Affordable dial tones

Access to telephones in India has risen in recent years like never before. Teledensity, as measured by the number of phones (both fixed line and mobile) to 100 people, has doubled to six in three years.

Yet the benefits of such connectivity have seldom reached millions of rural Indians. On paper, the connectivity in rural areas has improved but as any candid senior official of BSNL (Bharat Sanchar Nigam Ltd, the country's state-run dominant telecom services provider) will admit, fewer than half the number of phones in Indian villages work at any given point of time.

The biggest issue hampering the adoption of phones in villages is affordability "� or, lack thereof "� of the phone service. Several models have been tried to overcome this hurdle, the most visible and successful of which is public phones. Such phones amortise the cost of installation and spread maintenance charges over a number of telephone users.

There have been couple of other experiments too. In neighbouring Bangladesh, there is the credible experiment of the Grameen Phone project, which is built around micro-credit and self-help groups among rural folk. Grameen Phone owner aspirants, mostly women, borrow money from a micro-credit agency "� Grameen Bank "� and use it to fund the downpayment of a GSM (global system for mobile)-based phone. The phone is then used by a number of people in the immediate community around the owner of the Grameen Phone.

In Andhra Pradesh, an NGO called the Rural Telecom Foundation (RTF) committed to connecting Indian rural homes has demonstrated successfully a solution "� named 'Gramphone' "� that delivers a phone at Rs 12.50 a month (see TechTalk, Oct. 29, 2002.) Gramphone is similar to the 'party-line' model common in the US in the early 20th century and apartment blocks in urban India today.

The Gramphone 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.

The foundation has been able to wire up 260 fixed line phones in Kalleda village in Warangal district north central Andhra Pradesh and is attempting to scale up the model to other parts of the country. It estimates BSNL can bring 20 million new rural users into the network across the country through the party-line model for an one-time investment of Rs 2,000 crore and expect revenues of Rs 4,000 crore each year from them!

Now there is heart-warming news from West Bengal from an NGO that is looking to replicate the Grameen Phone model. Formed by Rajya Sabha Member of Parliament Nilotpal Basu of the Communist Party of India (Marxist) and six of his friends, the Grameen Sanchar Society is using BSNL's CDMA (code division multiple access, an American standard rivalling the European GSM) to increase the spread of the network.

The phone service is available to villagers at Rs 17,000. This is mostly funded by banks and small refinance institutions like the Small Industries Development Bank of India and minority financial development corporations.

The experiment, which started in February of last year, shows promise. At last count, the society had activated over a thousand connections and Basu says they are on way to their target of 3,000 by the end of this financial year.

According to him, the phone owners are making anywhere between Rs 5,000 and Rs 5,500 every month after paying interest on their borrowing.

Three-fourths goes to BSNL. Of the remaining, the society "� which acts as an intermediary between BSNL and the phone-owners "� charges 2.5 per cent, leaving 22.5 per cent for the owner.

The phone owners charge normative rates for outgoing calls and are allowed to charge up to Rs 5 a minute for each incoming call. If this sounds an anomaly in an incoming call-free regime, think of the four-five kilometres the owner has to pedal on a bicycle to 'deliver' a call or message.

What's in it for BSNL? It gets better utilisation of its network and has its bill-collection risk reduced because the Grameen Sanchar Society delivers bills and collects payments from its phone-owners who are mandatory members.

Says Basu: "There are 3357 gram panchayats in West Bengal. If we can have three such phones in each panchayat, we will be able to have almost 24-hour connectivity in each village."

The society now plans to expand the scope of the project by setting up internet kiosks and expects funding from the United Nations Development Programme.

The Gramphone and Grameen Sanchar experiments in India are testimony to the pent-up demand for phone services in Indian villages and demonstrate that, at the right prices point, services can offer decent returns to telecom service providers. If implemented by NGOs or local administrations like panchayats in corners of the country without a dial tone, such projects will lead to new avenues of income in rural India and could have a sizeable multiplier effect on the rest of the economy through enhanced productivity.

(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)