Context: Recently, the Department of Telecommunications (DoT) released draft rules to operationalise the Digital Bharat Nidhi, in a fresh attempt by the central government at increasing telecom connectivity in rural areas.

• It would replace the erstwhile Universal Service Obligation Fund (USOF), which is a pool of funds generated by a 5 per cent Universal Service Levy charged upon all the telecom fund operators on their Adjusted Gross Revenue (AGR).

About Digital Bharat Nidhi

• About: Digital Bharat Nidhi (DBN) is an initiative by Department of Telecommunications (DoT).

Aim: DBN aims to:

• improve internet connectivity, particularly in rural, remote, and economically disadvantaged areas.

• foster technology innovation, create regulatory sandboxes, and enhance the global presence of India’s telecom sector.

• promote innovation, indigenous technology development, and standardisation.

• support startups in the telecom sector and the manufacturing of telecom equipment.

• It replaces the Universal Service Obligation Fund (USOF) to ensure better allocation of resources.

• Focus: DBN will focus on research, development, and overall connectivity improvement.  It encourages telecom services for underserved groups, including women and people with disabilities.

• Funding: Telecom companies’ contributions to the Digital Bharat Nidhi will first be credited to the Consolidated Fund of India (CFI) and then later deposited into the DBN.

• Utilisation of funds: The funds will be used to promote access to telecommunication services, support research and development, fund pilot projects, and introduce new telecom technologies in underserved areas.

• Management and Implementation: An administrator will manage the fund, and projects will be executed by implementers selected through bidding or direct applications, ensuring transparency. The administrator will tailor payment methods (full, partial, co-funding) based on specific connectivity needs.

• Administrative Setup: The DoT will appoint an administrator to oversee DBN implementation and select implementers through competitive bidding. Detailed guidelines outline funding modalities such as full funding, co-funding, and market risk mitigation measures.

Need for the DBN ( Issues in USOF)

• Underutilization of Funds: USOF has been criticised for significant underutilization of funds allocated to it. Example: Between 2017 and 2022, despite collecting Rs 41,740 crore from telecom operators, only Rs 30,213 crore (72%) was utilised. In some years, utilisation was even lower, indicating inefficiencies in fund deployment.

• Bureaucratic Delays and Red Tape: Projects funded by USOF often face delays due to bureaucratic processes and approvals. This bureaucratic inertia hampers timely deployment of telecom infrastructure in rural and remote areas, defeating the fund's purpose.

• Lack of Transparency and Accountability: There have been concerns about transparency in how funds are allocated and disbursed. Limited accountability mechanisms make it challenging to track the effectiveness of USOF investments and ensure funds reach intended beneficiaries.

• Mismatch Between Fund Collection and Utilisation: The disparity between funds collected through the Universal Service Levy and actual expenditure raises questions about fund management. High collection rates contrasted with lower utilisation rates suggest inefficiencies in project selection, implementation, or monitoring.

• Complexity in Project Implementation: USOF projects often require extensive planning and coordination with multiple stakeholders, leading to implementation complexities. Deploying telecom infrastructure in remote areas involves technical challenges such as terrain, connectivity issues, and infrastructure maintenance.

• Inadequate Focus on Last-Mile Connectivity: Despite its mandate to enhance connectivity in underserved areas, USOF initiatives sometimes fail to address last-mile connectivity issues effectively.

About Universal Service Obligation Fund (USOF)

• USOF originated from Rowland Hill's postal reforms in 1837, later evolving to include telecommunications services under the Indian Telegraph (Amendment) Act, 2006.

• It was created in 2003 to improve telecom services in parts of the country that don’t make a lot of money. It is funded by a 5% tax on telecom operators’ adjusted gross revenue (AGR).

• Objective: USOF aims to provide affordable mobile and digital services in rural and remote areas, ensuring equitable access to knowledge and information for socio-economic development.

• Administration: Managed by an Administrator appointed by the Central Government, USOF operates under the Department of Telecommunications (DoT), Ministry of Communications.

Functions

• Facilitates the Telecom Technology Development Fund (TTDF) to support indigenous technology for affordable broadband and mobile services.

• Promotes research, standards development, and ecosystem building for telecom infrastructure in rural areas.

Conclusion

• The introduction of Digital Bharat Nidhi (DBN) marks a significant step towards addressing the longstanding challenges faced by the Universal Service Obligation Fund (USOF) in India. DBN not only aims to replace USOF but also seeks to revamp the approach towards enhancing rural telecom connectivity in the country.