India may have witnessed an overwhelming growth in its mobile subscriber base, having crossed the 600 million mark, but its broadband penetration numbers are dismal at 9.45 million as of June 30, 2010, way below the government’s targeted level of 20 million broadband connections by end-2010. The positive note is, however, that the number of broadband connections is increasing steadily, with 150,000 to 250,000 additions per month on an average.

On the technology front, digital subscriber line (DSL) has been the dominant technology in India. Of the total 8.77 million broadband subscribers in end-March 2010, 7.59 million were DSL based, 0.61 million used cable modem, 0.39 million Ethernet/LAN, 0.09 wireless, 0.04 million fibre, 0.03 million leased line, and 0.03 million subscribers used other technologies.

The government is hopeful that by undertaking specific measures, the demand for broadband will reach the target levels. The launch of 3G services will, furthermore, increase the broadband subscriber base at a much faster rate.

tele.net takes stock of the major developments in the wireline and wireless broadband space and the various initiatives being taken by the players in this segment…

WIRELINE BROADBAND

Though the wireline broadband market in India is currently plagued by issues like poor computer literacy and substitution of wireline technologies by wireless broadband, its subscription level is likely to touch 11.5 million by 2010-11, according to a recent study by CRISIL Research. This will primarily be on account of rising private participation, relevant content, increasing usage of smartphones and the introduction of new applications. Some of the major operator initiatives in this space are as follows:
Bharat Sanchar Nigam Limited

Bharat Sanchar Nigam Limited (BSNL), which controls over 60 per cent share of the country’s internet market, has been at the forefront of government initiatives to promote broadband connectivity. In February 2009, the state-run operator started rolling out wireline broadband services in the rural areas under the Universal Service Obligation (USO) Fund of the Department of Telecommunications (DoT). According to the agreement, BSNL will provide 861,459 connections by 2014 to common service centres, gram panchayats, higher secondary schools and public health centres as well as to individual users.

The speed of the broadband connections needs to be at least 512 kbps, with the capability to deliver data, voice and video services in the fixed mode. This USO Fund has an estimated subsidy flow of Rs 15 billion to ensure broadband connections at substantially reduced rates in terms of connectivity, customer premises equipment (CPE) cost and computing devices.

Apart from this, BSNL has tied up with PC manufacturers for promoting broadband services under the National Broadband Penetration Programme (NBPP) of the government, which aims to power the next million PC and broadband connections in untapped markets. In September 2009, the operator entered into a partnership with HCL Infosystems for offering low-cost broadband-enabled computers in rural areas. Chipmaker Intel and Microsoft are also part of the programme.

At present, BSNL is offering various broadband plans with speeds ranging from 256 kbps up to 8 Mbps. Most of these plans offer various add-on services such as video-on-demand, virtual private network (VPN), internet protocol television (IPTV), web conferencing and web hosting. However, BSNL currently lacks the ability to offer its broadband services over longer distances.

To better compete in the market, in February 2010, BSNL launched a new 24 Mbps ultra-fast broadband internet service to be transmitted through very high bit-rate DSL (VDSL) technology. The company is currently in the process of appointing a franchisee for its broadband services.

Mahanagar Telephone Nigam Limited
The biggest broadband service provider in Mumbai circle, Mahanagar Telephone Nigam Limited (MTNL) serves over 400,000 customers. It currently offers 20 Mbps VDSL broadband internet services and is in the process of launching 50 Mbps super high speed broadband internet services, which will primarily target enterprise users. For this, the company is planning to upgrade its ADSL network to VDSL technology.

Bharti Airtel

Leading private broadband service provider Bharti Airtel offers DSL broadband services in 94 cities. Realising the value of broadband for the company’s bottom line, Bharti recently entered into a joint venture with Alcatel-Lucent. This partnership will enable the company to migrate to next-generation networks to offer advanced services such as high speed internet, triple-play and media-rich, value-added services.

In 2009, Bharti introduced high speed broadband in the country with the launch of its 16 Mbps plans. In March this year, the company upgraded this scheme to 50 Mbps – the fastest wireline broadband service in the country. The service has been designed to support the deployment of triple-play services such as voice, video, data, IPTV, HDTV and interactive gaming.

Wireline applications

The key applications being adopted in the wireline broadband space are VOIP, IPTV and video conferencing. These applications are being effectively used by enterprises to bring down costs.

IPTV

IPTV, which is seen as a major growth driver for wireline broadband services, has been slow to take off in India. Launched in 2006, IPTV has gained a subscriber base of a little over 13,000. However, with telecom operators looking at new avenues to drive up their revenues, the uptake of IPTV is expected to reach 966,000 by 2011, according to estimates by the International Data Corporation (IDC).

The first IPTV deployment in the country was in 2006, when MTNL rolled out the service in Mumbai over its DSL, ADSL and ADSL2+ network. This was closely followed by BSNL, which has emerged as the largest IPTV player in the country. BSNL, which is targeting over 3 million subscribers in 93 cities by 2012, has adopted a franchise approach by tying up with the SmartTV Group as well as Aksh Optifibre.

In February 2008, the government allowed private players to enter the IPTV space. So far, Bharti Airtel and Reliance Communications (RCOM) have successfully launched their services in select circles. However, while the state-owned companies are aggressively promoting IPTV, the private players have kept a low profile so far.

A number of issues continue to plague the IPTV market in the country with the primary concern being its heavy dependence on broadband. The issue of last mile connectivity is another major concern. In addition, it is estimated that a viable, multi-channel IPTV broadcast will need bandwidth of about 20 Mbps. New developments like IPTV over satellite are expected to help overcome these obstacles.

VOIP

VOIP is a potential cost-saving technology that is yet to gain traction in the country. It provides features like flexible call routing and networked multimedia applications, thereby enabling corporations to lower their costs while offering services such as distance learning, customer support and remote sales presentations.

The VOIP market is estimated to reach Rs 30.78 billion by 2012. The low call rates as compared to conventional telephony and increasing internet penetration are set to drive its growth in India, provided necessary regulatory changes are brought in.

Key issues

Wireline broadband penetration has been low in the country primarily on account of the shrinking fixed line base, the government’s unwillingness to unbundle the local loop and poor quality of service.

Another bottleneck to the uptake of VOIP has been the low PC penetration in the country, as a result of which most users do not have a terminal to connect to wireline broadband. Moreover, the absence of relevant local language content has resulted in low awareness among the rural masses about the advantages of a broadband connection.

The lack of local loop unbundling has also been responsible for making wired broadband services highly capital intensive. The situation is worse in rural and geographically scattered regions where the return on investment is relatively low. Poor quality of service is another important concern.

A supportive regulatory environment, including a policy overhaul for right-of-way cost reduction, is necessary to drive broadband penetration. Financial incentives such as a licence fee waiver on broadband revenues also need to be provided by the government.

 WIRELESS BROADBAND

Given the low fixed line broadband penetration in India, there has been an increase in the importance of wireless broadband to act as a driver of the country’s growth. Wireless technology, which triggered an exponential growth in the telephony market, is projected to bring about a similar growth in the broadband segment, driven mainly by 3G-enabled mobile broadband services.

According to industry data, of the estimated 3.4 billion broadband users by 2014, about 80 per cent will be mobile broadband subscribers and the majority will be served by high speed packet access and long term evolution (LTE) networks. This will open up new opportunities for equipment vendors, given the relatively high capex on access networks.

3G and BWA services

After a series of administrative delays, India successfully concluded its 3G spectrum auctions in the first half of 2010. This was followed by an equally high-profile auction of broadband wireless access (BWA) spectrum that set the stage for a competitive wireless broadband market besides helping the government earn Rs 385.43 billion. At the BWA auctions, Infotel Broadband, in which Reliance Industries Limited (RIL) has bought 95 per cent stake, was the only pan-Indian winner. While Aircel won spectrum in eight circles, Tikona Digital got spectrum in five circles, Qualcomm and Bharti Airtel won in four circles each while Idea Cellular did not win the bid in any circle.

Service providers like Vodafone Essar, RCOM and Tata Communications exited the auction due to the extremely high prices. BSNL and MTNL had been allotted the spectrum earlier.

BWA, using technologies like Wi-Max, allows high speed broadband access (where there is no suitable wireline access), IP telephony, TV services and other voice and data multimedia services. Due to limited 3G spectrum and low broadband penetration, India is projected to become the largest Wi-Max market in Asia-Pacific by 2013. According to a recent study, India’s Wi-Max subscriber base is expected to reach 14 million by 2013 and grow annually at nearly 130 per cent. By 2013, about 20 per cent of the global Wi-Max users will be in India, making it a $13 billion market. However, a lot will depend on the timely deployment, pricing and marketing strategy adopted by the players. The prices will have to be at par with the current broadband offers for rapid uptake of the technology.

In India, BSNL and MTNL have deployed some Wi-Max networks and are working on their franchise relationships with suppliers like Harris Stratex and SOMA Networks. Wi-Max vendors like Motorola, Alvarion, Samsung and Huawei are also on the lookout for large-scale contracts in 2010-11.

But Wi-Max has its limitations as well. Though globally more than 50 commercial deployments have been made in the 2.3 GHz spectrum band as on June 30, 2010 (the band being allocated by the Indian government), most of the pilot projects by players like Bharti Airtel, RCOM and BSNL have taken place in the 3.3 GHz band (fixed Wi-Max). Moreover, the Wi-Max customer premises equipment pricing is likely to act as a major barrier in the early penetration of the service. There is also a need to develop relevant applications to drive the growth of this technology.

Moreover, with major players like Infotel Broadband, Aircel and Qualcomm planning to opt for the fourth-generation TD-LTE, Wi-Max may lose out in the race. LTE provides high data speeds of up to 10 Mbps as compared to a speed of 3 Mbps offered by 3G services, thereby allowing operators to introduce services such as high definition video, media mobility and online gaming. In addition, LTE can be overlaid on existing 2G and 3G networks and seamless services can be offered without the call or data getting cut while moving from one network to the other. Ericsson has already conducted the first trial of LTE in India in the 2.3 GHz band.

However, while successful trials have been conducted for Wi-Max, TD-LTE is yet to take off anywhere in the world. Also, while a TD-LTE base transceiver station (BTS) costs around $70,000 and devices around $250, a Wi-Max BTS is priced at just around $10,000, with devices costing around $40. Further, LTE uses technologies like MIMO, which lowers battery life. Therefore, it will take time for LTE dongles to get embedded in mobile devices.

 WIRELINE VS. WIRELESS

Wireline broadband technologies continue to rule the game for enterprises in the country, primarily due to their consistently high performance and speedy data connection. The success of wireline is largely dependent on flexible connectivity. Depending on the need, organisations are today looking for customised and flexible solutions to safeguard their business objectives.

Wireline services are also being preferred due to their ability to offer a bundled portfolio of broadband, IPTV and video communications. With the decline in ARPUs and falling margins, service providers are banking on such high bandwidth value-added services to stay ahead in the growth curve.

However, despite facing a bandwidth constraint, wireless broadband technologies (mobile broadband in particular) are increasingly gaining popularity. This is particularly true for the rural areas, which lack the necessary fixed line infrastructure. Globally, wireless technologies have already overtaken wireline broadband technologies, and going forward, this trend may catch on in India as well.

All in all, the Indian broadband market represents a huge potential for growth. While the country may not be able to meet its goal of achieving a subscriber base of 20 million subscribers by 2010, growth is expected to pick up with the launch of 3G and BWA services.