Is Modi government hyping the impact of BharatNet on Indian economy?

The government has recently announced plan to kickstart the second phase of BharatNet, a project started by the UPA government in 2011 under a different name National Optical Fibre Network (NOFN). Later when the Bharatiya Janata Party-led government came into power, it was renamed BharatNet. Under the second phase, the government aims to double the existing optical fibre network (OFN) in the country from about one million to two million kilometers. Both phases of BharatNet aim to cover 2.5 lakh gram panchayats (GPs) - one lakh in the first phase and 1.5 lakh in the second phase - with a total investment of some Rs 45,000 crore. In the first phase, over Rs 11,200 crore has already been spent.

Interestingly, in the second phase, there are plans to install 6-7 lakh wi-fi hotspots by 2018/19, primarily by telecom operators. This is a major boost because the country currently has about 36,000 wi-fi hotspots put together. Countries like France (13 million), US (9.8 million) and the UK (5.6 million) are far ahead of India at the moment in terms of wi-fi hotspots. In fact, operators like Jio look far more aggressive than government in rolling out public wi-fi hotspots. For instance, Jio has plans to set up 1.5 million hotspots over the next 18 months.

Till about last year, more than 85 per cent of the total wi-fi hotspots were located at cafes and hotels where users pay to access high-speed internet. It's yet to be seen if the people in rural areas would be willing to pay to use public wi-fi. The government has plans to provide VGF (viability gap funding) of Rs 3,600 crore in cases where telcos may find it difficult to operate.

BharatNet will provide last-mile connectivity to the remotest corners of the country but consumers in rural and urban areas will still have to heavily depend on telecom players, especially wireless operators, to access broadband internet. Under the BharatNet, the government is setting up optical fibre network and other infrastructure, and the bandwidth will be used by private telcos to provide services to end consumers.

Overplaying The Impact?

The impact of BharatNet on expanding the broadband footprint, and the economy in general, seems to be grossly over-estimated. According to telecom secretary Aruna Sundararajan, after the completion of BharatNet's second phase, it would add potentially Rs 4.5 lakh crore to the GDP (gross domestic product). She says that a 10 per cent increase in internet usage in India will lead to a 3.3 per cent increase in GDP.

Let's look at some numbers. With about one million kms of OFN (including about 0.72 million kms of OFN of private telcos like Idea-Vodafone, Bharti Airtel and Reliance Jio), the total wireline broadband consumers in India stand at 18.3 million as on June 2017. It also takes into account the network additions on account of the BharatNet project. In comparison, the wireless broadband consumers are over 15 times at 282.5 million. Clearly, more people are connected to telecom towers than to optical fibre network. Additionally, it points out to the effectiveness of OFN to provide wireless broadband services over wired internet.

The government's own target to connect the number of users (and government institutions) seems less ambitious. It is expected that about five million households (and 2.5 million government institutions) will be linked to BharatNet by 2020. It's safe to say that five million households would mean about 25 million users (each family would have an average of five members). In the current round of consolidation in the telecom sector, there are bigger private players bought for free. Take the case of Tata Teleservices which has 46.9 million subscribers in August.

Slow Pace

On November 13, while announcing the second phase of BharatNet, telecom secretary Sundararajan said that the first phase of BharatNet is nearing completion by December 2017. The official figures show that the target is unlikely to be achieved unless the pace of work is increased significantly. For instance, 76.3 per cent of the GPs have BharatNet services available.

The NOFN project was proposed to be completed in two years at an estimated cost of Rs 20,000 crore. So far, it has overshot its completion deadline and cost estimates by a huge margin. In over five years of existence, the government has been able to connect three-fourth of the targeted GPs, it's hard to believe that it can connect the remaining 24 per cent GPs in just over 30 days.