The draft National Telecom Policy (NTP) 2011, released by the Ministry of Communications and IT in October 2011, gives a major thrust to transparency, improvement of the investment climate and promotion of consumer interest. The policy is likely to bring some relief to the sector, which has been caught in a series of controversies regarding spectrum and licence issues, besides facing hyper-competition and declining revenues. In this context, tele.net organised a conference, “Impact of National Telecom Policy 2011”, on November 15, 2011. The conference covered key issues such as spectrum pricing and allocation; one nation, one licence; consolidation; and broadband. The following section presents the highlights of presentations made at the conference...

Jaideep Ghosh, Partner, KPMG India

India has one of the lowest broadband penetration levels in the world. Currently, the country’s broadband penetration stands at only 0.9 per cent as compared to 26.34 per cent in the US, 26.91 per cent in Japan and 7.23 per cent in Brazil.

Interestingly, the spend on broadband as a percentage of the total disposable income is low in the US (0.4 per cent), France and the UK (0.5 per cent), and Germany (0.9 per cent). This is much higher in China (3 per cent), South Africa (3.9 per cent), Brazil (2.1 per cent) and Mexico (1 per cent).

The Indian fixed line internet market had 12 million broadband users as of March 2011, of which 6 million were residential accounts, while the rest were enterprise connections. Revenues generated from broadband and narrowband services stood at $1,040 million and $360 million respectively.

The National Telecom Policy (NTP) 2011 is expected to push internet uptake in the country. Moreover, the introduction of broadband wireless access services as well as the introduction of cheaper access devices will drive broadband services.

According to the Telecom Regulatory Authority of India, as of March 2011, the top five broadband service providers were Bharti Airtel, which provides both GPRS (pan-Indian) and internet services (top 100 cities); Bharat Sanchar Nigam Limited (BSNL), which provides GPRS (across India except Delhi and Mumbai), CDMA 1x and internet services; Mahanagar Telephone Nigam Limited (MTNL), which offers GPRS, CDMA (in Delhi and Mumbai) and internet services; Reliance Communications (RCOM) which provides GPRS (pan-Indian), CDMA and internet services; and Tata Teleservices Limited, which provides GPRS (pan-Indian), CDMA as well as internet services.

According to the Internet Service Providers Association of India, the market share of these players as of March 2011, was as follows: BSNL (58 per cent, primarily DSL technology), MTNL (12 per cent, primarily DSL), RCOM (11 per cent, mainly DSL), Bharti Airtel (7 per cent, primarily DSL), and Hathway (2 per cent, mainly cables). Other players held 10 per cent share in the market.

As of March 2011, DSL was the most preferred technology for accessing the internet, with a 90 per cent share, followed by cable modems (4 per cent), Ethernet LAN (3 per cent) and wireless technologies (3 per cent).

The main drivers for internet growth in India are low entry tariffs; low consumer premises equipment cost; availability of localised content; accessibility to relevant applications; support to service providers in creating infrastructure; availability of spectrum; and a technology-neutral approach.

Moreover, several applications are set to take centre stage in the next five years. These include security and monitoring solutions (such as streaming video surveillance and vehicle tracking); transportation (smart traffic flow and real-time video monitoring); location-based services (high definition [HD] advertising for location-based services and augmented reality for field technicians); video and music (multi-device mobile HDTV streaming); games (multiplayer social gaming); education (gaming and interactive education); and mobile commerce (banking, payments, trading and ticketing).

Going forward, according to industry publications and KPMG analysis, the Indian broadband market would almost triple in size over the next four years, growing from about Rs 90 billion in 2010 to about Rs 257 billion by 2014.

To sum up, NTP 2011 recognises broadband connectivity as a basic necessity and strives to provide broadband-on- demand by 2015. Besides, it will provide high speed and high quality broadband access to all village panchayats through optic fibre by 2014. Moreover, the policy aims to promote the development of multilingual content and upgrade the minimum broadband speed to 512 kbps by end-2011, 2 Mbps by 2015 and at least 100 Mbps thereafter.