Broadband comes of age in India
Posted by egovindia on July 18, 2006
Broadband comes of age in India
With over a million users, Indian Broadband is taking the first steps of what promises to be a fruitful journey. Faiz Askari reports
Over the past few months, there has been intense speculation and excitement over broadband in India. The broadband market here is being targeted by a number of large international players, as well as domestic giants like Bharti, Tata, Reliance and Sify. But the main projections for the growing broadband market have been made on the basis of BSNL’s aggressive approach towards broadband. The Indian broadband market is perhaps the only one presently where telecom giants, Internet service providers, cable operators and even the Indian Railways are fighting for a piece of the pie. This is therefore a good time to take a look at the market for broadband in India.
In order to understand the current market scenario for broadband, we need to first understand the evolution of communication in India. Two years ago, the Internet was driving the PC boom, and the mood relating to the IT industry was optimistic and ambitious. Even then, broadband Internet access in the Indian home seemed to be the most lucrative market.
“I am sure we will find a way to overcome all hurdles and build a well-connected country through broadband”
– Vinnie Mehta
According to Vinnie Mehta, Executive Director, Manufacturers Association for Information Technology (MAIT), “Broadband fever is getting more active in India, especially because the Government of India has taken some aggressive initiatives in this direction. In the overall development IT in India, broadband has a major role to play.” Nevertheless, Mehta points out that although broadband connections have reached the 1.5 million mark this year, this number is almost half of the actual target.
Says Dr Subho Ray, President of the Internet & Mobile Association of India, “The broadband market seemed very lucrative for a number of reasons. Over 35 million Indian households already possess cable TV connections. The players entering the broadband race estimated that even if a portion of this segment opted for a broadband connection, the potential market would be huge.”
A couple of years ago an Internet connection was an expensive affair and also slow. Things have changed for the better since then. Commenting on today’s broadband scene, Pijush Kanti Das, President, Access Media, Sify says, “After two years of frenzied activity, the talk of broadband Internet access has turned into reality.”
Having said that, the current market for broadband in India can at best be described as nascent. Notes Dr Ray, “This market is unlikely to grow in a major way unless there is a huge and rapid improvement in infrastructure. There is no doubt that the broadband market in India has taken off, but it can achieve far better penetration. In fact, it is still in its infancy as far as consumer uptake is concerned.”
|The road ahead|
Comments Das, “Among the drivers for broadband in India—apart from faster downloads—will be the overall increase in productivity and the overall value proposition of being connected. The end-user in India has been exposed to using the basic non-bandwidth intensive applications like chat and e-mail. Another key driver for this market is the affordability factor. Using the Internet while sitting at home was not so common earlier. But now, due to cheaper rates, a common man can also use a broadband connection.”
In fact, many Indian companies are giving Internet-related facilities to their employees, like providing everyone with an independent mail ID and a machine that has Internet access. Adds Das, “Applications such as video-on-demand, which are bandwidth-intensive, are still unheard of in the Indian market. It is important that demand for these applications be created, because until applications like these become available, broadband will not pick up in the home segment.”
It is expected that the price of broadband in India will fall. The market will also move in the direction of a small number of users using more capacity (unlimited connections). On the other hand, it is expected that a large number of people will be happy with capped connections where a bandwidth usage cap is in place, say of 1 GB.
MAIT indicates that the market is growing at a rapid pace but still there are some initiatives required to speed up penetration. A recent MAIT report says, “The number of active subscribers increased to 4.12 million in March 2006 while the figure was 3.12 million in March 2005. Penetration of the Internet in the top 22 cities was 45 percent among businesses while for households it was 12 percent. Dial-up remains the most commonly used means of accessing The Internet among businesses. Although the proportion of businesses using dial-up has dropped from 54 percent in March 2005 to 38 percent in March 2006, the proportion of access through DSL/cable link has increased from 29 percent to 37 percent during the same period.”
Issues to be addressed
One of the primary issues is the lack of customer volumes which are needed if service providers are to subsidise rates. And Mehta believes that unless and until there is availability of localised content on the Internet, the broadband adaptation rate among Indian customers is not going to pick up. “With the term ‘localised content,’ I mean to say content for local users which is of their interest. In fact, a lot of private companies are now coming up with localised content, but it has to be more aggressively driven.”
Das agrees. “This is a most important factor for the growth of the Internet in India. Sify has already identified the potential of local content, and now we are offering content in many Indian languages.”
Elaborating on what kind of local content can drive the market details: “Taking an example. In Japan, the broadband market is booming because of the online gaming availability. On similar lines, I can suggest that the Indian Internet market could get good mileage from the availability of Hindi films over the Internet. Since Indian society is inclined towards movies and songs, this could be used to further broadband penetration.” Dr Ray highlights another issue that is affecting the broadband scenario in India: “The cost of bandwidth here is far higher than the prevailing rates in international markets.”
|Getting on the highway|
Over the past five years mobile phone tariffs have dropped considerably— almost by 90 percent. In response to this, the number of subscribers has risen by 85 percent in each of the last few years. This has helped the subscriber base cross 26 million.
However, this promising experience has not been repeated in the case of the Internet and broadband, which partly explains why several neighbouring countries including China, South Korea and Malaysia have stolen a march over India. They have achieved this by growing their user base and in turn those sections of the economy that benefit from digital technologies. Consider this statistic: the existing penetration of 0.02 broadband connections per 100 persons in India is in sharp contrast to the 25 per 100 persons in South Korea and even the 1.4 per 100 persons in China.
Yet Das remains optimistic. “Indian broadband is growing like anything these days. The focus is now moving from Class A cities. Vendors are targeting smaller Class B and Class C cities as well. Naturally, Sify is geared up to expand its horizon and reach out to the entire country.” The numbers support him. Sify Broadband is currently available in more than 90 cities across India, with a subscriber base of over 2,00,000. Indeed, the company added 43 cities and more than 100,000 subscribers in 2005.
The new Telecom Regulatory Authority of India (TRAI) recommendations for broadband expansion take into account and acknowledge the absence of any serious initiative to popularise high bandwidth connections. In response to this problem, TRAI formulations seek to harness a variety of technological solutions to deliver broadband. They also aim at including solutions that would effectively use the existing network of copper cables connecting conventional telephones.
Factors that will improve the broadband footprint are:
- Increase in PC penetration across homes
- Increase in awareness of broadband and related applications
- Increase in availability of broadband services with the entry of telcos
- Government focus
- Decrease in the cost of bandwidth.
Muses Mehta, “Broadband penetration and acceptability are surging smoothly because of many things. Apart from the government’s thrust and costs coming down, users of broadband are also getting mature. Users now demand more bandwidth and speed, and better service. In the West, the market is driven by rich content that caters mostly to an entertainment-oriented lifestyle. Broadband concentration is highest among affluent surfers in the United States. But this cannot be the reason for broadband penetration in India.”
Entertainment and lifestyle applications will definitely play a strong role in creating urban-centric revenue models. However, applications that are related to fields such as education, skill development, health and agriculture will be more appropriate for drawing immense value from the broadband infrastructure in India.
Last mile connectivity will have a bearing on the future of broadband in India. Issues such as affordability for end-users, availability of killer applications (which are bandwidth-intensive but of such great interest to users that they opt for it despite high costs) and demand for these applications become important only after the service becomes available.
Das of Sify comments, “The future seems to be very attractive as broadband acceptability is consistently moving up in India. Services like gaming, e-commerce and sharing will definitely influence and dominate the market.”
The broadband policy of India defines broadband as an “always on” connection with speeds over and above 256 kbps. The policy as it stands today is unlikely to make it affordable to the common man of India.
Dr Ray points out that “in today’s global world, where competition has also gone global, the Indian communication and connectivity status desperately needs to be enhanced. Our policy makers need to take a proactive approach to spread communication services to the 70 percent of India’s population living in rural areas. This in fact could also become a way to enhance our GDP.”
To overcome the many hurdles, the best strategy for spreading broadband is probably to make use of India’s available infrastructure. It needs to be done not only through telephone lines but also through power lines. The electric line will become the most obvious choice for spreading broadband since it is far more widespread and touches many homes.
On the future of broadband Vinnie Mehta has this to say, “The Indian market seems very attractive, but at the same time there are various issues that are yet to be resolved. There are a number of last mile infrastructure problems, and lack of content and applications, both of which are critical for the success of broadband in India. But I am sure we will find a way to overcome all the hurdles and build a well-connected country through broadband.”