The growth in the internet and broadband sector has been rather unsatisfactory till now and is far short of the target of 18 million internet subscribers by end-2007. However, significant interest has been shown in the segment by both the government and service providers. While the government has given priority to internet and broadband in the Union Budget 2008-09, operators are undertaking Wi-Max deployments on a large scale. tele.net spoke to industry analysts about the future of the internet and broadband segment in the country, in terms of technology deployments, tariffs and applications. Excerpts…
How do you view the future competitive landscape of the internet and broadband sector in India?
Rajesh Chharia: The future of broadband in India is bright given that a number of new technologies, value-added services (VAS) and applications are yet to be explored. At present, the potential of the rural market is almost untapped. However, this area is very price sensitive and we have to take care while deciding tariffs and cost-based applications.
Sourabh Kaushal: By the end of 2007, there were around 11 million wireline internet subscribers with 3.13 million broadband subscribers. This translates into an internet penetration of just 1 per cent, significantly lower than some of the other developing countries.According to recent Telecom Regulatory Authority of India data, however, there were close to 50 million wireless internet subscribers using GSM/CDMA handsets.With the launch of 3G and Wi-Max, wireless technology would be the key driver of internet services in the future.
Sridhar T. Pai: The future competitive scenario of the internet and broadband market looks very healthy and aggressive. There will be focused players of two types. One, players with pan-Indian licences like AT&T and British Telecom, who have deep pockets and an international presence. The second set will comprise niche players with specifically defined targets.
While there are approximately 135 active ISP licensees right now, neither are they all providing great services nor are they all doing profitable business. The top five or six players have about 90 per cent market share while the rest of the market is divided between the remaining ISPs. Many smaller players have already disappeared. The ones that have survived have made it because they have very good reach. In the future, these players will continue to face the challenge of scalability with some of them finding it difficult to operate any longer and may, at some point, even exit.
If the larger players don’t substitute them and start offering services in remote, smaller regions, the customer will suffer.This may be a major concern for the future.
As far as consolidation is concerned, some regional cable-based ISPs might get acquired. In my opinion, however, this may not be a dominant trend, nor do I expect it in the immediate future. Before anything, operators must first build up their networks over the next three years; only then can a noticeable level of consolidation occur.
Prashant Singhal: Competition in the internet and broadband sector in India is quite in line with the rest of the world. Thanks to legacy networks, incumbents have had a headstart. As a result, over 78 per cent of the broadband and internet subscriber base lies with large integrated telecom operators. This situation is unlikely to change in the near future.
To increase broadband competition,the union government has to allow unbundling of the local loop. That will allow new players to offer broadband services on the existing infrastructure of the incumbent. However, considering the opposition from the incumbent, this could take some time.
The next round of competition will come when mobile operators start offering wireless broadband access. There were 46 million wireless internet subscribers as of September 2007. These subscribers would be the first to opt for broadband wireless access when it is offered by the operators.
Which broadband technologies are expected to be popular in the future in the Indian market and why?
Rajesh Chharia: With its mobility and high bandwidth capacity, Wi-Max may prove to be a good technology to promote broadband. However, price can be a hurdle in two ways ?? cost of customer premises equipment (CPE) and spectrum. Given that Wi-Max spectrum will be made available through auction, costs may get passed on to the customer. For rural customers, price will be a key entry barrier and till we do not overcome this issue, broadband penetration in rural India will remain negligible.
Sourabh Kaushal: Advanced wireless technologies such as Wi-Max and 3G are expected to drive broadband growth in the country. These technologies have been successful in different parts of the world and India could also deploy them to achieve the next level of the telecom revolution.
Wi-Max provides wireless access over long distances (metropolitan area networks) delivering point-to-point links the way mobile technology does. This technology is important for India, as the wireline network, especially in the rural areas, is not as widespread as in developed countries. The technology is also expected to take care of last mile issues. For these reasons, Wi-Max may be able to provide affordable broadband access in rural India.
3G technology could be used for largescale broadband deployment, since each subscriber would automatically be broadband enabled. More importantly, 3G infrastructure could be easily and quickly deployed due to its 2G underlay. Another important aspect is that like current cellular devices, the 3G access device would be affordable to all social classes.
Sridhar T. Pai: DSL is likely to continue and a lot of WiMax deployment will happen. Wi-Fi growth will also be significant. Some optical companies have started coming in, so there will be a lot of fibre deployment in the form of FTTX ?? fibre to the kerb, fibre to the home and fibre to the business.
Mobile broadband has already taken off given the number of people accessing the internet using their mobiles. The nature of these transactions, however, does not appear to involve net surfing for long hours but shows instead, a quick check on some things.
Prashant Singhal: Currently, over 81 per cent of broadband connectivity is over DSL. This is quite in line with global trends. While DSL will continue, broadband connectivity over optic fibre is expected to take off in a big way as bigger operators wire up more cities.At present, fibre accounts for less than 1 per cent of the total broadband subscriber base.
In the future, growth in broadband will be driven by mobile subscribers. The technologies that will provide connectivity include Wi-Fi, Wi-Max and 3G. However, for that to take off, the government has to allocate spectrum to service providers.Once that happens, it will drive broadband wireless access among India’s 240 million mobile subscribers.
In the future, which broadband applications are likely to take off in a big way and why?
Rajesh Chharia: Simple browsing will not attract customers to broadband. We have to consider a lot of other options like e-governance (local and central governments), e-education, emedicine, e-entertainment (IPTV) with local content, and voice over internet protocol (VoIP), at a reasonable cost.
Sourabh Kaushal: Broadband allows the transmission of huge volumes of data and thus gives rise to new means of communication and application. Such applications have actually driven internet users (both enterprise and individual) to opt for broadband services.
Some of these applications are:
Sridhar T. Pai: A lot of conventional as well as unconventional applications will be important. What is critical is that there has not been as much innovation in this segment as has been in mobile VAS. In the future, a lot of Wi-Fi, Wi-Max or broadband-based VAS services will be seen for enterprise and home users.
Unified communications is going to be big in India. Applications like IPTV, direct-to-home and interactive services will shortly come into the picture. Though VoIP is also a key application, there are some problems with its mass take-off.
The four major ISPs are the integrated telecom players Bharti Airtel, Reliance Communications (RCOM), Tata Teleservices and Bharat Sanchar Nigam Limited, and they have cellular, national long distance (NLD) and international long distance (ILD) licences besides their ISP ones. So, they have a vested interest in offering NLD, ILD and cellular services at normal rates rather than offering VoIP at lower tariffs.
Moreover, the high pricing of interconnect in India, does not make VoIP a profitable business.
Similarly, IPTV is going to take a while to take off. It will be offered as some sort of a bundled service along with other internet services. The player who can really make a difference here is RCOM. All other players are trying to gauge Reliance’s position since they are equipped with the necessary networks. For some reason, however, nothing is happening.
Prashant Singhal: These are still early days for broadband in India. With the youth accounting for 54 per cent of India’s population, music downloads will be one of the biggest applications. While it has already taken off in the big cities, it will catch on in smaller towns over the next couple of years.
In smaller towns, many pilot projects on e-governance, telemedicine and e-education are being carried out. Of them, telemedicine has already taken off with over 350 units operational across India. It will emerge as a huge opportunity.Currently, e-education is restricted to the bigger cities. Once broadband takes off in a big way, it will be offered in all towns across India.
What are some expected trends in tariff and pricing plans of operators in India?
Rajesh Chharia: Tariff depends on the speed/bandwidth available over a particular connection.Different operators now offer plans suited to the needs of the customer, who chooses a plan based on usage. In the future, the operator may offer free services depending on the usage of other VAS by that customer, with VAS charges covering bandwidth costs. Operators have to seriously plan launching VAS on lines similar to mobile telephony.
Sourabh Kaushal: Indian customers are price and quality sensitive. The broadband boom in India will happen only with timely and inexpensive deployment of broadband access technologies. This will make access to broadband more feasible for the masses similar to the mobile boom the country is now witnessing.
The TriBand Plan of Mahanagar Telephone Nigam Limited has been reasonably successful, as it offers broadband service with up to 2 Mbps speed at a monthly tariff of Rs 200. Operators will have to design various innovative plans to make broadband affordable to different segments of the population.
Sridhar T. Pai: In the context of a further reduction in broadband prices for home users, the average revenue per user is already somewhat low. However, with increased competition and new entrants coming into the segment, tariffs are likely to decrease further.However, the key issue for ISPs is not tariff but the quality of broadband services they can offer to the customer.
Prashant Singhal: Subscribers today pay Rs 999 for a 256 kbps unlimited download broadband connection. This will definitely get cheaper.The subscriber could either get faster connectivity at the same price or get the same connection at a lower price. As subscriber numbers increase, broadband tariffs are likely to follow the trend set by mobile services. The faster broadband growth takes place, the faster will tariffs decline.
Fixed fee unlimited download tariff plans will be the most popular. However, combo plans that offer a mix of free phone calls and limited downloads will also do well.
Is free broadband service at 2 Mbps a viable option for India in the future?
Rajesh Chharia: Nothing is, or will be free ?? every service has a cost. But it will be the operators’ call on how to compensate the access cost of broadband with their VAS. In India, we have over 20 different languages. Due to an acute shortage in local content, our dependence on international servers is very high, which affects the cost.
Sourabh Kaushal: Free broadband could be a possibility in India only if the government takes the initiative to make it available to the masses through the Universal Service Obligation (USO) Fund. Similar services are offered in many US cities where free municipal broadband connectivity is available for residents.
But the real challenge lies in increasing PC penetration. The government should promote vendors to look at sub10k PCs in a big way. This, along with an attractive financial package and basic IT education (computers and application familiarity), would make PCs affordable for semi-urban and rural India. Another challenge for rural broadband would be substantial and relevant content for the diverse Indian population, without which the possibility of success for broadband in rural areas is very low. The government should play a leading role in developing and deploying applications (e-governance, e-education, agricultural services, healthcare services, etc.) that could be used by the masses. Apart from this, service providers should also be encouraged to develop rich local content in the same way as they are encouraged to undertake rural telecom expansion (fixed line, mobile and broadband) through the USO Fund.
Sridhar T. Pai: It is very unlikely that broadband at 2 Mbps will become free as it will cause problems for ISPs. If ISPs are not healthy, services will suffer. The key is to make broadband services affordable, bring down prices further and improve the quality of services offered.
Prashant Singhal: The government had talked about offering 2 Mbps broadband connectivity free to consumers using state-owned operators BSNL and MTNL by 2009. That is easier said than done. It will definitely be great for customers, but will hurt telecom operators badly. Instead of a free service, it is quite possible that consumers will be able to get a 2 Mbps connection for a reasonable, flat fee quite soon. That will definitely drive subscriber numbers and ensure that operators are not hit.
