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Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.


Subhash Bhatnagar Indian Institute of Management Ahmedabad ABSTRACT This paper presents the current status of Information and Communication Technology (ICT) in rural India in terms of access to telephony, Internet and other electronic media. The access is poor and would require huge investment to cover large parts of rural India which have no access to communications facilities. The paper proposes a framework which would require a micro level analysis of the rural areas. The paper argues that a uniform approach such as improving a universal service obligation as a part of granting regional licenses may not be workable for a large country like India. Rural areas with significant economic activity would have to be treated differently from remote and economically backward regions. A proactive policy is needed which encourages investment in infrastructure for rural areas. The nature of encouragement for different regions would have to be based on the cost of providing access; the potential for earning revenue and the institutions which can deliver a valuable service in rural areas. Finally, a case study from the context of co-operative dairy movement is presented which illustrates how rural communities can benefit from ICT (Computing and Internet access). Such communities are willing to invest in ICT, provided that real value is delivered. Lessons are drawn from the case study to understand how the information culture can be successfully spread to rural areas. Access to ICT by Rural Areas is Poor As of March 2000 there were only 3.7 million lines in rural areas. This means that the tele density was around 0.33 per thousand. The current status of village level access is provided in table 1. The table indicates that of the six hundred thousand villages only 55% had a telephone. Extension of coverage to 25% of the uncovered villages is being targeted in the plans for the coming year It is unlikely that this planned commitment would be met. Even in the urban areas the private service providers have not been able to meet their commitments. Six licenses for providing basic services in Gujarat, Madhya Pradesh, Andhra Pradesh, Maharashtra, Punjab and Rajasthan circles were issued. These were issued in the year 1997-98. As of April 2000 service had started only in 3 circles viz., Madhya Pradesh, Andhra Pradesh and Maharashtra and except for Madhya Pradesh the number of lines actually commissioned are less than 20% in Andhra Pradesh and 10% in Maharashtra. This clearly indicates that the private service providers have not been able to meet their commitments even in the urban areas. The commitments made for Madhya Pradesh, Andhra Pradesh and Maharashtra circles for providing Village Panchayat Telephone (VPT) by private service provider are given in table below. These commitments have not been fulfilled and an up-to-date plan to fulfil these commitments is also not available.

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

Table 2: Commitment of VPTs by private FSPs Private FSP Commitment as per license agreement within 12 months 24 months 36 months Bharti Telenet 5,500 11,000 16,500 Tata Teleservices 6096* 6096* 6096* Hughes Ispat Ltd. 4,000 25,760** 25,760** * No. of uncovered villages are less than committed percentage of DELs ** No. of uncovered villages are limited to 25,760 Effective date 30-9-97 30-9-97 30-9-97

Almost 91% of the 600,000 villages have a population of less than 2000. More than half of these villages have less than 500 inhabitants. This indicates that the Indian landscape is dotted with sparsely populated villages spread far and wide. This has implications for cost of building infrastructure to take telephony to rural areas as well as for demand for services and revenue generation. To understand the status of rural telephony, data from Gujarat telecom circle was analysed. The analysis is presented in Table 3. The data represented exchange-wise details of 1913 exchanges at the end of February 2000. On the aggregate only 340,000 lines (17% of total line capacity in Gujarat) is available for rural areas to serve 17646 villages and a total population of 27 million. Nearly 39000 connections are waitlisted representing 41% of all waitlisted connections. This means that the urban demand is satisfied to a greater extent than the rural demand. In two districts there is no waitlist but in two districts waitlisted connections are as much as 30% to 40% of the total capacity of the exchanges. The percentage of working connections varies from 55% to 84%. This means that waitlisted people are waiting for the last mile problem to be solved. The entire Gujarat State has 174 local calling areas. This number is less than the number of talukas in the state. It means that a local call can only reach villages within a taluka and sometimes even that may not be possible. The implications are that if the Internet service provider is to be reached through a local call, at least 177 service provision points must exist. It is only in certain districts that a fibre optic media connects the exchange with a higher level exchange. The percentage of exchanges that are connected with fibre optic media varies between 4%to 30% except for one case where it is 60%. Apparently, 25000 kms. of fibre has been laid in Gujarat but it is clear that much more is required to be done. In fact in 13 of the 19 districts more than 50% of the connections to higher level exchanges are still through overhead wires. This would result in poor quality of telephone connections and the likelihood of good Internet connectivity is also remote. This is clear evidence that access to telephones in rural areas is very poor. It is widely recognised that the potential of impacting development in rural areas is substantially enhanced if telephone access can lead to Internet access in these areas. Telephones provide voice connectivity and can become useful for gathering economic information, requesting emergency services and keeping in touch with migrant relatives. With Internet connections all of the above can be realised in an inexpensive manner and many more services can be offered to the rural population. The next section reviews the access to Internet in general and then more specifically in rural areas. Internet Access in Rural Areas Although the current subscriber base of the Internet is not known with much certainty it is estimated to be around 1 million. Out of 350 licenses issued to non-government sector ISPs around 80 had commenced service by June 2000. The Indian parliament was informed that there are 1.4 million subscribers on June 30, 2000. [TOI, 2000] An International Data Corporation (IDC) study estimates 2

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

that the base will grow to 4 million in 2001, 7.5 million in 2002 and 13 million in 2003. The estimated number of users in 2004 is 22.4 million. The current number of users on a subscriber base of 1 million are estimated to be 2 million. It is interesting that 29% of the surfers access the net from cyber cafe, 31% from work place and 22% from home. In comparison to the 1 million PCs sold currently it is expected that 7 million PCs will be sold in 2004. However what might be disturbing to the policy makers is the digital divide in the country. As in the case of telephones the divide is acute between urban and rural areas. Nearly 0.82 million subscribers (55%) are accounted for by Mumbai, Delhi, Chennai, Bangalore and Calcutta, the five metropolitan towns. More than 77% of the Internet access is accounted for by 25 state capitals (large cities of population more than 1-2 million). According to a NASSCOM survey[TOI, July 24, 2000] sixty eight cities and towns account for more than 92% of net access. Two hundred cities account for more than 98% of the access. As per a clarification in the Indian Parliament the north east of India has just 900 Internet connections. Compared to telephones or Internet, electronic media of cable and TV has a much larger coverage. Currently there are 70 channels on air and the electronic medium accounts for 45% of advertisement expenditure in India. By the year 2004 at least 250 broadband channels are expected to be on the air. There are 63 million homes which have a TV. The TV industry is growing at 7% annually [IE, July 22, 2000]. The cable industry is growing faster at the rate of about 17% a year. TV and cable have made significant inroads into the urban poor and have some presence in the rural areas. Some Key Issues in Provision of Rural Telecom Access To provide telecom access in rural areas, infrastructure must be built up in terms of exchanges/Remote Terminal Units (RTUs) and copper paired cable connections need to be drawn upto the location of the terminal equipment in case of fixed lines. For wireless technologies, a similar type of infrastructure needs to be built. One key issue for a new service provider operating in a small area is the interconnection with the rest of the network. In discussing access to ICT by rural population, issues relating to nature of demand, investment and revenue potential and organisational mechanisms to ensure reliable service are important. Experiences from South Asian countries, research studies and discussions in media do provide a partial understanding of some of the issues. These are discussed below. Nature of demand: Is there a felt need for improved communication systems? What types of communications should the system support: voice telephony, email, fax, paging, two-way radio communications. The technologies which should be used also needs to be seriously considered. Some studies have shown that real economic benefit can arise if rural population could receive calls [Bhatnagar, 1999]. Calls coming from migrant labourers could increase if a direct contact could be established between the migrant labourer and his family members. One of the disadvantages of a community call centre is the inability of such centres to pipe in telephone calls to individual homes. Perhaps cellular phones can offer such advantages. Investments and revenues: The investments will be high irrespective of whether technologies are used to provide these services separately or through convergence through a single medium. Will rural population be able to pay for the services at rates which justify investments? Will sufficient revenues be generated? 3

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

There has been a considerable debate on whether rural telephones can generate adequate revenue. There is some evidence to suggest that private telephones in the rural areas do not contribute significant revenues to the service provider. Nearly 70% of the outgoing traffic from rural areas is meant for a destination within the district. Of this 40% remained within the Taluka. Only 20% traffic goes to another district and hardly 10% to another State. International calls represent less than 1% of the traffic [ICICI, 1998]. The revenue potential from rural areas is therefore small and large operators do not stand to benefit. In fact a large proportion of private telephones in urban areas also do not generate adequate revenue that would justify investment [Manikutty, 1999]. The ability to afford an individual connection in rural areas is poor. In 1997 per telephone revenue was 1.4 times the per capita income in India as compared to 0.05 in industrialised countries, making service appear 28 times less affordable in India. Any approach to rural telecom access therefore needs to be based on community access. It has always been felt that rural telephony would require a subsidy. As a general rule this may be true. However, there are pockets of rural areas with economical activity which can easily support telephones with normal tariff charge. In a survey in India it was found that some Public Call Offices in rural areas were generating revenues of as much as Rs.14,000/- per month [Jain, 1998]. Similarly, studies of Bangladeshs Grameen Telephone initiative of providing cellular phones to women entrepreneurs in rural areas has shown that a large percentage of such entrepreneurs were economically stable. They could pay the lease amount for the hand set, pay for the air time charges and still make profits of 300 to 400 takas ($ 7-$ 10) per week. It is not difficult to identify such rural pockets because they either lie at the periphery of urban centres or are located in areas which have high level of economic activity such as in villages with large number of artisans involved in export oriented work. For most rural areas (which may not provide adequate telecom revenue) there is need to look for opportunities of value addition. Creating Internet kiosks is one such opportunity where a variety of services can be offered. These services can include logging request for service from government, access to public and market information, delivery of news and education and telecom (email, IP telephony) services. Organisations that can provide such services/ content for the benefit of rural populations include NGOs and dairy/agriculture co-operatives. If such kiosks were to be established, it would be reasonable to expect that all sectors/organisations, which can deliver services through such kiosk, would participate in making the necessary investment for establishing the kiosk. Organisational mechanisms: In India the discussion on rural telephony has remained confined to technological solutions to the problem of extending coverage to areas with low subscriber density. The utilisation aspect of the problem has been largely ignored. Yet it has been widely observed that mere provision of access does not ensure its use; a whole lot of social and economic factors intervene. In thinking about a community access approach an important consideration would be to ensure access to different castes and communities The performance record of VPTs in most villages is very poor [Das, 1998]. Large number of them are out of order and many are disconnected due to non-payment of bills as villagers often perceive it as a free service provided by the government. VPTs that function normally operate for limited hours of the day because these may be housed in Post Offices and noncommercial establishments. It has been suggested (Puri, S. and Titzema, T., 1999) that labour-exporting countries would benefit from policies and programmes that enable micro-finance institutions that are trusted at the village level to play a key role in channeling remittances This would ensure that families have access to safe and 4

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

secure savings and credit schemes. For example Grameen Bank with its electronic communication facilities between its head office, zonal offices and branch offices, together with the telecommunication infrastructure of Grameen Phone, could fulfil this role in Bangladesh. Initiatives such as Grameen Telecom are proving that micro-credit programmes tied to the development of Public Calling Office (PCO)-type micro-enterprises can significantly increase rural access to telecommunication systems. However, in many regions of developing countries and emerging nations where rural service exists, the challenges of acquiring service and equipment prevent rural entrepreneurs from establishing locally-owned and managed PCO operations. Also, operators of existing rural telecommunication systems may be reluctant to expand due to the challenges of revenue collection, equipment maintenance, vandalism, and acquiring customer support. The solution perhaps lies in linking existing and successful micro-credit organizations with rural telecom operators (fixed line and/or wireless) to expand PCO coverage in rural areas. Small loans to rural entrepreneurs (perhaps targeted to women and youth) can enable entrepreneurs to establish PCOs providing a range of services including telephone, fax, email and even web, photocopy and computer word-processing services. A franchise programme of this sort would also establish consistency of service across a region that would in turn, support the social and economic development of the region. A Framework Based on Micro Understanding of Rural Areas: The discussion above suggests that no single approach to providing community services will succeed in all rural areas. Perhaps rural areas could be segregated in 2x2 matrix. One dimension to be considered is the level of economic activity and the consequent size of demand, whether large or small. The other dimension that could be considered is the kind of investment that would be required to provide telephone access to a specific rural area. This depends on the current infrastructure that has been put in place and the kind of technologies that one may be able to use. There are villages to which telephone access can be provided with limited investment because they are within easy reach of existing rural exchanges. On the other hand there are villages which are remote and considerable new investment would be required in fixed lines or radio transmission to cover these areas. The investment can therefore be seen as low and high. The cost estimates for providing a village public telephone can vary considerably depending upon the technology used and the closeness of the village to the current infrastructure. Some estimates reported by Pinaki and Jain [Das and Jain, 2000] from Tamil Nadu, Uttar Pradesh, Kerala, Punjab and Rajasthan vary from Rs. 62000 per line to Rs.154000 per line when Multiple Access Radio Relay (MARR) is used. The investments vary from Rs. 32000 to Rs.55000 or more in case of wireline connections. Typically planners have used three cost estimates at varying levels from Rs. 50000 to Rs.100000. In Bangladesh, Grameen Telecom is using Cellular technology for its Village Pay Phones (VPP) project. It has cost GT less than half of fixed line cost but the coverage is restricted to a narrow corridor around the urban infrastructure. One can identify an approach that is most suitable for each of the four boxes in the matrix. Where demand is high and investments are low emphasis should be on delivering reliable service through small private entrepreneurs. Local entrepreneurs should be encouraged to provide community services. They can be encouraged by facilitating the establishing of PCO and kiosks through reduced paper work and provision of loan assistance to establish shops, etc.

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

In cases where the existing demand is poor, other services should be bundled in with telecom services. The best way to do it is to allow co-operatives and NGOs to take the lead so that telecom access could be useful for the primary tasks of such organisations. Since relatively small investment is required, such organisations can create the infrastructure on their own. In the long run they would not be losers as the total value of the bundled services might still outweigh the cost of investment and operational expenses. The examples of the work undertaken by Swaminathan Foundation in India in establishing information kiosks in Pondicherry [www.mssrf.org] and use of computers in thousands of rural milk collection societies establishes the principle of the workability of this proposition.

Revenue Potential
High Small private telecom operators should be allowed to operate level 1 exchange and offer telecom services independently or as exclusive franchise of large operators. Telecom companies and the operators can be encouraged through a no tax regime. Financing institutions may need to be created to provide finances to such operators. Small private companies can manage rural infrastructure and provide service. Local entrepreneurs should be encouraged to open community telecom service centres and information kiosks Low Subsidy should be given to the operators on the basis of least subsidy requirements Developmental Organisations (NGO, Cooperatives) should be encouraged to form Rural Telecom companies. Interconnection with existing networks is mandated . Encourage community services through developmental agencies



Co-operatives and NGOs should be encouraged to take lead in establishing multiple services community communication centres which can also be useful for the primary tasks of such organisations.

For areas which will require high investment and have a large potential demand, large operators should be allowed to franchise the operations at a village exchange level to a few private telecom operators on exclusive basis. Small private companies could manage the infrastructure from the last level of exchange upto the end users instrument. They would be responsible for revenue collection, providing new connections and maintenance. Since the potential demand is large, a subsidy may not be required but the operators may need encouragement through a no tax regime. Financing institutions may need to be created to provide finances to such operators as they are likely to be small in size with limited facilities. Government/Non-Government Development agencies need to identify high revenue potential areas and make business plans for partnership with existing/new operators to create infrastructure.


Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

In the most difficult areas which require high investment and are likely to have poor revenue potential, subsidies would be required. However, to minimise the impact on the exchequer such areas could be auctioned to small operators on the basis of least subsidy requirements. Co-operatives and NGO can be encouraged to form telecom companies. However, the statute covering the co-operatives usually prevent them from diversifying into related activities. On the other hand rural areas do not offer space for a multiplicity of organisations to operate. It is therefore more viable to allow a single agency to provide the entire range of services needed in rural areas. These would include telecom services as well. Although co-operative movement has worked in several sectors such as dairy, handloom, sugar, such successes have been restricted to a few states such as Gujarat, Maharashtra and Tamil Nadu. On the other hand, the co-operative movement has not yet met with success in the north of India. Government/public sector has been unable to deliver telecom or information services in the rural areas. There are problems of service delivery in providing new connections, keeping lines maintained for high up time and in collecting revenues. There is a large amount of revenue leakage through corruption. In fact it seems the government is best suited for creating an appropriate telecom infrastructure and to keep such infrastructure well maintained. Provision of services to the end consumers should be left to private entrepreneurs and other organisations which have over the years learnt to deal with clients and provide services. A subsidy from universal service fund created by a universal service levy to rural service providers would serve as incentive for them to provide reliable service in such areas. The subsidy could also be targeted specifically for building interconnect arrangements. License conditions must mandate an obligation to provide interconnections to all operators who venture into high investment or low revenue potential areas. Several details of the scheme are however still to be worked out by the Government in consultation with TRAI and these considerations can be factored in. In the next section we discuss a case study of IT use in the dairy sector in remote rural areas [Chakravarty, Rupak, 2000]. The case study exemplifies the willingness of rural institutions to invest in technology, provided that such technology can deliver real value. The study further describes the extension of the original application which takes Internet access to rural areas that can provide a variety of benefits to the rural population. Case Study of IT Application in Milk Collection Societies Milk production has been important for India as milk is one of the main source of proteins and calcium for a largely vegetarian population. In 1999 India became the largest producer of milk largely because of the efforts of the co-operative movement initiated by the National Dairy Development Board (NDDB). Milk is collected by co-operative societies located in the hinterland. Some of the societies have their own chilling units. From others milk is transported daily by tankers to large milk processing plants. In these plants milk is converted into several products. The marketing of these products is often the responsibility of a separate co-operative organisation. The NDDB has played the role of providing consultancy and project management skills for the Dairy movement in India. Efficient collection of milk and remunerative prices to the producers have been a prime reason for the growth of milk production in India. Both of these to some degree have been influenced by the innovative use of IT at the milk collection centre. 7

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

Milk is collected at the co-operative milk collection centres which are located within 5-10 kilometres of the villages supplying the milk. Number of milk farmers selling milk to these centres varies from 100 to 1000 and the daily collection varies from 1000 litres to 10,000 litres. Farmers bring their milk in a variety of containers and cans. Each farmer is given a plastic card as an identification. The farmer arrives at the counter and drops the card into a box which reads it electronically and transmits the identification number to the PC. Then the milk is emptied out in a steel trough kept over a weigh bridge. Instantly the weight of the milk is displayed to the farmers as well as communicated to a PC. The trough is connected by a pipe to a can in which milk is transported to the dairy. In places where there is a chilling plant the trough is connected to a pump which sends the milk to the chiller. One operator is required to manage the filling of cans. Another operator sitting by the side of the trough takes a 5 ml. sample of milk and holds it up to a tube of a fat testing machine. A hand lever in the machine has to be moved three times for the milk sample to be tested for its fat content. The whole operation takes a few seconds. The fat content is displayed to the farmer and is communicated to the PC. The PC calculates the amount due to the farmer on the basis of a rate chart where the milk price varies depending on the fat content. The total value of the milk is printed out on a printer and given to the farmer who can collect the price from the adjoining window. The payment to the farmer is automatically rounded to the closest rupee and the balance change due to the farmer is stored so that it can be added to the farmers pay-out for the next day. In many centres the whole transaction takes 20 seconds. The entire system costs around $ 2000 and is currently supplied by at least two private companies. Nearly 600 such systems are in operation in Kheda district in Gujarat. There are 70,000 village societies of which a total of 2500 have been computerised. The benefits to the farmers and the local co-operative have been documented. [Chakravarty, Rupak, 2000 ] The farmers benefit from the computerization because their payment is now based on an accurate measurement of fat content and weight. In the earlier system the fat content was calculated a few hours after the milk was received because the process of measurement was cumbersome. This lead to malpractice and under-payment to the farmers. Also the payment to the farmers was made every ten days because of the inability of the collection centres to calculate the payment immediately. The IT system enables prompt, accurate and immediate payment. Besides the queues at the milk collection centres are short even though the number of people selling their milk are quite large. Considering the fact that the 600 milk collection centres receive milk from 60 thousand farmers daily, even a ten minutes saving for each farmer every day amounts to a total saving of 30 thousand man days in a month. With the spread of Internet and web technologies it is widely believed that useful information content can be delivered to rural population through information kiosks. Such kiosks can also deliver some of the services that governments and other institutions need to offer to the rural population. Several state governments are indeed planning to establish such kiosks in rural areas. However, past experience of NIC kiosks in some urban areas suggests that the number of citizens that use such kiosks/services is very limited. This could have been the result of poor location, content which was not updated or useful or interface which was not user friendly. When IIMA became aware of the dairy application 8

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

described above, it immediately recognised the potential of building upon an application which operates in 2500 rural locations and exposes half a million people daily to the benefits of IT. DISK: IIMA E-Governance/ CTPS Project for the Dairy Sector The Diary Information System Kiosk (DISK) project was conceived with two major components. An application running at the society level which could be provided Internet connectivity and a Dairy Portal at the district level serving transactional and information needs of all members and staff at various levels in the district co-operative structure. The software to be used at the society level was developed with the following objectives: To provide data analysis and decision support to help a rural milk collection society in improving its performance i.e. increasing milk collection. To provide analysis of data so that the productivity and yield of milch cattle owned by members can be improved. To provide facilities to farmers to place orders for a variety of goods and services offered by different agencies in the co-operative sector and seek information on a variety of subjects of interest to them.

The type of services to be offered at these centres would be as follows: 1) Delivery of information related to dairying: This would include best practices in breeding and raring milch cattle, schedule of services provided by government and other private sector agencies and collecting feed back on the quality of service provided to the catchment area. 2) Provide access to a multi-media data base on large number of innovations captured by SRISHTI (an NGO working in co-operation with IIMA) from hundreds of villages. These innovations cover agricultural practices, medicinal plants, home remedies, tools and implements, etc. The multimedia format has captured the description of the innovations provided by the innovators and a visual presentation of the innovations. 3) If Internet telephony were to be permitted, such a centre also could be used as a communication centre offering services like email, fax and Internet telephony. 4) Internet Banking Services and Automated Teller Machines (ATMs): This will enable the milk societies to credit the payments directly into banking accounts of the sellers. These sellers already have plastic card identifiers. The card identifier may have to be upgraded to smart cards carrying biometric identification. These cards could be used for the purposes of withdrawal of cash from ATMs. 5) The automatic printing process of daily payment slips provides a means of communicating with the farmers. For example, a data base is maintained in the computer for each farmer indicating the number of milch cattle and other details. If a cattle requires inoculation on a specific day (information provided by a veterinary service data base) this fact can be printed out on the farmers payment slip as a reminder. A large amount of detailed data history on milk production by individual farmers is now available in the data base in the milk collection centre. Such data can be utilised for forecasting of milk collection 9

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

and incorporating seasonality. Seasonal variations in fat content of milk can be analysed by farmers and by collection centres. Such analysis can be useful for the dairy, veterinary services, cattle feed companies and the milk collection societies. Thus the IT application has benefited all the concerned stakeholders. Many interesting DSS can be built to forecast aggregate milk collection and monitor the produce from individual sellers. The application has access to data on farmers, their milch cattle, and the past record of transactions. Up-to date data about farmers milch cattle, and service delivery is to be collected in an interactive fashion during the farmers daily visit to the society. This can improve the quality of data and also provide complete data for those societies which have been computerised. With availability of complete data and its analysis, both services and productivity can be improved substantially. The focus of the entire project is on improving the delivery of insemination, veterinary services, education, purchase and sale of milk. Such an improvement can lead to increase in productivity and collection, and therefore NDDB would be interested in seeing the wide spread use of this application. Some upgradation of hardware/software and an Internet connection would be required. For the portal at the unions, a small server and a leased line connectivity would be needed. The union portal can actually be implemented at a central location at one of the NDDB web servers. Current Status The above application has been developed for two societies on IIMA E-Governance centre platforms. A portal with illustrative content in Gujarati and English has been developed and is accessible as a beta site [URL: www.iimahd.ernet.in/egov]. Currently the application is being pilot tested in one of the cooperative village society of Amul dairy in Kheda district. Eleven one-day workshops were conducted by IIMA to sensitise 500 mangers of the entire co-operative dairy sector to the potential of using IT at society and district levels. The workshops created a reasonable amount of excitement and support for DISK amongst the participants. Preliminary estimates indicate that about 1000 milk collection centres could opt for the above application. It is interesting how the automation of milk societies, initially built around a micro-processor, has taken a decade to diffuse on a large scale. A significant impetus to this activity was provided when two entrepreneurs started offering the integrated system to milk societies. They marketed their systems aggressively, sometimes offering to install the system free of cost initially until the customers were satisfied. They used these free-installation to demonstrate to neighbouring societies the utility of the automated milk collection centres. Intensive training in operating this system was provided to two or three office bearers of the milk collection societies. Maintenance of the IT systems was provided by motorcycle borne service engineers who could quickly attend to the faults. The IIMA initiative has chosen to involve small private sector companies in taking the DISK project to a large number of rural areas. The very limited success of IIMA DISK project strengthens the argument that the policy on rural access must move away from its dependence on large telecom service providers. In fact experience of several decades in countries like the US suggests that hundreds of rural telecom co-operatives have served a large segment of the rural US population and continue to do so [Henderson B, 2000]. Government policy has recognised their importance and has provided financing for the investments that were needed to reach new areas. 10

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

Conclusion Telecommunication investors, financial institutions that provide telecom loans, urban telecom operators, and telecom equipment vendors are generally reluctant to involve themselves in rural operations because they see telecom ventures in rural areas, especially those in developing countries and emerging markets, as high-risk, troublesome, or not worth significant effort. One potential solution is to target un-served and under-served regions and provide support for acquisition of quality market appraisal knowledge and market data through market research in the field, in order to prove the business case, attract investment capital, and reduce the effort required by investors and operators. Telecom operators and equipment vendors typically have the technical resources and operational expertise necessary to leverage profitable rural telecom opportunities, and if they are presented with a solid business case, this relieves them of the burden of researching rural markets themselves. For example in the case of Grameen Telecom, it was business case interventions on behalf of Gonophone and Grameen Bank that attracted external investment from a qualified foreign operator. There is so much happening on the technology front that it is difficult to suggest robust approaches for taking telecom to rural areas. The policy in the past few years was focused on imposing an universal service obligation on fixed line basic service providers. However, recent experience suggests that fixed line basic service providers are not interested in expanding their network. Their strategy evolves around corporate users. The total number of lines that basic providers have added in urban areas in the last three years is 0.2 million and this is to service high bandwidth data needs of large corporate users [TOI, August 5, 2000]. On the other hand cellular telephony has made bigger strides in India. Already a subscriber based of 2.1 million has been generated. Therefore it seems likely that future of rural telephony may ride on wireless technology such as cellular, wireless in the local loop and Cordet (developed by IIT, Madras). The current limitations of low data bandwidth on wireless may also be overcome in due course. Rural areas need to be serviced through low cost, low bandwidth solutions which have high reliability. This means that technology solutions will have to be adapted to local terrain and conditions. Demand for information services would have to be generated through aggressive marketing and overheads will have to be kept low to serve a cost sensitive market. Large organisations in public or private sector are unlikely to be able to operate in this manner. Perhaps the rural telecom environment would have to be less regulated than it is in the urban and metropolitan towns. For example, cable operation has been considerably less regulated and this has enabled large number of small players to spread the network. Since communications in rural India is largely need based (as opposed to social or leisure). voice telephony is not of paramount importance. Voice, email in local script and a variety of information services riding over the Internet may well be the answer to the communication needs of rural areas. Long-term exclusive territory license for specified technologies may be detrimental - they lock out potential entrants that come with more cost effective technologies. WLL terminals at village coupled with PABX to provide a local village exchange and multiplying the number of phones available from a single line - VP operator could become a local network operator. PCO operators could become total communication shops providing phone, fax, email, Internet, computer training, photocopying services. 11

Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

Such partnerships are necessary as large licensed operators are not very interested in operating enduser technologies. They prefer the more technical job of supplying operating service and having a straightforward method of collecting revenue. This provides a substantial market opportunity for facilitating the operation of end-user technologies and services, especially those that provide consistent, high-quality and low-cost services.


Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

Table no. 1: Current status of village level access to telephone

S. No CIRCLES TOTAL VILLAGES STATUS AS ON 1.4.2000 VPT VILLAGES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Andaman & Nicobar Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Jammu & Kashmir Karnataka Kerala Madhya Pradesh Maharashtra North East Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh(E) Uttar Pradesh(W) West Bengal Calcutta 282 29460 22224 79208 18125 6850 16997 6764 27066 1530 71526 42467 14446 46989 12687 38634 17991 75698 39551 38337 468 274 23379 14181 24923 13923 6807 10364 3793 25801 1530 46498 31541 4336 22928 12123 23727 17845 46492 23531 19997 421 VILLAGES with NO VPT 8 6081 8043 54285 4202 43 6633 2971 1265 0 25028 10926 10110 24061 564 14907 146 29206 16020 18340 47 DOTS TARGET FOR 2000-01 & 2001-02 2000-01 8 0 5000 22000 0 43 3000 2000 1265 0 4500 0 5000 12000 0 0 146 15500 6000 9000 47 2001-02 DOTS TARGET FOR 2000-02

0 0 3043 32285 0 0 3633 971 0 0 1360 0 5110 12061 0 0 0 13706 10020 9340 0 0 91529

8 0 8043 54285 0 43 6633 2971 1265 0 5860 0 10110 24061 0 0 146 29206 16020 18340 47 0 177038



191 607491

191 374605

0 232886

0 85509


Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

Table no. 3: Rural Telephony (Analysis of data from Gujarat telecom circle)
S. No. District No. of villag es 646 595 1368 1116 865 694 1034 965 884 1093 1889 841 1363 1185 648 1639 821 17646 No. of exch ange 67 84 139 36 73 69 77 45 109 218 74 106 94 48 69 58 76 1366 547 71% Rural Capacit y # of lines 32772 14824 25320 17832 12688 11704 20632 7584 28910 50928 13712 23316 21840 34452 9408 17444 44390 34336 165264 17% No. of Wait List (%) No. of Working Connect ions (%) 24844 (76) 12051 (81) 18997 (75) 10239 (57) 7291 (57) 8911 (76) 13376 (65) 4371 (58) 20854 (72) 36539 (72) 10400 (76) 18327 (79) 16285 (75) 25798 (75) 6763 (72) 9556 (55) 37108 (84) 281710 (82) 1506219 No. of local call areas 10 7 16 8 12 10 15 8 13 9 9 12 9 9 8 11 8 174 No. of exchanges Fibre media (%) 15 17 22 10 10 3 14 9 32 30 19 15 11 2 3 12 10 261 (22) (20) (16) (28) (14) (4) (18) (20) (29) (14) (26) (14) (12) (60) (4) (21) (13) (19) No. of exchanges Overhead media (%) 7 41 87 17 27 41 50 26 55 75 35 67 63 4 43 34 12 684 (10) (49) (63) (47) (37) (59) (65) (58) (50) (34) (47) (63) (67) (8) (62) (59) (16) (50)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Ahmedabad Amreli Banaskantha Bharuch Bhavnagar Jamnagar Junagadh Kheda Kutch Mehsana Panchmahal Rajkot Sabarkantha Surat

Vadodara Valsad Total rural Total urban Rural % of total

1662 4682 1635 0 4660 1465 0 142 2891 5133 984 5389 5112 2949 1126 750 5915 38580 56627 41%

(5) (32) (6) (0) (37) (13) (0) (2) (10) (10) (7) (23) (23) (9) (12) (4) (13) (11)


Paper presented at India Telecom Conference, Asia-Pacific Research Center, Stanford University, November 2000.

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