Broadband woes

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Fixed line hasn’t trickled down and wireless is priced too high. Is there a solution to India’s broadband blues? By Mehak Chawla

We have debated, we have discussed, we have invested and we have formed strategies. Yet, we have not been able to harvest any numbers. Broadband is a topic that has sparked off a lot of debates (and scams) in the country but has failed to gain mass adoption.

Back in 2000, we could say, much like we say for some other technologies today, that broadband is still in its infancy and will take time to traverse from the hype curve to the adoption curve. However, it’s 2012 and such excuses are no longer valid. What we need to do now is to not only face the reality of being unsuccessful with respect to broadband penetration but also do some serious soul searching as to how the broadband deficiency can be cured.

According to figures published by TRAI (Telecom Regulatory Authority of India) in January 2012, the number of wired broadband subscribers in India reached 13.3 million in December 2011. Broadband (in India) is defined as a rate greater than 256 Kbps download speeds.

On the other hand, the total Internet Subscriber base reached 20.99 Million as on 31st September, 2011 thereby registering a growth rate of 3.25% over the previous quarter. Internet by definition means anything less than the set broadband speed of 256 Kbps. Over 61% of these Internet subscribers in India have taken a broadband connection thereby achieving a broadband subscriber base of 12.83 Million as on 31st September, 2011 as compared to 10.31 million as on 31st September, 2010. This translates into a net addition of 2.52 million broadband subscribers during the financial year 2010-2011 with growth rate of 24.44 %. Broadband in India reported a growth of 35.5% in the previous financial year (31st March 2011 vs. 31st March2010)

However, as a whole, the broadband penetration rate is just around 10% of the Internet user base and as a percentage of India’s population is at ~1%. Prakash Bajpai, Founder, MD & CEO, Tikona Digital Networks, put this in perspective when he commented that, “Our 1% penetration happens to be the one of the lowest in the world as compared to other economies like Russia (11%), Brazil (7.5%) and China (9.5%).”

“Pegging a monthly ARPU of Rs 500 implies total revenue of Rs 7,800 crores,” he said estimating the size of the Indian broadband market.

With only 1% of our total population being able to derive the benefits of broadband, we have to go back to the drawing board.

Factors assisting broadband penetration
Broadband Wireless Access (BWA) Mobile broadband can significantly accelerate the deployment of broadband services. By the end of 2011, it is estimated that the number of 3G subscribers in India had already exceeded the number of broadband subscribers. This is noteworthy because wired broadband services were first rolled out in 2003 whereas 3G services were first introduced in late 2009. It is very likely that mobile broadband might well become the popular way to enjoy broadband in the future
Converged services Globally, video has been one of the biggest drivers for broadband, especially as operators have leveraged broadband infrastructure to roll out video services over their IP infrastructure, i.e. IPTV for short. For the consumer, the availability of such converged services over a common network increases the attractiveness of broadband
Multimedia content With the advent of over-the-top (OTT) services such as Youtube, Skype video etc, broadband is fast becoming essential to view multimedia content 
Cloud services  The IT world is going through a rapid transformation where applications are now being offered over the network. Rather than weak penetration of broadband holding back adoption of Cloud services, the latter will spur more investment into broadband
Source: Brocade

Growth impeders

There are multiple reasons as to why broadband growth has been slow. Fewer wireline connections coupled with the higher cost to connect are two factors inhibiting broadband penetration. Elaborated Bajpai, “An investment of $1,200 to 1,500 per home is required as against an ARPU of merely $10. This is a typical case of a business being unviable.”

TRAI stated in a consultation paper that the non-availability of a national broadband network to provide connectivity up to the village level and non-availability of content in vernacular languages are major causes of concern when it comes to taking the Internet to the masses.

This apart, the complicated Right Of Way (ROW) procedures and high ROW charges to lay a telecom network are dissuading service providers from venturing into the creation of new infrastructure for telecom services. Obtaining right of way clearances has proven to be major hurdle in creating new telecom infrastructure including the laying of optical fiber cables. Of late, no operator has been investing neither in creating any significant new cable plant nor in rolling out wireless networks to build capacity for broadband.

Natesh Mani, President – Commercial and Consumer Business, Sify Technologies Ltd., said, “Higher international bandwidth prices are another hurdle. Service providers pay about 65% of their revenue towards the cost of arranging domestic and international bandwidth.”

Cost is a factor on the consumer front too. The high cost of data plans, high handset or PC costs, and lack of local and segmented content are also threatening the cause of broadband in India.

However, some of this is expected to get resolved with the proliferation of low cost tablets and netbooks.

There is another front though, that needs immediate attention and that’s the regulatory front.

Up the regulator’s sleeve

DSL, a technology that makes use of the vast copper cable infrastructure that was originally installed to deliver voice, is said to be the most practical technology to deliver broadband. Unfortunately, a significant hurdle to the rollout of broadband services is the absence of requirements on Local Loop Unbundling (LLU).

Elaborated Ananda Rajagopal, Senior Director, Service Provider Product Management, Brocade Communications, “With incumbents owning over 90% of the copper infrastructure, operators are challenged to do a fast roll-out of wired broadband services. TRAI also recognizes this as a hurdle and has long advocated the need to enforce LLU.”

As of today DSL constitutes 85.72% of the total broadband subscriber base, whereas wireless broadband accounts for just 2.78%.

LLU must be enforced but, although regulators have acknowledged the need, action is lacking.

The other thing that the industry believed the regulators need to address are the Right Of Way procedures. As mentioned earlier complicated ROW procedures and high costs are discouraging the expansion of infrastructure services. The industry has since long been demanding simpler ROW procedures and analysts feel that these are an imperative if broadband has to finally address the last mile connectivity challenges.

The other policy challenge is on the wireless front. 3G, claim experts, doesn’t have enough spectrum to make a difference. Explained Bajpai, “3G operators have only 5 MHz; that’s just about enough for a small screen and only sufficient for light users of the Internet. Therefore, broadband is a tough equation to solve.”

The migration to IPv6 , expected to better the broadband experience, is also progressing slowly. There are questions about whether big investors like RIL who are pumping in a lot of money in this space will be able to alter the landscape without defined regulations.

However, things on the policy front seem to be improving, albeit at a languid pace. The new telecom policy (NTP 2011), the first since 1999, is likely to be cleared by April. The policy, experts believed, would clear the air. As per the proposed structure, operators would be allowed to hold higher spectrum of up to 8 MHz, except for Delhi and Mumbai where the upper limit would be 10 MHz. The draft also stated that TRAI was to recommend a migration path for telecom companies

This policy should result in a substantial improvement of the 3G experience, on whose shoulders now rests the broadband burden.

The harbinger of hope

Hemant Joshi, Partner, Deloitte Haskins & Sells, remarked, “India is a mobile country. 96% of the total subscribers are wireless subscribers and only 4% are wireline subscribers.” No wonder then that almost broadband’s hopes are riding on mobile 3G.

According to Internet and Mobile Association of India (IAMAI), mobile Internet users are expected to touch 48 million by end March 2012. On an average, in the last year, the number of mobile Internet users has been witnessing a growth of 15% quarter-on-quarter. According to Deepak Gulati, Executive President, Mobility, Tata Teleservices Limited, “Currently, wireless mobile broadband industry revenue stand at over Rs 3,000 crores every year, whereas industry gross customer additions are close to 5 lakh every month.”

With the advent of 3G, things were expected to change drastically for the mobile broadband space. The results however, are yet to be visible. So far, 3G hasn’t been able to see any substantial growth. The cost of data-plans and smartphones has often been held responsible for this below-expectation performance. As Bajpai said, “Even with 3G, mobile broadband experience in large cities is below par. Mobile broadband can catch the users’ fancy only if we get the price-quality equation right.”

However, the hope is yet to die. According to Dr. Subho Ray, President, IAMAI, “3G can be described as in an early stage. Usually, from auction to network roll-out to mass adoption, the new technology takes at least three years. One year is too little a time to make any useful comment on the state of affairs.”

Joshi said, “Since mobile broadband can be installed instantly, is available at comparable prices to wireline and does not require huge investment in creating the fixed line infrastructure, we believe that wireless broadband will grow much faster than wireline broadband.”

Social networking applications and entertainment apps for astrology, bollywood, cricket etc. are expected to drive much of this growth.

With close to Rs 70,000 crores having been paid by the telecom companies to the government for the 3G licenses, there are huge hopes for a surge in number of users connecting to the Internet through their mobile phones which will be aided by the fact that a large portion of recently made mobile handsets have the capability to access the Internet.

Operators are expected to invest around $121 bn in 3G infrastructure over the next five years and the number of 3G subscribers in India is projected to cross 107 mn mark by 2015, where the rural subscribers will comprise 24% of the overall 3G subscriber base. According to Abhishek Chauhan, Senior Consultant, ICT Practice, Frost & Sullivan, South Asia and Middle East, 3G revenues are estimated to increase from Rs 862 crores in FY 2010 to close to Rs 200,000 crores in FY 2017 at a CAGR of close to 120%.

The tunnel is certainly well lit for 3G. Meanwhile, TRAI and DoT have already started the process for 4G LTE advanced deployments through consultation papers published for the industry review.

4G LTE technology is expected to bring more growth in the broadband space as unlike 3G, which offers an average usable data transfer speed of 1-3 Mbps, 4G technology will offer about 10 Mbps. Also 4G operators will effectively have at least three times the spectrum as compared to the 3G operators allowing them to create a substantially larger capacity to service high usage applications as well as volume of subscribers.

However, “The high cost of setting up a terrestrial broadband network, providing seamless network connectivity and high dongle cost are some of the major challenges that are hindering the penetration of wireless mobile broadband in India,” observed Gulati.

In the realm of affordability

So far, the biggest crib around both wired and wireless broadband has been that the plans and devices are not within the affordability bracket for a majority of population. While the smartphones could make you poorer by upwards of Rs 15,000, a PC/Laptop is dearer by Rs 20,000 or more.

The good news is that with the multiplicity of devices entering the market and the competition getting intensified, prices are expected to take a downward dip. Today, a smartphone can be purchased for around Rs 12,000. Tablets have entered the picture, some with bundled 3G data plans look like a relatively affordable proposition.

Data plans also are getting cheaper and BSNL, according to sources, is not too far from introducing a data plan at around Rs 50 per month. The hopes around 4G changing the mobile broadband space for the better are also high and Broadband Wireless Access is also expected to accelerate the reach of broadband significantly.

mehak.chawla@expressindia.com


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