Finance Minister Arun Jaitley today announced the budget allocation for Bharat Net is Rs 10,000 crore. This might affect the telecom sector’s plans for wired broadband in the country.

The budget proposed that by 2017-18, high-speed optic fiber will be available for over 1 lakh Gram Panchayats as part of Bharat Net. 

Currently, BharatNet is present in 59,000 gram panchayats spanning a distance of 137,515 km of optic fiber. BharatNet is funded under the Universal Services Obligation Fund—set up by the government in 2002 for providing telecom services in rural areas at subsidized rates.

With an additional Rs 10,000 crore boost, the fiber line project might meet expansion targets faster. State-owned telco BSNL provides broadband at subsidized rates, which is also funded under the USOF. However, the USOF funding for subsidized BSNL connections is currently frozen. We could expect BSNL to make use of BharatNet infrastructure for subsidized broadband connections, as the DoT is already using it for providing broadband at Common Service Centers (CSCs).

The wireless segment is largely owned by private telecom operators, with PSUs like BSNL and MTNL holding just over 9% of the overall segment. However the wireless segment has its flaws: Call drops, Points of Interconnection (PoI) blockade, high spectrum prices, unreliable connectivity, among others. The broadband segment, on the other hand, has low penetration compared to wireless: In October 2016, there were 17.93 million wired broadband subscribers, compared to more than 200 million wireless subscribers.

With more investments in broadband infrastructure deployed by BharatNet, private players could be forced to enter the wired segment with additional investments into their own broadband infrastructure. Recently, operators including Reliance Jio, Airtel, and Vodafone made investments into fiber rollout, but these investments come from established telecom players. Smaller players like ACT, Tikona, Hathway who largely operate in metro and Tier-2 cities, will be persuaded to enter smaller cities to compete with bigger players.