One amendment in tender document could have avoided BBNL tender cancellation–Use satellite instead of laying OFC

Earlier this month, government-owned Bharat Broadband Network Ltd (BBNL) cancelled a Rs 19,000 crore tender to lay optical fibre cable (OFC) across villages because there were no bidders to execute the project. The cancellation puts at risk the target of broadband connectivity for every village by 2024.

To be clear, there is no shortage of enthusiasm in the private sector to bid for projects in rural areas, per se. After all, they offer wireless telephony across the country. But companies were unenthused by the way the government, specifically the Department of Telecommunications (DoT), wants to go about its broadband plans.

Using satellites to offer broadband services based on competitive bidding for each rural circle would have done the job. Instead, the department has clogged its plans in a maze of details that have scared off potential bidders.

Chief among those are the requirement that bidders have to secure the right of way (RoW) from states, towns and village authorities to lay the 1,600,000 kilometres of cables to secure the connectivity. BBNL will only act as a facilitator for this process.

An India Ratings & Research note last year had described this requirement as a “complex” challenge. “…stakeholders will be concerned over delays in RoW, which can affect the project completion and the revenue potential of the network”. Bidders are right to be worried. In a decade, even government-owned companies have managed to secure only about 25 per cent of the distance. Some of that was by BSNL, and that too by a special purpose vehicle it set up in 2012 to solely do this job.

The current tender was approved by the Union cabinet last year to lay the rest of the cables in 16 states (the tender bunches some of the smaller states into circles to create a viable scale of operation). For this purpose, the cabinet has offered Rs 19,041 crore of viability gap funding for a public-private partnership model. This model was supposed to be executed as nine separate packages across 16 states, for a concession period of 30 years. BharatNet is considered the backbone of the government’s Digital India programme that aims to reduce the digital divide between urban and rural India. When up and running, it will connect all 643,000 villages.

There was an easy answer to this vast challenge, though. Instead of laying fibres along the ground, braving local opposition on land rights, the bidders should have been allowed to tap broadband from a constellation of low earth orbit satellites. India now has the capacity to send up these satellites regularly. It would have saved the Centre a lot of money. Besides the viability gap funding, the Centre has already spent Rs 24,000 crore through BBNL. Adding other expenses, the total outlay for BharatNet project is now at a massive Rs 61,109 crore.

There are two reasons the cheaper alternative is not being explored. The first is that Prime Minister Narendra Modi in his Independence Day speech of 2020 had announced his plans to reach OFC links to all villages within the next 1,000 days. This target could have been simplified easily. The aim of the PM’s announcement was to reach broadband connectivity to villages, so DoT could have interpreted the message to mean satellite-based connectivity, with only the bare minimum local connections riding on cables. That way, the deadline of 2024 would have been far easier to meet.

The other challenge was the problems with bureaucracy, which was more difficult to dismantle. Since 2005, a clutch of state-run companies — BSNL, RailTel and Power Grid Corporation of India — have tried to provide a right of way for the OFC network. As BBNL’s study in a July 2021 investor presentation shows, the results have been dismal. It pointed to “limited focus on operation, maintenance and utilisation” of the dark fibres. The United Progressive Alliance government in 2012 tried a different track. It established BBNL with the sole aim of implementing BharatNet. After a decade of trying, the failed tenders this month show, this too was a wasted effort.

In 2016-17, the pace of laying the OFC was 168 km per day. By the end of calendar 2016, 65,000 village panchayats had been reached. The speed of laying the cables has risen since then, to about 350 km per day as of January 2020, when the total length of the network reached 445,304 km. To reach the remaining 450,000 villages within the next 1,000 days, they will need to lay another 1,251,000 km of cable. And this assumes there are no problems in securing permissions for the right of way.

But a simpler environment would entail laying off a vast army of government employees. Meanwhile, BBNL’s bill adds to that of its sister organisations, BSNL and MTNL, which have cost the government Rs 69,000 crore in revival packages till FY21. There are now plans to merge BBNL with BSNL. Incidentally, in its tenders, BBNL had clipped the role of BSNL instead, allowing state government and private sector companies to enter the competition that was earlier reserved only for the central government-run companies.

The other challenge written in the aborted tender is that the network uptime requirement should be at least 98 per cent. Data from the Telecom Regulatory Authority of India (TRAI) shows the present installed networks reported an uptime of 58 per cent, as of November 30, 2020. To offer the higher service requirement, operators would need to ensure uninterrupted power, safety of cables and so on.

A simpler tender for private sector bidders doing away with the OFC requirement was all that was needed. It would have ushered in competition among the bidders since there would be no monopoly powers with respect to an owned cable line. This is something TRAI had suggested. Business Standard