Big is beautiful for Bharti

Already a giant in the telecom sector, the group has set ambitious targets for its broadband venture. How ambitious? Well, take a look at this report from RAHUL NEEL MANI

BBNL wants to be the specialist communication service provider for corporates and SMEs, says Ashok Juneja

The latest news is that Bharti Broadband Networks (BBNL) is now profitable. Last fiscal, this Bharti Enterprises company posted revenues of Rs 120 crore, and intends to grow by 100 percent this year. Internet, international private leased circuits (IPLC) and national long distance (NLD) are the three key areas that will bring more business for BBNL.

With the days of monopolistic Internet bandwidth over—VSNL is no longer the sole provider—aggressive players with their own capacity are entering the markets. Although both Bharti and Dishnet announced their undersea cable plans at around the same time, Dishnet is still at the planning stage while Bharti has commissioned its cable and is providing commercial bandwidth to customers.

The good news at BBNL is the launch of Network i2i, the data services network, on the 8.3 terabit capacity undersea cable from Singapore to Chennai. With this, BBNL is right on track to capture what it is looking for: a 50 percent market share in the Internet bandwidth space. Large orders are now under execution, and the company is rolling them out fast.

The entry of BBNL has already had a great impact on bandwidth pricing. Costs have come down to almost half now. VSNL charged Rs 58 lakh/annum for a 2 Mbps line (list price), while today BBNL is offering the same at Rs 35 lakh. On a case-to-case basis, even VSNL offers low bandwidth prices today, but its prices are still on the higher side. With the entry of Network i2i, market dynamics have changed. "We have brought down the prices…they are now even lower than satellite prices," says a beaming Ashok Juneja, chief executive officer, BBNL. This has helped the company attack satellite players and grab a large chunk of market share from them. The message is clear: Why go for satellite connectivity with much more latency when you can get yourself undersea fibre-based bandwidth which is more reliable and robust?

The menu doesn’t stop there. The company is offering a full suite of composite solutions, including ‘bandwidth anywhere’ in the country. Unlike a satellite-based solution, you get a ‘point of landing station’ where you can obtain integrated services from Bharti.

Operating with a strong client focus, the company has developed innovative solutions where technologies synergise to go beyond immediate market needs. The elements of such solutions cover a vast domain—from VSAT-based broadband interactive terminals to the new Networkthree architecture designed and developed by the company. Based on bandwidth from i2i, BBNL is in a position to proactively provide solutions that are built on scalable frameworks, assure top-of-the-line service levels, and offer the best return-on-investment standards. These solutions include point-to-point managed connectivity on fibre, microwave, VSATs or copper, VPN systems (including IP-VPNs), ISDN services, server co-location, corporate mailing and Web hosting, broadband, two-way IP-based VSAT links for intranet and Internet connectivity, and mobile data on GPRS with widest coverage and integration with corporate networks.

Bharti still keen on VSAT?

Rumours were making the rounds that Bharti VSAT business was bleeding. Company officials say it is well known that VSAT is a very niche market product right now, and business is low in terms of volumes. (VSAT is useful for customers who are beyond the reach of fibre or other forms of terrestrial communication.) Juneja points out that Bharti’s experiment with the nationwide fibre backbone and its feed from the undersea cable has so far been doing exceedingly well, and the future of India’s Internet bandwidth will reside there, while "VSATs are still good for the upcountry, rural areas, and places where last mile connectivity is a major concern." VSATs will also remain relevant in segments like distance learning and broadcast services, for which it is the best medium. "We believe that Bharti has valid reasons to continue in the VSAT business. The company has registered tremendous growth in the past two years," says Juneja. So, Bharti is still very much into VSATs.

Nevertheless, being a small player in the VSAT market, the company is probably struggling since Hughes Escorts Communications (HECL) is well ahead of other players. HCL Comnet, Comsat Max and BBNL are all running neck-to-neck. HCL Comnet and Comsat Max include their private hubs (such as NSE and BSE) when they count their total installations, but if these are discounted, then these three players are almost level. In services, HECL is number one, but Bharti is fighting for the next spot. Out of the 17,240 shared VSAT hubs, HECL has 5,331, Comsat Max has 3,493, Bharti has 3,047 and HCL Comnet has 3,022. If sources who say that Comsat Max is up for sale are to be believed, BBNL could become the second-largest player soon.

50 percent bandwidth market share

The company is on track to capture 50 percent Internet bandwidth market share in terms of orders received, though not in terms of revenues. "The revenues will show only when these orders get rolled out fully. It will not be an instant rollout as opposed to other media," says Juneja. But the amount of orders booked so far indicates the company is on target.

Network i2i has also become India’s first submarine cable company. It is a 50:50 joint venture between Bharti and SingTel, and has undertaken the largest infrastructure project ever between Indian and Singaporean companies. It will operate a huge service network of fibre optic cables in the country based on the submarine cable network, which cost nearly $650 million. The self-healing 10,800-kilometre ring network will link Singapore, Chennai and Mumbai. The entire cable network utilises the latest DWDM technology to provide transmission facilities, which can be upgraded to ensure durability.

For Bharti, there are mainly three types of customers for this bandwidth—the ISPs and cable operators are one group. The company sells to them at a special price and they in turn sell it to retail customers, small and medium enterprises (SMEs), and the small office home office (SOHO) segment. The second type of customer is the corporate, to which the company sells directly. Then there is the retail consumer and SOHO market, where the company provides DSL services through TouchTel.

Bharti also provides leased line services to high-end SMEs through broadband. Upcountry requirements are met through VSAT provisioning. Each of these sectors has a different pricing structure. For example, a DSL pricing would be entirely different from the pricing to ISPs. It also depends on the quality, reliability and performance throughput. Large customers are always given a margin to resell. The consumer market is very price sensitive, hence it has to be cheaper. DSL pricing starts from Rs 1,000 per month upwards. Leased lines will probably be Rs 1 lakh per annum, which is the upper end of the DSL bracket. For the corporate sector it is around Rs 35 lakh.

Is Network i2i superior?

Juneja says that one has to look for a couple of things when choosing a cable. One, which generation does the cable belongs to? SeMeWe3 and FLAG are old cables now, so their electronics may have aged. Oversea electronics can be replaced, but what about undersea electronics? Their cables themselves may have aged because the normal age of a cable is 10-15 years. By comparison, i2i has installed the latest generation cable. It will age less and has better quality electronic equipment. The route of the cable is also through a non-seismic and low shipping zone. Declares Juneja, "The quality of i2i is much better and robust." The track record suggests that i2i has no recorded failure in the past one year, while SeMeWe3 has failed over half a dozen times.

BBNL had planned to lay one more cable from Singapore to Mumbai, but that plan is now modified because Bharti is joining the SeMeWe4 consortium. "We will now build it along with the consortium. The cost of laying a cable is very high, so if you build it with partners it’s easier," explains Juneja. Another benefit of being part of such a consortium is that the company can get access to capacity on other routes. Bharti has already launched audio conferencing, and will soon be launching broadband-based video conferencing as well. All the services will utilise the Bharti backbone, whether it is NLD, ILDO, i2i or mobile services.

Focus on SMEs

The company feels that in India, entrepreneurs, professionals and the SOHO segment form a large chunk of the business nowadays. "While we talk to corporate customers for big business, we also want to prepare ourselves for the SME sector, which has large volumes," says Juneja. The company is aware that the SME sector is price sensitive, so it is planning to introduce economically priced products and services. Till now the sector’s exposure to the Internet has been very limited, but henceforth, easy access will give them a cheaper means of reaching customers. BBNL provides the service to TouchTel (the basic telephony arm of Bharti), and they provide DSL lines to end-customers. Similarly, the company is looking at supplying bandwidth to the SME segment through cable operators who will provide the last mile. The corporate/retail-household ratio of the company was so far 50:50, but now, with the increased emphasis on SMEs, it will become almost 75:25. Adds Juneja, "We want to be the specialist communication service provider for corporates and SMEs."

Instead of focusing too much on new launches, the company wants to grow in the existing set of offerings and ensure maximum market share for itself. "The focus will be on consolidation of services and making them more reliable," says Juneja. Still, customers will see a lot of variants of the existing services from Bharti Broadband before the second cable lands in Mumbai through the SeMeWe4 consortium.