Affordable calls for rural India

Tech Talk

The 'Gramphone' experiment in Andhra Pradesh has demonstrated enough critical mass for DoT policy makers and BSNL to scale up the trial

Village telephony has been a bugbear for telecom policy makers in India. Quarter after quarter, telecom service companies "� Bharat Sanchar Nigam Ltd. (BSNL) and the private telecom providers "� have missed their mandated village phone targets.

Telecom managers shrug their shoulders and tell you that the investment-return equation just does not work out in the case of hinterland phone networks. Each rural phone is expensive to wire up while the revenues "� forget earnings for a long time "� have very little upside for years.

For those telecom executives and analysts looking for a toehold into rural and, perhaps small-town India, the conventional thinking that 'rural is not profitable' has been turned on its head in an experiment in Andhra Pradesh.

Last October, I wrote about Rural Telecom Foundation (RTF), a non-profit foundation committed to rural telephony in India. The foundation has wired up 260 homes in Kalleda village in Warangal district in north central Andhra Pradesh through what is, in telecom parlance, called the 'party line' scheme.

Dubbed 'Gramphone', the RTF's 'party-line' model splits or multiplexes a direct line from a telephone exchange into, say, four phones. At its simplest, it is akin to having a phone and three extensions; add more incoming lines and the Gramphone will resemble the PABX (private automatic branch exchange) in your office.

The pricing of the scheme was simple arithmetic: a rural phone in Kalleda (under the Parvatagiri exchange of BSNL) comes at Rs 100 for a two-month billing cycle and offers users 125 free calls. Spread across four households, this worked out to Rs 12.50 a month for some 30 outgoing calls and unlimited incoming calls.

Based on its learning from the Kalleda experiment, the RTF is now suggesting a new model that promises to be a money-spinner for the implementing company; in this case, BSNL.

The foundation has worked on increasing the multiplexed households that a single Gramphone line can wire up. After tests, it has come up with a solution to wire up to 10 extensions or households on a single line from the telephone exchange.

This line, it has suggested, should be priced at Rs 450 a month with unlimited calling within the 'short-distance calling area' or SDCA which is the local calling geographical unit mandated by Indian telecom rules that typically has a 20-30 km radius.

Traffic patterns in India show that a majority of calls (70-80 per cent) are within an SDCA and Parvatagiri is no different. The Rs 450-a-month package also takes care of billing issues among members of each 'party-line' unit and does away with monitoring the costs of outgoing calls.

At Rs 450 a month and 10 'party-line' extensions, the cost a household pays is less than Rs 50 a month, which is approximately a land labourer's daily wage in an area like Kalleda.

RTF thinks, legitimately so, this is affordable in rural India. The revenue implications of this new model are stunning: in Parvatagiri, RTF has projected with the new Rs 450-a-month package, total revenues will triple from Rs 1,20,000 a month to Rs 3,60,000. It assumes the number of phones in the area will increase from the current 800 to 1,200 and half of these (600 phones) will be on the new Rs 450-a-month package.

The investment for this Gramphone conversion is not very high. RTF estimates a cost of under Rs 800 for each Gramphone extension if the direct exchange line to the village exists.

The investment-return equation then works out to be much more appetizing for a company like BSNL which already has 25,000 rural exchanges and phone lines laid on the ground or wireless connections.

RTF estimates that BSNL can bring in 20 million new rural users into the network through the Gramphone model for a one-time investment of Rs 2,000 crore and expect revenues of Rs 4,000 crore each year from them!

These are astonishing numbers and need validation. For a start, all that the RTF is asking for is permission to implement the new Rs 450-a-month package in Parvatagiri village as a pilot project of BSNL and then to scale it up to the Warangal SDCA and 'secondary switching area' (SSA, again a telecom geographical definition which comprises several SDCAs and is equivalent in most cases to a district).

The Gramphone is a very interesting model to wire up Indian villages. It makes phone services affordable for the rural millions, who are looking for low-cost solutions for their communication needs.

As a survey of the Kalleda experiment by students of the National Law School of India University has shown, users are willing to live with issues like lack of privacy on the Gramphone model.

Leaders at the Department of Telecommunications and BSNL "� and, in time, private fixed line service companies "� owe it to themselves and India to give it a shot. It has wonderful potential to work with de-centralised governance and self-help groups.

(Josey Puliyenthuruthel works at content company perZuade. His views are personal and may not be endorsed by his employer, the company's investors, customers or vendors. Comments may be sent to josey@perzuade.com)