Digital Bharat Nidhi: First set of rules under Telecom Act notified
The Digital Bharat Nidhi, established through the Telecommunications Act, 2023, replaces the Universal Service Obligation Fund
The Department of Telecommunications on Saturday,notified and brought into effect the first set of rules under the Telecommunication Act, 2023, prescribing the functioning of the Digital Bharat Nidhi (DBN),which replaces the Universal Service Obligation Fund (USOF).
The DBN was established through the Telecommunications Act, 2023, which was passed by Parliament and received the President’s assent in December. The USOF was established to provide telecom services in remote and rural areas at affordable and reasonable prices through a universal access levy (UAL). The UAL is 5% of the telecom company's adjusted gross revenue (AGR).
The draft rules were released for a 30-day public consultation on July 4 and the notified rules are almost identical to the draft rules with minor changes in languages. Section 24 to 26 of the Act, which renamed the USOF as DBN, and defined how its funding would work, came into effect on June 26.
The new rules replace rules 523 to 527 of the Indian Telegraph Rules, 1951, which prescribed how the USOF would operate. However, the new rules will not override the existing arrangement until their date of expiry. USOF was given statutory status in December 2003 through amendments to the Indian Telegraph Act (which has now been replaced by the Telecom Act, 2023).
Under section 25, payments received for DBN will first be credited to the Consolidated Fund of India. They will then be credited to the DBN by the central government (on approval from Parliament through a law) exclusively to either give access to telecommunication services in underserved rural, remote and urban areas; to support pilot projects and consultancy assistance to serve underserved areas; to support research and development in telecommunications; or to support introduction of new telecom services, technologies and products.
The central government will appoint a DBN administrator via gazette notification. To maintain continuity, the current USOF administrator will be renamed as the DBN administrator. This administrator will select “DBN implementers” either through bidding or by inviting applications. For underserved areas, implementers will be selected through bidding. For research and development of new telecom technologies, products or services, implementers will be selected through a call for proposal or expression of interest that will lay down technical parameters. The rules allow for the administrator to nominate an implementer under “special circumstances” with the approval of the central government.
Implementers receiving funding from the DBN must offer services to underserved areas in “an open and non-discriminatory” manner and comply with instructions issued by the DBN administrator. The administrator can determine funding modalities on a case-by-case basis, including full funding, partial funding, co-funding, market risk mitigation and risk capital.
The DBN administrator has the power to formulate the procedure for bidding and inviting applications, including the eligibility and evaluation criteria. They can disburse funds from DBN to implementers and specify terms and conditions related to assets created through DBN funds. A digital portal will be created for implementers and stakeholders to provide services, report and monitor schemes and projects.
By letting the fund be used for research and innovation, for promoting domestic telecom manufacturing, and other purposes, the new rules "will address the gaps with the earlier USOF regime, which was mainly criticised for under-utilisation of funds", Aprajita Rana, partner at AZB & Partners, said.
"Having said that, other criticism by the industry asking for under-utilised funds to first be used before imposition of further levy, or to make Bharat Nidhi rate levy inversely proportional to rural connectivity already achieved by providers taking efforts to extend their services in rural areas have not been addressed at all," she said.
The administrator, much like the USOF administrator, has the power to monitor, evaluate or verify the work done by implementers. They will also specify the procedures and records that the DBN implementer will have to follow and maintain. These broader powers of the administrator, such as engaging consultants to ensure efficient use of funds, conducting pilot projects, settling disputes between implementers, were not available under the earlier telegraph rules, Rana said.