The New Telecom Policy 1999 envisaged provision of access to basic telecom services to all at affordable and reasonable prices. The resources for meeting the Universal Service Obligation (USO) shall be generated through a Universal Service Levy (USL) at a prescribed percentage of the revenue earned by the operators holding different type of licenses. Further, the New Telecom Policy 1999 envisaged implementation of Universal Service Obligation for rural and remote areas through all Basic service providers who will be reimbursed from the funds collected by way of USL. Other service providers shall also be allowed to participate in USO provisioning subject to technical feasibility and shall be similarly reimbursed out of the funds of USL.

The Universal Service Support has been started from the financial year 2002-03 based on the following guidelines.



 Provision of Public Telecom and Information services:

a)      Installation of VPTs in the remaining villages:- For installation of VPTs in the 607491 villages, identified as per 1991 census which were required to be covered by 31.3.2002, no reimbursement towards capital recovery shall be admissible and given. However, the net cost towards operating expenses of these VPTs will be reimbursed. For the remaining villages i.e., additional revenue villages identified as per 2001 census, the net cost towards both, the annual capital recovery as well as annual operating expenses will be allowed as a support from the USF.

b)      Provision of additional rural community phones in areas after achieving the target of one VPT in every village: - The second public phone will also be installed in villages where the population exceeds 2000. These may be provided in public places in the village. For installation of such phones, the net cost towards both, the annual capital recovery as well as annual operating expenses will be allowed as a support from the USF.

c)      Replacement of VPTs installed before 1.4.2002: - A large number of VPTs working on MARR systems will need to be replaced to ensure their reliable operation. The BSOs will be required to replace such VPTs for which the net cost towards both, the annual capital recovery as well as annual operating expenses will be allowed as a support from the USF.

 d) Up gradation of VPTs to Public Telecom and Info Centers (PTICs): - It shall be endeavoured to provide data transmission facilities within 5Kms of every village by the year 2004. Data transmission will also be provided at least in villages where regular post offices are located. The reimbursement from the USF will be towards Net Cost that may arise if the PTICs are engineered by upgrading an existing VPT, with the minimum configuration of I) a PC, II) a modem and III) a UPS. Both capital and operational cost will be taken into account to determine the quantum of support from USF. A phased programme will be drawn and implemented to upgrade about 35,000 VPTs to function as PTICs by end of 2004.

e) Installation of High Speed PTICs: - This is required for providing wide band applications like tele-education and tele-medicine based on two basic channels i.e., 128 Kbps. In the first phase by 2004, about 2 HPTICs shall be set up in each SDCA. Both capital and operational costs will be taken into account to determine the quantum of support from USF.


Provision of household telephones in Net High cost areas (rural/remote)

For Stream - II, the cost of service in the SDCA's will comprise the capital recovery and operating expenses in respect of the access network, developed for DELs after the specified date. Per line net cost will be worked out on the basis of SDCA average. At the begining of each financial year, the service providers would indicate their SDCA wise roll out plan including projected cost and revenue. The rural SDCA as per list issued by the Department of Telecommunications shall be treated as rural SDCA for this purpose. The subsidy will be automatically withdrawn as soon as any SDCA's net cost becomes zero i.e., it becomes a revenue surplus area.

Stream-I will be given priority in respect of disbursement of funds over Stream-II and top priority will be accorded, in their order of sequence to a, b, and c of Stream-I as described above.

The implementation of Universal Service Obligation shall be through a multi-layered bidding process on the least quoted subsidy support basis. For this purpose the first round of bidding will be amongst the existing Access providers of the concerned service area. Where no bids are received from any of the BSOs / CMSPs in the concerned service area, or the lowest bid is higher than the benchmark then a fresh round of bidding shall be called from where all the BSOs and CMSPs in the country including the ones in the concerned service area as well as their franchisees. The existing Service areas as defined in the basic services licences shall be the unit of bidding for US support.

The lowest bid, offering the least subsidy shall be accepted subject to a ceiling of the benchmark cost as determined by DOT. A subsidy higher than the benchmark shall not be accepted, and may either call for negotiations or further round of bidding. For calculating the benchmark cost, fully allocated current costs method shall be adopted, considering the most effective solution for a particular location / area. For operating expenses the cost will be calculated on the basis of operations run most efficiently.

A separate fund for crediting the receipts towards USO has been set up and is presently administered by the DoT. The Universal service support shall be reimbursed on the basis of actual physical performance. Such reimbursements will be made on completion of the targets and after necessary verification of the same. The DoT or its authorised representatives shall have the right to inspect the sites used for extending the service.