Broadband

Is there a market for broadband in India?

Few IT sectors are as challenging as the Indian broadband market. This market is perhaps the only one in India where telecom giants, ISPs, cable operators, and even the Indian Railways are fighting for the spoils amidst a bloodbath in the market. Srikanth R P tells you where the Indian broadband market is headed

According to Kobita Desai, most service providers are constrained by lack of funds and have to depend upon access to customers through the incumbent's network

When the Internet was driving the PC boom around two years ago, the mood of anyone associated with IT was not only optimistic but ambitious—very ambitious. Among other sectors, broadband Internet access to the home seemed the most lucrative market because of the estimated numbers. With over 35 million Indian households already possessing cable TV connections, players entering the broadband race estimated that even if a portion of this segment opted for a broadband connection the windfalls would be huge. Hypnotised by the market potential, players of all hues—from utilities to ISPs to cable operators—began a frantic race to wire up India with optic fibre.

But after two years, there is not much talk of broadband Internet access today. Except for a few successful players most players who sunk in huge amounts of money have gone bust. Some players have even turned around their plans for offering broadband Internet access and have started offering their networks to service the needs of telecom players.

Current scenario

The current scenario in India with respect to broadband subscribers can at best be described as nascent and unlikely to grow in a major way unless there is a huge reduction in access costs and a rapid improvement in infrastructure.

Opines Ritesh Shanker, senior research analyst, Frost & Sullivan, “The broadband access market in India has not taken off as was expected earlier and is still in its infancy as far as consumer uptake is concerned. It is a typical chicken and egg story in terms of infrastructure and content. There are still various issues to be solved, like the last mile infrastructure problem and lack of content and applications. Additionally, options available in the market were also not up to the mark, which has contributed to the slow growth of the broadband access market in India.”

The chicken and egg situation can be best seen from the experiences of utilities that entered this space. Many players sought the best commercial routes and went about installing optic fibre networks worth crores after getting ‘market feedback’ that a particular area had a high literacy rate with good PC penetration. But after installing the network, reality turned out to be very different. The inhibitor was the high cost that the players tried to recover from customers. This was a hopeless situation as customers were not ready to pay high rates and at the same time the players could not subsidise costs simply because they had invested huge amounts in building their networks. In an effort to reduce costs, players started downscaling bandwidth requirements. The result was that in some cases customers began complaining that access speeds were even slower than dial-up speeds.

Infrastructure in place

Though the current scenario with respect to infrastructure does not support broadband applications, the scenario can change with telecom players like BSNL investing in optic fibre networks in a huge way. For example, BSNL is looking at scaling its current optic fibre network from 1,50,000 route km to around 4,00,000 route km. Similarly, players like Power Grid, Indian Railways and GAIL have plans to scale their optic fibre networks. (See Box : Optic fibre networks). Though the networks will be primarily used for servicing the needs of telecom players, analysts believe that as the networks scale up with respect to bandwidth they would be used to offer broadband Internet access and even applications like video-on-demand and Internet TV.

Options

Broadband access can be offered through the following routes: Cable, DSL, wireless and broadband satellite.

DSL
Among these technologies, DSL hold tremendous promise for a country like India. DSL (Digital Subscriber Line) allows a service provider to provide both voice and data on the same telephone line. This means that one can effectively surf the Internet and receive a phone call at the same time. Hence players like MTNL and BSNL can effectively use their existing copper lines to deliver broadband Internet using DSL. The last mile connectivity problem is also effectively negated through this route.

Says Kobita Desai, senior analyst, Telecom and Mobile, Gartner India, “Having access to the local loop is the key to success. Almost 90 percent of the local loop belongs to the incumbent BSNL or MTNL and success does not come easy. Most service providers are constrained by lack of funds and have to depend upon access to customers through the incumbent’s network. Alternatively, service providers have to either work out commercial arrangements that not only take a long time for approval but are also skewed in favour of the incumbent. The other option is to deploy parallel networks, which is a huge waste of resources. Few have the funds or the resilience to roll out large broadband networks. Carriers like Tata, Reliance, Bharti (because of their enterprise focus) and BSNL (the PSU giant almost owns the local loop and it will take a long while for others to achieve the same magnitude of scale) are likely to dominate this space.” BSNL has already started offering always-on Internet on an experimental basis in one city in each telecom circle.

Cable
In a similar way, cable players who already have the reach and provide cable TV services to millions of subscribers have the potential to convert their existing subscribers to broadband Internet access subscribers. Successful players in this space include In2Cable and Hathway Cable Internet.

In2Cable has close to 30,000 users registered for cable Internet. In addition to providing services like broadband Internet access, cable players are also looking at providing value-added services to differentiate themselves from the competition.

Says T M Sridharan, CEO, In2Cable India, “To help our customers see value in our service offerings, we have a CRM system wherein a customer can see his usage, his bills and all other required information. Additionally, we are also providing VOIP-based services and VPN services.” The other big cable player in this space, Hathway, is also optimistic on the growth of the market and is looking at launching a host of value-added services to boost revenues.

Says a Hathway spokesperson, “We see applications like real-time gaming and video content emerging in the coming year. This will add to the attractiveness for broadband connections. We have also launched VOIP services under the brand name, Net Talk.” The success of both these players can be seen from the fact that In2Cable has a presence in 8 cities across India while Hathway has a presence across 6 cities.

Wireless
When the broadband race began, players who had the access to infrastructure and reach supposedly had the edge over other players. But some players like Sify have leapt over the rooftops with the help of wireless technology. Sify for instance uses a wireless broadband technology called Point-to-Multipoint technology that enables customers to be connected using a wireless radio network. The strategy has paid off in a big way as Sify has managed to sign up over 400 buildings in Mumbai alone. Each building has a minimum of 20 customers, which translates to 8,000 customers.

Says Rustom Irani, chief technology officer, Sify, “We realised that broadband had not taken off in a big way given the high cost and the task of laying cables to every building to enable broadband delivery. The key lay in enabling the last mile for delivery of broadband in such a way that it was acceptable to everyone, quick to deploy and had a low cost of execution. This is what we have been able to achieve with our hybrid technology. In addition to making the service available in residential buildings through our fixed wireless broadband access solution, we are tying up with cable operators on a revenue sharing basis.” After its success in Mumbai, Sify is now looking at taking Point-to-Multipoint technology to Chennai, Delhi, Bangalore, Hyderabad, Pune, Chandigarh, Noida and Gurgaon.

The technology gives Sify not only the option to deploy a solution quickly, but more importantly, helps the ISP do it cost effectively. All Point-to-Multipoint needs is a hub to generate signals, which then fires signals in different directions, and a receiver to receive the signals. Along with the receiver, there is a multiplexer that then splits incoming signals into smaller bandwidth signals, which is then delivered to the end-customer through an Ethernet cable connection to the PC. So whenever Sify signs on a new building, all it needs to do is to put a receiver on the building and allocate bandwidth according to customer needs.

Issues like the last mile infrastructure problem, lack of content and applications, and lack of options available in the market have contributed to the slow growth of the broadband access market in India, says ritesh shankar

Satellite
VSATs have been traditionally used for providing connectivity to remote places and in linking geographically dispersed locations. The government’s decision to change the licensing model from a fixed license fee to a revenue sharing model has seen a positive change and given a fillip to the industry. This has resulted in players offering more value-added services than just plain connectivity. Says Partho Banerjee, president and
CEO, Hughes Escorts Communications, “Traditionally, we used to provide satellite communications services with the help of VSATs. But recently we have launched the DirecWay broadband platform in India that supports a slew of applications like gaming, interactive education and training and extended enterprise networks. By using the broadband medium, companies can provide value-added services such as file broadcasting and multimedia content delivery.” With prices falling, one can expect VSATs to make a strong foray into niche applications like online lotteries and telemedicine.

Key issues

Apart from the lack of customer volumes that service providers need to subsidise rates, the cost of bandwidth is also far higher than rates in international markets. And there is definitely a fuzzy picture in the market with respect to bandwidth availability. Some players say that the bandwidth available at their disposal is much more than is utilised and some say that available bandwidth is lower than demand.

Opines Rustom Irani of Sify, “It is not the amount of bandwidth alone that is a concern, but the availability of affordable bandwidth. Today, international bandwidth prices are artificially high because of lack of open competition. Initially, the i2i cable was proposed and would have drastically brought prices down to around 20 percent of what was prevailing then. However, this promise has not been realised and one wonders whether the amount of bandwidth available in the country is being projected as low to keep prices high. This is the simple demand outstrips supply model, which cannot be true due to the 8 Terabit i2i cable now operational.”

To summarise, the lack of broadband subscribers in India can be put down to a number of reasons. To begin with, the Internet is still in its early development stage in India with only 8 million users. Secondly, capacities on both domestic and international bandwidth links currently in India is nowhere near that of international carriers or that available in more developed countries. Along with such capacities, content that is aimed at broadband access also needs to be available. These include graphics-rich news sites, video chats and online games. All these are not currently available simply because demand does not exist.

Future

Most analysts that Express Computer spoke to said that they believe telecom companies will dominate the broadband access space by providing services through DSL to their existing subscribers. One can even expect to see smart players like Sify emerging in the broadband access market in a big way as they have been able to negate the advantage of existing infrastructure through wireless broadband services.

Service providers will also have to find a balance between targeting the high volume (but low-value) consumer space and the high-value corporate space.

Opines Desai of Gartner, “While the future lies in targeting the consumer space, the enterprise market is the first opportunity. Remote access/inter-office connectivity is likely to be a dominant need. We also expect small offices and branch office connectivity to fuel demand as it is a more cost-effective, high-speed alternative to leased lines and ISDN.”

In addition to DSL, analysts like Frost & Sullivan’s Ritesh Shanker believe that with the advent of CAS (Conditional Access Systems), there will be much more investment flowing into cable infrastructure, leading to better broadband access.

Optic Fibre Networks: Summary of Rollout

Source: Nasscom 

Internet subscriber base projections

Source: Nasscom