Broadening The Market- A Retrospect On Broadband In India

India may have overwhelmed the world with its mobile subscriber numbers and established its clout as one of the fastest growing telecom markets in the world, but one segment has remained a conundrum for many market followers – the viability and growth prospects of the country’s wireline broadband market.

Despite the realisation to secure better Internet access throughout the country, India’s adoption of high-speed broadband has been noticeably slow. There is an apparent paradox between the meteoric rise of subscriber growth on the one end and a close-to-zero percentile of broadband penetration on the other.

While the number of broadband Internet subscribers in India is witnessing a spurt, having increased by more than 70 percent in 2008, they only account for 0.5 percent of the population at the start of 2009. This is ironic considering that the APAC region is the largest contributor of broadband penetration in the world amounting to a 39 percent share globally.

Basic Realities

The Indian telecom market is confronted by several realities that act as roadblocks for progress when it comes to wireline broadband take-up:

* Stifled Infrastructure: About 70 percent of Indians live in remote, inaccessible rural areas that are crippled by very poor infrastructure as roads, rail tracks or electricity. Building infrastructure to reach and cover these remote locations, poses a significant operational challenge.

* Cost of Access and Building: Even without the operational difficulties of reaching these rural areas, the cost of wireline infrastructure is higher than that of mobile infrastructure and requires longer lead times. Telecom companies need to evaluate their RoI based on capital and operational cost, both for the ‘build’ phase and for the ongoing operations of the network.

This is only compounded by the relatively high right-of-way costs. In many cities in India, local authorities charge relatively high right-of-way fees for wireline network deployment, further impacting the business case of wireline deployment.

* Low Income Levels: As with any business case, service providers need to evaluate the propensity of customers to pay for the services offered. In India, where income levels are some of the lowest in the world, and a portion of which is already being spent on mobile communications, new network build needs to be evaluated on the basis of acceptable RoI. The ‘build them and they will come’ is an approach which needs to be carefully evaluated.

* Low PC Penetration: In many global markets, the main terminal for wireline broadband is the PC. People use their computers, whether at home or at work, to access the Internet and to consume content. As PC penetration in India is low (about 0.3 percent), most users do not have a terminal to connect to wireline broadband.

The Need for Enablers

With broadband access being increasingly associated with national prosperity and the ability to compete effectively in a global market, how does India solve this paradox, and join the rest of the world’s affection for broadband access?

The answer is inherited in a few contributing factors described below.

First and foremost, a supportive regulatory environment is a must. National governments around the world have made broadband penetration a priority, whether with ‘PC in every school’ initiatives or stimulus packages for network operators. Municipalities and local governments have long identified that a strong broadband infrastructure leads to an increase in the standard of living and in the attractiveness of their regions and are making wireline broadband a priority.

In India, a fresh look needs to be taken to assess the regulatory environment, including an overhaul of policies for right-of-way cost reduction.

A second, yet equally important factor, is the need to consider various network infrastructure technologies when evaluating the merits of wireline deployment. A combination of fixed and mobile solutions may be the best and only option when looking to reduce the cost of infrastructure deployment in hard-to-reach areas. One of the key technologies is WiMAX, which is well-suited for India’s stifled infrastructure. There are already predictions that India will be the largest WiMAX consumer in Asia Pacific.

Even the lack of PC penetration is addressable. One possible solution is to connect wireline broadband to the ~300M TV sets in India as an alternative terminal. In this scenario IPTV would be the driving service for wireline broadband proliferation in India.

Broadband: At the Cusp of Growth

If the broadband market in India meets the Indian government’s goal of achieving 20 million subscribers by 2010, it might still emerge as one of the world’s largest broadband markets. We can only watch with amazement the thirst for communication manifested in the country’s unprecedented growth in mobile connectivity to truly appreciate the hidden potential of broadband in India.

I am a true believer of the idea that the adoption of broadband is crucial in creating a new digital India, a global player whose population is both connected and empowered.

Pande is President of ECI Telecom India.