Despite broadband being identified as a key thrust area of the government, broadband penetration in India is far below the required level. In fact, a recent report by the Telecom Regulatory Authority of India (TRAI) shows that while the demand for broadband connections is increasing across the country, operators are unable to handle the supply mechanics. As such, the Broadband Policy target of 10 million users by 2007 is nowhere in sight.
At the end of 2005, the broadband user base in the country stood at 840,000. Of this, 23,000 were added in the last three months of the year. Though it represented a quarterly growth rate of 37 per cent and a 17-fold growth since January 2005, the pace was not brisk enough to meet the broadband target of 3 million by 2005.
The government’s focus on broadband was well-conceived. Since broadband allows spread of services such as egovernance, e-commerce, e-education and e-health, its expectation was that it would spur growth, which would, in turn, drive up broadband demand. It would also give an impetus to rural telephony. Moreover, broadband would be a step towards convergence.
A Confederation of Indian Industry (CII) position paper on the impact of increasing broadband penetration in the country estimates an additional benefit of $100 billion over a decade through improvements in productivity and use of broadband in areas like e-governance and telemedicine.
In the words of Deepak Maheshwari, secretary, Internet Service Providers Association of India (ISPAI), “E-governance, e-learning, telemedicine and entertainment could be the biggest drivers for broadband in India.
However, given the present figures, broadband usage will have to increase at least five times the current rate to meet the Broadband Policy target.
Demand-supply gap
Early February, TRAI presented a report outlining the growth in broadband and internet connections in India. The report reveals that there is a big gap as far as demand and provision of broadband services is concerned. According to the report, the total broadband connections in the country reached 840,000 in December 2005 as against 3 million envisaged by the Department of Telecommunications (DoT) in the Broadband Policy, 2004. Even the government-owned Bharat Sanchar Nigam Limited (BSNL) could not meet its target. The PSU had 170,000 connections as of September 2005 against a target of 1 million by December 2005.
However, according to TRAI, the internet segment surpassed its target of 6 million subscribers by December 2005 to reach 7.5 million. This shows there is substantial demand for both broadband and internet services.
According to analysts and TRAI, the sudden spurt in demand for broadband connections is a direct effect of the reduction in prices by telecom operators. In a bid to capture both rural and urban markets, telecom operators have drastically cut broadband tariffs. BSNL’s monthly rates for the home segment currently vary from Rs 250 (for 256 kbps bandwidth) to Rs 3,300 (for 1 Mbps). Corporate plans begin at Rs 700 and go up to Rs 9,000 per month, depending on the bandwidth.
The other telecom PSU, Mahanagar Telephone Nigam Limited (MTNL), has also reduced its broadband tariffs by 50 per cent to Rs 199. Private broadband service providers have followed suit and aligned their tariffs with BSNL/MTNL. As a result, broadband demand has shot up by 70 to 80 per cent in recent months and is expected to escalate further by 50 to 60 per cent on account of the cheap connections.
But while connections get cheaper and demand burgeons, supply is unable to keep pace. There is a significant time lag in getting a connection and the quality of service leaves much to be desired. The regulator agrees that supply-side constraints exist, both with respect to carriage and content.
One key issue on the supply side is last mile access. As Maheshwari says, “The competition for broadband is restrained due to lack of access to the last mile copper that has not been mandatorily unbundled.
In fact, the world over, incumbents such as BSNL have copper cable going into consumers’ homes. Once this is unbundled, other suppliers can lease it to provide services such as broadband and triple play to customers. “Worldwide, wherever fair unbundling has been implemented under regulatory supervision, there has been a spurt in broadband growth,” says Maheshwari.
The government had its reasons for not accepting TRAI’s recommendation on unbundling the last mile. This would hurt BSNL’s long-term business plans, it felt. However, once other technologies (such as Wi-Max and aerial cables, which are being used in some parts of the country) develop, companies will be able to provide easier broadband access to users.
The way forward
Some positive steps have indeed been taken. Ericsson, one of the largest suppliers of wireline technology in the country, recently announced that it has touched the 1 million mark in wireline broadband lines in India, an important milestone in building broadband infrastructure in the country.
On the service providers’ front, BSNL is expanding its services in different regions to boost broadband growth. For instance, after launching Data One broadband services in Mysore, BSNL is now extending broadband connectivity to all taluk headquarters in the area in the next few months. This will enable the rural public to access the same kind of service as urban subscribers, according to the company. Further, BSNL is in the process of investing Rs 10 million to add 32,000 broadband ports in Gujarat before March 2006 to cater to the high broadband demand in the state. Currently, BSNL has 44,000 ports with 29,000 broadband connections in Gujarat and, until recently, was unable to fulfil the entire demand for broadband connections. BSNL, Gujarat has a demand for around 6,000 broadband connections on its waiting list. With this addition, its broadband connections in the state are expected to increase from 29,000 to 70,000 in three months. According to the PSU, all the 32,000 ports are expected to be exhausted within a couple of weeks once they are equipped. BSNL is planning to install some more ports after March in order to meet the high broadband demand.
However, a lot more needs to be done. The foremost requirement is unbundling of the last mile. There is enough evidence to show that such a move does not adversely affect the incumbent if it responds fast enough. British Telecom, for instance, still has the biggest share in the broadband market in the UK, despite unbundling. Similarly, PCCW remains a leading IP-TV provider in Hong Kong despite unbundling.
There is also hope for broadband in TRAI’s recommendations on unified licences, which would allow cable TV operators to provide telephony and phone operators to provide TV signals. This will reportedly allow 60 million cable TV homes to get access to broadband internet. DoT is yet to move on the TRAI recommendations, but if these come through quickly, the entire debate on using BSNL’s last mile copper cable would be addressed.
From an industry perspective, the proliferation of broadband is expected to be driven by applications and hence there is an urgent need to develop this. Says D.P.S. Seth, member, TRAI: “Development of the applications desired by customers, particularly rural customers, has to be priority. The seed can be provided by e-governance applications with possible USO support”.
Besides, integrated operators and independent ISPs are expanding their reach through cable ethernet and wireless solutions. Says Maheshwari: “Now that WiMax-certified equipment is available, deployment can happen, provided the frequency allocations are done in 3.4-3.6 GHz band and spectrum pricing is aligned to the market potential of the respective geographies rather than a `one-size-fits-all’.”
TRAI has recommended a target of 20 million broadband connections in India by 2010 (approximately 1.7 per cent broadband penetration) based on the demand in the country. That is around 20 times the present level. Broadband penetration in the country is currently around 0.1 per cent. “It has been anticipated that the first 7 million can be achieved using the copper pairs of telephone companies in the initial two to three years. The number should get a boost by utilising the coaxial cable used for cable TV. Thereafter, further growth will come from wireless. That technology will be ready for large-scale deployment in two-three years,” notes Seth.
The government has, in its broadband policy, accepted this target and added that for a country and economy of this size, and the efficiency-improving impact of broadband, this is the least we can aim for.
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