Bharatnet – Gathering Momentum Despite a Slow Start

Mission-critical applications such as healthcare and education can proliferate only when there is a robust optical fiber broadband backbone.— BharatNet will fulfill this

Rajesh Nair (name changed on request), a technical assistant working at a Gram Panchayat (GP) office in the vicinity of Kottayam district in Kerala is frantically trying to reach local BSNL officials.

For the past two days, the broadband connection at the GP office under the Bharat Net project has not been working after nearby roadworks caused a break in the underground optical fiber cable.

“The BharatNet broadband has been functional here for the past two years. We use it to offer e-governance services to citizens,” says Nair. However, when there is an issue with the connection then it takes time to rectify because Bharat Broadband Network Ltd (BBNL) is no longer managing the network and BSNL has its own broadband services here,” Nair adds. Thankfully, the GP has backup internet connectivity from a private operator to enable smooth office functioning when the BBNLconnection is down.

Some twenty-five kilometers away, in another gram panchayat, Jimmy Mathew (name changed), also a technical assistant, faces similar issues. “The connection is working now, but when there are issues it takes longer to get rectification. When we call for help we are told that the BBNL contract is over, and a private operator has taken over. We are forced to take a backup internet connection to enable smooth functioning of the office,” Mathew told Voice & Data.

Gram panchayats map1

The two-gram panchayats are part of an ambitious initiative by the Centre to provide high-speed broadband connectivity to 2,50,000 gram panchayats across the country. The project, announced in October 2011, was supposed to be commissioned in two years at a cost estimated at `20,000 crores. More than ten years later, after missing many deadlines and trying out different models, the Bharat Net project is now picking up steam even though it continues to face many issues on the ground.

What is the BharatNet project?

The BharatNet project, initially called the National Optic Fiber Network (NOFN), was approved by the Government in 2011 to connect 2.5 lakh Gram Panchayats (GPs) in the country. This connectivity could be extended to cover all 6.5 lakh villages in the country, providing services like e-gov, telemedicine, tele-education, e-health, etc.

There is no doubt that optical fibre is critical to India’s digital roadmap and Bharat Net, despite its shortcomings, is well on its way to become one of the largest OFC networks with 23 to 24 lakh Km of cable assets.

The optical fiber network is an ambitious initiative aimed at triggering a broadband revolution across the country. NOFN was envisaged as an information super-highway through the creation of a robust middle-mile infrastructure for reaching broadband connectivity to all Gram Panchayats. The Centre created a special purpose vehicle (SPV), Bharat Broadband Network Limited (BBNL), to act as the executing agency responsible for overseeing the project, determining reference prices for each activity, and procuring optical fiber. BSNL, RailTel, and PGCIL were responsible for trenching and ducting as well as laying the fiber.

The initial phase

Under Phase-I of BharatNet, a target of connecting one lakh GPs through optical fiber cable was set. But by 2014 the network had reached only around 5000-gram panchayats. Lack of coordination among the various agencies involved in the project was a common theme wherever the broadband network has been rolled out. One of the key bottlenecks was that the appointed agencies possessed limited autonomy to make decisions in matters of price discovery.

With the primary objective of controlling costs and minimising unnecessary expenditure, BBNL established reference prices for each activity to be undertaken by the central public sector undertaking (CPSU) – BSNL, Railtel, and PGCIL.

As a result, however, any time the price discovered by the CPSU for contracting exceeded this reference price by over 10%, the CPSU was required to obtain additional approvals from BBNL. Such constant back and forth mired the project in time overruns while also triggering institutional friction between BBNL and the CPSUs.

Realising the slow pace of implementation and marred by day-to-day issues, the Department of Telecommunications constituted a Committee to review the strategy in January 2015. The Committee, in its report, said that the design of the NOFN program assumed that the final leg of last-mile access and service provision to end-users would be covered by the private sector. However, this resulted in the executing agencies lacking inherent incentives to ensure that the network is built to high-quality standards.

The Committee’s report also identified a lack of long-term planning in other network elements such as service provisioning, bandwidth utilisation, operations and maintenance, and allocation of responsibilities for individual project components, which it attributed to BBNL’s shortage of a large professional staff with relevant management proficiency.

Despite outlining the challenges in the model, the Committee proposed to continue with the CPSU-led model and State-led model in most regions. It proposed to introduce private operators under an EPC model only in 10 of the 22 telecom circles.

In March 2016, the TRAI issued a paper punching holes in the Committee’s observations. “It appears that the CPSU and State-led models outlined in the Committee Report share many of the same characteristics of the NOFN implementation model that have been previously outlined as increasing the risk of failure due to misaligned incentives,” the TRAI said.

R K Upadhyay2

“Rural broadband penetration in the country is extremely poor. No private telecom operator has taken significant steps to improve the situation. Hence optical fibre network being created by Government of India through BBNL is the only hope to increase the poor penetration of Broadband in rural India.”

R K Upadhyay, former Chairman, Bharat Sanchar Nigam Ltd.

Criticising the EPC model for private players, the TRAI said, “With the private contractor having no long-term stake post-deployment and the weak monitoring capacity of the public monitoring agency (especially given the highly technical nature of the project and the sheer volume of work that must be monitored), there exist perverse incentives for private contractors to increase profit margins by reducing costs through the deployment of poor quality infrastructure and there exist no incentives for speedy implementation (since the executing agency’s source of revenue is independent of how quickly the network is made operational).”

Instead, the telecom regulator proposed a public-private partnership (PPP) model as it creates long-term private engagement. “The concessionaire should be responsible for deployment as well as operating and marketing the network. Given the desirability of leveraging private sector efficiency and technical capacity but recognising that many rural areas may not be perceived by it as lucrative enough, Viability Gap Funding (VGF) should be offered to encourage private infrastructure deployment and operations in such areas,” the TRAI said in its recommendations issued in March 2016.

Need for Fixed Broadband Network

While the initial slow progress in the rollout prompted many experts and industry executives to call for the termination of the project, it is clear that BharatNet is perhaps the most important infrastructure project if India wants to achieve the status of becoming a digital superpower. Broadband penetration in India is 55%which is significantly lower compared to that of China at 95%, and other European nations at around 95-115%. Mobile penetration in countries like Japan & USA is 180% & 150%. (Source: OECD, TRAI, Mbit report 2021).

Further in terms of Broadband speed, India is ranked 131stamong 140 nations (source…) in terms of mobile broadband speed and 66thamong 177 countries in fixed broadband.

Whereas global average speed in the case of mobile and fixed broadband is 33.71Mbps and 76.94Mbps respectively. For fixed-line broadband, the highest speed reported is in Singapore at 205Mbps (Source: Speed Test, TRAI)

But when it comes to adopting digitisation and online platforms Indian users are among the top consumers globally. The consumption of video and online content has been growing exponentially over the last two years. The tectonic shift from an analog world to a digital future is visible across all aspects of life.

At the center of this transition to a digital world is the availability of a reliable and affordable data network. Optical fiber networks have the capability to carry much more data than a wireless network because of the inherent limitations of the radio spectrum.

Mission-critical applications such as healthcare and education can proliferate only when there is a robust optical fiber broadband backbone. Private telecom companies including Reliance Jio have announced plans to connect over 1,100 cities with optical fiber. While this will cater to the urban consumers, BharatNet is critical in ensuring that the rural folks also reap the digital dividends.

“Rural broadband penetration in the country is extremely poor.No private telecom operator has taken significant steps to improve the situation. Hence optical fiber network being created by Government of India through BBNL is the only hope to increase the poor penetration of Broadband in rural India,”

says R K Upadhyay, former Chairman, Bharat Sanchar Nigam Ltd.

Wireline subscribers in India were just under 24 million as of December 2021 with a growth rate of 1% per month. Urban and rural subscribers accounted for approximately 92% and 8% respectively. Compare these figures with the total number of 1178 million telecom subscribers and 792 million broadband subscribers. Obviously, the fixed-line broadband coverage is very low in proportion to the overall telecom coverage and rural area fixed-line coverage is abysmal.

Criticising the EPC model for private players, TRAI had said, private contractors have no long-term stake post-deployment and therefore there is a perverse incentive for private contractors to increase profit margins by reducing costs through the deployment of poor quality infrastructure.

So, it is clear that India has a problem so far as fixed-line broadband coverage is concerned and an acute problem as far as rural area coverage of broadband is concerned. But at the same time, the average mobile data consumption in India touched 17GB per user per month in 2021, according to Nokia‘s annual ‘Mobile Broadband Index (Mbit) Report 2022’.

As data consumption keeps growing exponentially and with new technologies such as 5G on the way, wireless platforms will not be enough to meet the demands of bandwidth-guzzling consumers.

BharatNet utilization models1

Rentala Chandrashekhar, former Secretary, Department of Telecom told V&D: “Fixed-line broadband is important for India for several reasons. The newer generation of services and many of the existing ones require high-capacity, reliable, and sustained broadband connectivity for a meaningful user experience. Some of the critical services in the social sector like education, skilling, healthcare, agri-related services require such connectivity.”

Educational institutions, for example, have a large number of users at a single location. Such needs simply cannot be met by wireless services. At best, a combination of wireline and wi-fi can serve the purpose. Developments like the Metaverse which present an AR/VR interface cannot even function without reliable broadband.

“Barely 3% of broadband subscribers are connected via fixed-line. The quality, reliability, and sustained high bandwidth provided by wireless broadband providers are uneven and patchy. Moreover, it is dependent on traffic patterns, with poorer quality during peak times. So, for many critical uses, wireless broadband is simply not good enough. Wireline broadband is very important for schools and colleges, for example,” says Chandrashekhar.

PPP Model

Given the importance of fixed-line broadband to the overall digital economy, Hon. Prime Minister Narendra Modi on 15th August 2020 in his Independence Day speech announced connectivity to all inhabited villages through Optical Fibre Cable.

Thus, the mandate of BharatNet was revised to extend the connectivity from Gram Panchayats to all inhabited villages, thereby enhancing the scope of BharatNet to provide connectivity to all ~6.5 lakh inhabited villages together with a focus on the creation, maintenance, and utilization of the network.

A global tender for the development of BharatNet, through the PPP model, was floated by BBNL.

The tender was for the development of BharatNet through a design, build, operate and transfer model in nine separate packages across 16 States in India. This essentially meant that the government would give the responsibility for upgradation, maintenance, and operation of the network to private players. To make this undertaking commercially attractive for private players, the government also promised to foot the bill partially, through viability gap funding capped at `19,041 crores overall. Recognizing the importance and need for building this digital infrastructure as well as encouraging private participation, the threshold was extended to 60 percent for BharatNet, instead of 40% for other government projects under similar PPP models.

Rentala Chandrashekhar1

“If you go by the number of kilometres of fibre laid or the number of villages that have been covered, then, progress has been substantial, though far less than what was projected. However, there is little doubt that it has not had the revolutionary impact that was anticipated.”

Rentala Chandrashekhar, former Secretary, Department of Telecom

However, not even a single private player submitted a bid even though 50 players had initially shown interest. According to industry sources, the PPP model envisaged by the government had several issues but the biggest worry for the private players was that they were dependent on their ability to generate revenues from the fiber. “The tender conditions were tough especially when one considers that the project was essentially aimed at rural markets. No one was sure about making revenue to make the project viable,” said an industry source.

“The normal principle in PPP is that you should transfer only those risks and uncertainties to the private partner that they are in a position to control. Here, you were transferring the uncertainty of uptake and payment for these internet services by numerous government institutions like schools, panchayats, PHCs, cooperatives, etc. in rural areas and that too, over an extended period of time,” said another source.

According to Chandrashekhar, “Private players are not very interested in areas where there is low demand and are preferring to go on their own in the few areas where the demand is high. There could also be some concerns regarding indirect dependence on BSNL as the perception is that BharatNet and its operations, including personnel, are dependent wholly or partly on BSNL.”

Multiple industry sources also raised concerns about negative bidding. According to the notice inviting tender (NIT), the project will be assigned to the enterprise that can complete the project with the least financial support from the government. This means that the project will be assigned to the player submitting the bid with the lowest subsidy requirement or highest rate of premium for the government.

Experts cite the 2007 tender where USO Fund aimed to provide subsidy support to set up mobile infrastructure in rural and remote areas, however, that tender invited negative bids. That is, enterprises ended up paying the government for project ownership. These undertakings were later abandoned due to commercial unviability. Thus in the enthusiasm to bid for the project, costs were poorly estimated and lowballed, and the industry was apprehensive that this could have happened again.

The other big worry for many potential bidders was that there was no clarity on the quality of the network already rolled out by BBNL. “Bidders might have been worried that they would be taking on a network that was poorly laid out and maintained, therefore they might not be able to accurately estimate the cost of maintaining the existing network,” an industry expert said.

Current status

Despite these challenges industry experts agree that BharatNet has picked up steam over the past few years. As of March 2022, about 5,70,115 Kms of optical fiber has been rolled out connecting 1.83 lakh gram panchayats.

Over 1 lakh WiFi hotspots have been rolled out to provide direct connectivity to villagers on their mobile phones. As of February 2022, about 4028.87 TB of data has been used up on this network. The Government has so far disbursed `27,000 crores from the Universal Services Obligation Fund to finance the rollout. “Pandemic highlighted the importance of effective and robust digital infrastructure. In a transitional economy like ours, the absence of broadband remains a key issue for digital divides between populations, communities, and ethnic groups. Building broadband connectivity on top of existing mobile broadband infrastructure is a fast and cost-efficient option to bridge the digital divide. It will help to expand service to far-flung areas of the country which will enhance rural teledensity and play a stellar role in enhancing connectivity to the rural sector,” says Lt. Gen Dr. S.P. Kochhar, Director General, Cellular Operators Association of India.

SP Kochhar1

“Pandemic highlighted the importance of effective and robust digital infrastructure. In a transitional economy like ours the absence of broadband remains a key issue for digital divides between populations, communities and ethnic groups.”

Lt. Gen Dr S.P. Kochhar, Director General, Cellular Operators Association of India

Experts agree that the full potential of the project has not been unleashed yet. “If you go by the number of kilometers of fiber laid or the number of villages that have been covered, then, progress has been substantial, though far less than what was projected. However, there is little doubt that it has not had the revolutionary impact that was anticipated,” says Chandrashekhar who was at the helm of DoT when the national optical fiber project was envisaged.

According to Chandrashekhar, there are several reasons for the project to miss out on targets but all of which can be resolved with a concerted strategy accompanied by focused action. The first is that the project was viewed and implemented as an infrastructure project involving the laying of fiber and installing the active electronics required for connectivity. In fact, it needs to be viewed as a full-range service provision that looks at the QoS available to the rural user as the measurable outcome. This has, perhaps not been the case.

Secondly, the utility of such services depends critically on applications in various sectors including the social sectors mentioned above. “There has been both a lack of adequate applications and end infrastructure at the public institutions. Lack of coordination in aligning all of these has meant that apps are ready in some places, but connectivity is not or infrastructure is not available, or the other way around. Involving states in driving usage is critical given the nature of these services many of which fall on the state list. Consequently, the business case remains doubtful,” says Chandrashekhar.

What next

Given the national importance of the project, the Government is now putting in place a new blueprint. In a bid to rope in private players to roll out the national optical fiber project BharatNet, the Department of Telecommunication is looking to bring a new model where private players will be given annual payments over a period of 20 years for constructing and maintaining the rural broadband connectivity infrastructure. Last-mile services using this infrastructure will likely be given out separately to interested private players with viability gap funding support from the Centre.

According to sources, the DoT is discussing various models to bring private players into the project after the last attempt under a PPP model did not attract any bidders.

“The PPP model had several issues because private operators did not want to be dependent on potential revenues for recovering their investments. Under the new model, the DoT may delink the revenue aspect from managing and operating the broadband network,” said a source close to the development.

The government may foot the entire capital expenditure for constructing the network under the new model. In the previously proposed setup, the government would have only given the differential (viability gap funding) to make the project economically viable.

In addition to this, the government is also considering splitting the bidding on the network into two categories.

In the first category, private players will bid on constructing and maintaining the core network, and the entire exercise will be paid for by the government. As per sources, private entities bidding on this tender will, however, be unable to collect revenue from the network.

The second category of tenders is reserved for service providers, who can provide last-mile rural services using the internet connectivity provided by BharatNet. Here, the government may consider providing viability gap funding to make providing services in a low-revenue rural market economically viable.

KS Rao1

“Fibre is a key asset. It is a digital highway. Your information highways should be under government control. The only thing is the way it is being implemented. Government agencies do not have competencies to build, manage and maintain such networks.”

KS Rao, Chief Corporate Officer, STL

DoT may also order a third-party audit of the Bharat Net assets to give a clear picture of the quality of the infrastructure to potential bidders. Official sources in the DoT told V&D that “Our immediate objective is to ramp up utilisation and increase the availability of the network to 98% in hilly regions and 99% in the plains.”

“For increasing this commercial utilisation, we are requesting BSNL to provide immediate connectivity to ISPs, VNOs, and other application service providers at the village level where the Fibre from Block to GP is already there,” he added.

For maintenance of the Bharatnet network at those locations where there is no SPV either by the State or by any other private player, BSNL will be given the responsibility.

“The PPP tender is being redrafted and will soon be issued with a new set of terms,” he confirmed. System integrators such as Tech Mahindra, STL, L&T, and HFCL may bid for the revised project.

In a recent interview with V&D, KS Rao, Chief Corporate Officer, STL had proposed to create a wholesale entity to hold all-optical fiber assets owned by public and private sector companies.

“Our recommendation has always been that the government has a significant role in creating a national backbone. Fiber is a key asset. It is a digital highway. Your information highways should be under government control. The only thing is the way it is being implemented. Government agencies do not have the competencies to build, manage and maintain such networks. We are recommending that the Government should create a wholesale entity,” Rao had said in the Aatmanirbhar issue of Voice & Data.

For example, India has several fiber assets. Telcos have their own networks. BSNL has 7 lakh km. of fiber in the ground. Then there is RailTel andPowergrid.

“If all of this is pooled together as a government asset, it can be made into a wholesale entity, with a key focus on rural connectivity. That is true BharatNet,” said Rao.

Chandrashekhar believes that a concerted plan of action combines rollout of infrastructure with actual provision of services with QoS guarantees, development/ usage of apps/content that provide important services, and coordination with states both for rollout, ROW, and app development and usage are key.

“Incentivizing states based on rollout and usage would help. Creating localized models of extensive utilization in collaboration with progressive states would help immensely in demonstrating the transformative impact that is possible with the effective implementation and utilization of BharatNet.

Dr. B M Baveja1

“There are villages under the administrative control of the GPs that need to be served using an appropriate last mile connectivity means (wired or wireless). Alternate Technologies to NOFN, include the wireless technologies of - TV White Space; RF including Wi-Fi hotspots.”

Dr B M Baveja, ex Senior Director, MeitY

Lastly, a dialogue by DOT with private TSPs to understand their expectations and reservations and how to achieve/overcome them is important,” the former DoT official said.

BBNL merger with BSNL

The government is also considering a potential merger of BSNL and BBNL in order to streamline processes and find synergies. BharatNet is a middle-mile infrastructure between Block and the Gram Panchayats. The GPON equipment (OLTE) at the Block level is kept in the BSNL Exchange and also fed from its power supply system.

In BharatNet Phase I, the BSNL fiber was used till the Fibre Point of Interconnect (FPOI), beyond which incremental fiber has been laid up to the Gram Panchayats. BharatNet Phase I used more than 1.9 lakh Km of BSNL fiber which is almost 40% of the Phase I network.

BharatNet Phase II does not use BSNL fiber but GPON equipment at most of the places (except States adopting ring architecture) is still kept in BSNL exchanges. In order to provide the services at the GP level, the Internet bandwidth is to be fed into the OLTE at BSNL Exchange. BSNL with its own ILL at the Block level and its network of TIPs in the last mile is better placed to utilise the network. BSNL has the largest OFC network in the country. This experience can be used for end-to-end maintenance of the BharatNet network.

“Considering all this, to bring synergy in operations, maintenance, and utilisation of BharatNet, the O&M, and Utilisation of BharatNet have been entrusted to BSNL since April 1 this year.

It is also felt that handing over of BharatNet assets to BSNL for O&M and Utilisation will provide the much-needed financial support to BSNL in times to come,” Sarvesh Singh, Chairman and Managing Director of BBNL told V&D in an interview.

But others like Chandrashekhar do not think this is a great idea. Firstly, BSNL has its own issues and limitations. Secondly, BBNL is envisaged as a common infrastructure that can be used by all players. ”This would be severely undermined if it is merged with BSNL, which makes it a competitor in the market and not an ally. These aspects need to be considered very carefully before taking any decision. It would be useful to look at the example of British Telecom and Openreach in the UK which are somewhat analogous to BSNL and BBNL respectively and study their evolution and draw appropriate lessons from that,” Chandrashekhar said.

But the support for handing over to BSNL still resonates with many. “BharatNet has lost its initial momentum,” said an industry veteran who has been closely tracking the BharatNet project and been part of its evolving framework.

“The initial design of 2014-2016 had envisaged at least 5 Wifi Hotspots at Village level with assured takeoff. Now it is all fragmented in terms of ownership, maintenance, and usage.  Some hard decisions may be required. The existing network has to be handed over to BSNL for operations, maintenance, and rural use. Bring in new operators for the remaining areas. Those areas which are not yet covered under BharatNet should be auctioned under the PPP model,” he added. “The assured culture of usage in remote areas for applications like Telemedicine and Tele Education was to be developed first to drive this at the grass-root levels,” he said.

Dr. B M Baveja, ex-Senior Director, MeitY said there are various wireless technologies to complement the BharatNet Project for provisioning broadband connectivity at a faster pace. “There are villages under the administrative control of the GPs that need to be served using an appropriate last mile connectivity means (wired or wireless). Alternate Technologies to NOFN, include the wireless technologies of - TV White Space; RF including Wi-Fi hotspots,” Baveja said.

There is no doubt that optical fiber is critical to India’s digital roadmap and Bharat Net, despite its shortcomings, is well on its way to becoming one of the largest OFC networks with 23 to 24 lakh Km of cable assets.

By Jose JN & V&D Bureau

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