Can BBNL-BSNL merger be a game-changer for rural broadband connectivity?

The jury is out on whether the merger of two state-owned telecom companies can help step up rural broadband connectivity

The recent announcement that Bharat Broadband Network Ltd (BBNL) -- which is implementing the government’s BharatNet project -- would be merged with state-owned Bharat Sanchar Nigam Ltd (BSNL) came as a surprise to industry watchers. The apparent reason for the proposed merger is BBNL’s failure to meet India’s rural broadband target. Some 10 years after BBNL was set up with the mission of empowering the hinterland with internet connectivity to enable online healthcare and education, the government is making amends by combining the two entities.    

The question is: How will the merger help step up rural broadband numbers and in meeting the goal set for 2025, almost coinciding with the 2024 general election? The target is to provide broadband access to 600,000 gram panchayats by 2025.       

Making the decision public at a recent event, BSNL Chairman and Managing Director P K Purwar said the merger was a turnaround opportunity for the state-owned telco. Pointing out that it was a chance for BSNL to become a strategic asset, he said, “We have a responsibility to prove ourselves.”

To put things in perspective, the cumulative losses incurred by BSNL and the Mahanagar Telephone Nigam Ltd (MTNL) were pegged at Rs 95,701 crore and Rs 35,348 crore, respectively, as of 2020-21. While there’s lack of clarity on whether MTNL would be a part of the BBNL-BSNL merger, separate talks on combining BSNL and MTNL have been on for about two decades. BSNL offers telecom services (both landline and wireless) across India except in Mumbai and Delhi – the two cities where MTNL is the state-owned telco.
 

Business Standard reached out to Purwar to understand the reason for making BBNL and BSNL a single state-owned entity. Purwar said the present capacity utilisation at BharatNet was not up to the mark and, therefore, a solution had to be found. On whether there could have been a remedy other than merger, the BSNL CMD said it’s not for him to comment since it’s a government decision. While pointing out that there would be synergies between the two organisations, he said it was too early to talk about meeting targets. “We should be clear it’s not a commercial venture, and we will need government hand-holding,” Purwar said when asked about the probability of meeting the 2025 rural broadband deadline.

        

BBNL CMD Sarvesh Singh could not be reached for comment even as there’s heartburn in the organisation over the merger proposal. Any merger comes with uncertainty and this is no different. According to sources, the modalities of BBNL employees moving to BSNL are being worked out. BBNL is a lean organisation with just about 250 employees, many of whom are on deputation. “Our focus will be on continuity of services and operation. We welcome everybody,’’ Purwar said.          

BharatNet under BBNL is among the world’s biggest rural broadband projects. This is funded by Universal Service Obligation Fund (USOF), which was initially meant to cater to village telephony handled primarily by BSNL. USOF gets part of private telcos’ money in a revenue-sharing arrangement. When BBNL was set up 10 years ago, the objective was to lay out optical fibre network using USOF with access to all service providers on a non-discriminatory basis. Now with the control coming to BSNL, which competes with private service providers, there’s a sense of discomfort. BSNL, as custodian of the USOF (of around Rs 58,000 crore), has on its part tried to calm the nerves by saying it would ensure that all such assets are made available to all service providers on arm’s-length principle.

In fact, engagement with industry, or lack of it, has resulted in the merger of BBNL and BSNL in some ways. Last month, BBNL failed to get any private bids in a PPP tender as industry players found the going complex. The revenue-sharing arrangement mentioned in the tender clause didn’t make business sense, industry players argued. Otherwise, too, execution of service-level agreements and right of way for laying optical fibre cable have been problematic for private telcos in the rural broadband piece.     

Purwar, the man who will have to lead the show with curtailed manpower following a VRS that cut the employee strength by 60 per cent, is counting the positives. “BSNL can bring significant knowhow and organisational strength to the table,” he said while talking about infrastructure creation, network maintenance and links with telecom and internet service providers.

As former administrator of the USO Fund and also secretary in the Department of Telecommunications, Shyamal Ghosh may understand the complexities involved in rural telephony and broadband. When asked how the merger of BBNL with BSNL would play out in meeting rural broadband targets, Ghosh said, ‘’the biggest challenge is to get the work done expeditiously as per prescribed parameters and thereafter ensure the stability of the network at all times.’’      

It may just help that BSNL already has 2.1 million FTTH (fibre to the home) connections and is adding some 100,000 lines every month. Branded Bharat Fibre, it offers state-of-the-art technology on fixed access platforms.

Can that be a game-changer for rural broadband? According to Sujit Kumar, founding chairman of the Confederation of Indian Industry’s (CII’s) National Broadband Committee, rural broadband has lacked prioritisation at the administrative and political levels. “Fibre combined with last-mile wireless could provide ubiquitous net connectivity to rural India,” said Kumar, who’s a visiting professor at IIM Ahmedabad, adding that resources have never been a challenge, project management has.