Nov 16, 2013

THE BIG NOFN LOOT: Another mega scam is in the making

Date:- 16, November, 2013

Since ages Indian population is being fooled by its government and it appears as if the Indian populace is destined to be fooled, time and again, and that too without learning any lesson. Fooled, both in their mortal avatars and in their dreams. In 2011, the Indian government, led by the telecom ministry, fed the Indian citizens, especially the rural populace with a special dream-which was availability of high-speed Internet connectivity at their gram panchayats in the next two years, where they can get all the available government services.

Villagers who run from pillar to post to get citizen-centric services like birth/ death certificates, land records, education, health, can get these services electronically at their gram panchayats. This is quite a dream for the rural folks!

The dream-NOFN-it was said will be backed by a `20,000-crore investment, and a phased allocation of the fund has already been done. But a closer look at the so-called ambitious ICT project will
leave the country speechless.

A reality check of the National Optic Fiber Network (NOFN) and its proposition looks almost unviable and appears as a very well unthoughtful project in terms of serving the citizens or rather a very well thought out project keeping the coming general election and the huge money lying idle at the USO
Fund in mind.

A deep analysis would show that while this plan was being discussed in the AC rooms of Delhi, in reality, a `20,000 crore loot was being charted out by the same perpetrators.
Demystifying NOFN

First thing first. Let’s check what the NOFN project is in its totality. The Government of India in 2011 proposed a plan to connect all the 2,50,000 gram panchayats (GP) in the country through optic fiber in order to provide high-speed data connectivity through 100mbps national optic fiber network. That means bandwidth of 100 mbps will be made available at GP level for providing citizen-centric government services.s9

As of now, connectivity exists till the block level of each state, the government claims.

The NOFN project would lay the incremental fiber from block to GP level. A corpus of `20,000 crore has been allocated for this project and it will be utilized from the USO Fund. The project was to be completed by October 2013–two years since its approval by the cabinet.

The objective of the project is to offer e-governance services and utility bill payment, etc for the rural people. A special purpose vehicle (SPV) Bharat Broadband Network Limited (BBNL) was formed to execute the project. The project also envisages providing non-discriminatory access to all service providers, ISPs, communication providers, and cable service providers to use the infrastructure and offer services. PSUs like BSNL, Powergrid, and Railtel will carry out the job of laying the optic fiber network on behalf of BBNL.

The NOFN would use GPON technology developed by C-Dot for this network. Not a bad idea, after all, or so it seems.
NOFN: Dream vs Reality


Now let’s check how the dream fares against the realities. The NOFN project envisages laying fiber from Block to GP.

The average distance from block to GP is estimated to be 2 km. That means around 5 lakh km of optic fiber would be laid. So, the national optic fiber network, essentially is just a network, and not an end-to-end service delivered at the GP or village level, which means, a customer is not going to get any service if only the network or infrastructure is put in place.

In order to offer end-to-end service to the real users, the project requires access service providers like any telecom or communication service provider to set up its own infrastructure at the GP level.

What does it translate to, then? Additional investment by the TSPs, CPs, ISPs, etc.

“The objective of the scheme is to extend initially the existing optical fiber network from districts HQ’s/Block HQ’s level up to the gram panchayat level by utilizing Universal Service Obligation Fund.
The cost of the initial phase of the NOFN scheme is likely to be in the region of `20,000 crore.Similar amount of investment is likely to be made by private sector complementing the NOFN infrastructure while providing services to individual users,” KapilSibal, Minister for Communications and IT had said in July 2012.

So in essence, the project requires an estimated `20,000 crore investment from the government and another `20,000 are to be offered to people at villages.

“It would be same or even more,” says A K Bhargava, Director, Operations at BBNL.

So, by basic calculation, the project cost is more than `40,000crore. Assuming the NOFN infrastructure by the government is in place, what does the private telco then need to do to get the required bandwidth? First, a service provider needs to hire bandwidth from BSNL from the Internet gateway till the Block.

Second, it needs to use NOFN network from Block to GP, and thirdly, it needs to set up its own access network at the GP or village to offer the end user services. Does it truly excite private operators to invest so much money at the GP level? “Not at all,” says a top executive at one of India’s top telecom operators.

“Neither is there a business model nor the government has any such plans at the GP level,” he adds.
Even after laying the OFC network, whether the operators will be willing and whether there is commercially viability in providing services to GPs is questionable – as it involves big cost in setting up the access network, leasing bandwidth from BSNL and BBNL and operations of the same.

“It appears the entire project is not at all well thought out,” says ShivajiChatterji, VP at Hughes Communications.

“There was no consultation with the telecom stakeholders whether they are ready to go to villages if the network is put in place,” he adds. It raises many a questions.

If the project expects operators to invest money and provide service at GP level, then was it not required to have a proper discussion with the respective industry bodies or at the individual level?

For making the project successful, has any business model being planned taking the RoI of private players into consideration?

With so much discrepancy at the planning level, does the project look feasible? “I do not think so,” says a senior executive at one of the top CDMA players in the country, who looks after the broadband business of the telecom firm. “It is a failure at the planning level, leave aside the execution stage,” he adds.
Rollout Issues

Hold on, the country’s biggest ICT project does not just have planning issues, it alsohas rollout issues of similar magnitude. The project was to be completed in two years – by October 2013 – from the day it was planned. But the project is already severely delayed. Today, at the end of October, only few pilots are being carried out. And now an extension till September 2015 has been sought from the Cabinet Committee for its completion-a delay of two years.

“The project does not appear viable even on paper,” says GirishTrivedi, co-founder, Monk Consulting. “And we are not talking about execution, as the roll out will be the biggest hurdle,” he adds.

Besides, there will be more delay in actually providing end user service-as the access network needs to be deployed after the BBNL network is deployed! So, how long will it really take for completion? “May be another four to five years from now,” said A K Bhargava of BBNL, the SPV created to execute the NOFN project. “Once the network is ready, only then will the private operators set up their network, and it will take time,” he explains.

Besides, the project aims at laying around 5 lakh kms of optic fiber to connect all the GPs to respective Blocks in two years. A reality check will tell a different story. At present, the total OFC present in India is around 10 lakh kms, of which 7 lakh kms were laid in the last 15 years, at an average of 46,000 kms per annum.

If we go by the same pace, then laying 5 lakh kms would take 10 years. More so, if we look at the supply side of the OFC, India gets around 80,000 kms of OFC per annum, means it would take seven years to deploy, just considering the manufacturing constraint. Further, assuming 2 kms of OFC per GP is too low, and it could increase significantly in larger states, which means the total OFC requirement could go beyond the estimated 5 lakh kms. If that happens, the project would be delayed further.


The Big Loot &The Failed Projects

So far, we have seen the flaws in the planning as well as the technical implementation of the NOFN project. Even theoretically it does not appear viable. Now, we will look into much deeper and find out how the entire project is a big loot of the tax payer’s money. The `20,000-crore allocated for the project, if not directly the tax payer’s money, but it is definitely the hard earned money of the telecom operators who part with some amount of their revenue for the USO Fund, which is meant for the ICT development at the rural areas of the country.
First and foremost, why does the government want to connect all the Gps again for providing G2C services? Has the government not planned a similar project in 2006 in its five-year plan, when they wanted to connect all villages and offer the same services by setting up common service centers (CSC)?

The CSC model is an initiative of the National e-Governance Plan. It is aimed at providing high-quality and cost-effective video, voice and data content and services in the areas of e-governance, education, health, tele-medicine, banking and financial services, utility payments, entertainment, etc. The scheme was to set up 1 lakh CSCs and each CSC would serve a cluster of 5-6 villages, so that all 6 lakh villages in the country can get the G2C and G2B services. And the plan was to be completed by 2011.

As per CSC, the services have reached deeper beyond GP-the villages. The latest data on CSC says there are 1,26,986 CSCs in the country as of August 2013, means all 6 lakh villagers are getting high-speed data, video, tele-health, education, and tele-medicine services! So if all the villages are connected and the villagers are getting the promised services, then where is the need of offering the citizen-centric services at GP level through NOFN? There is only one difference between CSCs and NOFN – there are plans from different ministries of the same government, and there are two different set of funds allocated to the projects. Either the ministry of IT is looting the people of the country or the ministry of telecom is all set for the loot. Secondly, why does the project expect private operators to invest more money on rural areas whereas they have already deposited this `20,000 crore with the USOF for the same purpose? As per the plan, besides government’s investment, private operators need to invest around `20,000 crore more to offer the services. If a simple calculation is made, an investment of `40 lakh would be required for each GP, as per the plan (`10 lakh for BBNL, `10 lakh for access network, and around `2 lakh for maintenance per annum. Assuming a 10-year life cycle, it means `40 lakh per GP). Is there a lucrative business model available for the private players to invest half of this amount? And the reality is that if the private operators do not join the bandwagon, then the project is going to be doomed at the first place. Again a loss of `20,000 crore. The project, as per the plan, is to be executed by three PSUs-BSNL, Powergrid, and Railtel. Was it a right decision looking at the past records of their capability and service delivery in rolling out such networks in such a short period? BSNL, which is losing ground as well as revenue against the private operators despite getting ample support from the government, has not been able to ramp up its own network. It has also failed in setting up an alternate OFC network for the armed forces against the 3G spectrum that they vacated in 2010. And, on the broadband front, the company is not growing as fast as is expected or as per its potential. “The respective PSUs have failed in their respective business areas, more specifically BSNL, in the last few years,” said a telecom analyst at an international research firm based in Delhi, on condition of anonymity. “When a project of such large scale is in their hands, I have grave doubt, if they would complete in time,” he added. However, A K Bhargava of BBNL has a different opinion. “In India these players are the best in their own fields, and BSNL has the maximum expertise in reaching rural areas.” “I’m not sure about the time, but they would successfully execute this,” he adds. But the industry has a different take on this. We spoke to many telecom analysts and industry watchers. On condition of anonymity, they said the whole plan has two-fold agenda. One, the general election 2014 is round the corner, and the government wanted to push yet another populist program saying the project would bridge the divide between rural and urban in terms of broadband connectivity. Second, there is huge fund lying idle at the USOF, and the PSUs, especially BSNL, is bleeding. The whole game is money changing hands from a common corpus to BSNL. There is one more form of loot that can be seen in this whole project. The project aims at providing 100 mbps capacity of bandwidth at GP level. Is there really a requirement for 100 Mbps BB to the GP. The question is–is there enough requirement for data coming from the GP or required by the GP ? 100 Mbps means 12.5 MB per second or 750 MB per mintute or 6000 MB per hour or 48,000 MB per 8-hour work day ! But the actual demand is 10-20 MB/GP/day which is 0.04% of this capacity!

This estimate is based on the data consumption at the GP level where G2C and G2B services are offered successfully. Plus, availability of enough content is doubtful for using anything close to this capacity.

Even if one gets 100 Mbps BW from GP to Block using BBNL, one needs to take BW from BSNL from block to Internet (is there enough BW ?) and pay for the same (cost of 100 Mbps BW ?) “Its like setting up an airport in a place where there is just one flyer,” says an analyst. Most importantly, has the government evaluated any other available model in offering the same services which could have been more cost effective and could have been rolled out at a faster pace? The ultimate aim is to provide the services to the citizens and that too timely. So is there any alternative? Yes, we have, and we have some successful case studies.
What could be the alternative?

VSAT could have been a much better alternative in providing the same services to the rural populace. Unlike NOFN, it is a technology solution to provide end-toend service to the customers. Keeping the difficult demography of Indian hinterland in mind, VSAT would be ideally suited for rural and remote areas and is rightly suited for the requirement of a GP (broadband per site). The network offers efficient delivery of broadcast services (video), provides data, voice and video services.

It also offers excellent security and reliability as is evident from the fact that 90% of ATMs in the country run on VSAT network. More so, the time required to set up a VSAT network is much less than laying fiber– the entire 2,50,000 GPs could be connected within 18 to 24 months.

Besides serving at GP level, the network can be extended to other points in village through Ethernet or local wireless. We already have a case study in Gujarat where all 13,685 GPs are connected via VSAT network and similar services are being offered successfully for the last five years at a cost of 1/40th of the cost of NOFN project per GP.

The Nation Wants to Know

The nation wants to know whether the government really wants to serve its people or itself? If the objective is to reach out to the ICT-challenged rural folks then faster and effective services should get the priority? And, if there is a successful model available in the country and has been running successfully for the last five years, should n’t the government not adopt that and start serving its people now? And most importantly, if the same service, with more efficiency can be offered at a price of `4,000 crore, is spending `20,000 crore with lots of flaws in the project is not a plan of misappropriation of funds or a big loot? Are we not heading towards a loss of huge money and failure of our broadband goal of 175 mn by 2017?
The Indian telecom industry and the people of India deserves an answer and the government has to offer one, sooner or later.

Source: Voice&data (

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