless?]
5. Telcos will very soon charge up the wireless, they will know how many consumers are waiting at the other end.
It will be a lose lose situation for all: the rural consumer will be burdened with a mobile phone, and all others will have to invest out their own pockets to build a rural business and the government will be hauled up by the election commission. And the process will be complicated... but then if you have decided to give away free money why not make the dsitribution process as complicated as possible?
Jai Hind