\While the broadband segment with a penetration of only 1 per cent has failed to keep pace with the wireless market, which had a teledensity of 73.16 per cent as of April 2013, high speed internet services are gaining momentum owing to various private and government initiatives. The advent of 3G and 4G technologies has opened up new avenues for the segment as operators can now provide quality high speed services to consumers on the move. Government initiatives in bridging the digital divide will also push broadband growth in the country’s hinterland. The

Rs 200 billion National Optical Fibre Network (NOFN) is a noteworthy project, which aims to bring wired broadband connectivity to all village gram panchayats by 2015. Also, the ambitious broadband targets set under the National Telecom Policy, 2012, are an indicator of the growth the government expects to witness in the segment. The policy aims to provide reliable and affordable broadband-on-demand by 2015 as well as establish 175 million broadband connections by 2017 and 600 million connections by 2020.

In fact, the overall broadband ecosystem in India has been undergoing significant changes over the past few years. The wireless platform has emerged as the preferred access medium. There has been considerable progress with respect to availability and affordability of devices. Further, with the recent instances of operators reducing their 3G tariffs, high speed data services have become more affordable. The content space has evolved and several applications are available in local languages. However, there is still major scope for improvement in the broadband ecosystem.

A look at the current status and structure of the broadband market, key growth drivers and the way forward…

 Market size and key players

As per the Telecom Regulatory Authority of India (TRAI), the country’s broadband subscriber base stood at 15.09 million at end-April 2013. These subscribers are served by a highly fragmented broadband market comprising over 160 internet service providers (ISPs). The top three ISPs accounted for over 80 per cent of the total market share. Unlike in the wireless telephony space, public sector operators’ performance in the broadband segment has been very impressive. Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) together account for about 73.1 per cent of the market. Other key players in the segment include Bharti Airtel, Reliance Communications, Hathway, You Broadband, Tikona Digital Networks as well as Tata Communications.

In the wireless space, Sistema Shyam TeleServices Limited (SSTL) has been providing high speed broadband services under the MBlaze brand since 2009. Over the years, SSTL has expanded its footprint significantly across the country. Meanwhile, Tata Teleservices Limited offers the Tata Photon+ broadband services on the EVDO platform.

The broadband wireless access (BWA) spectrum auctions in 2010 resulted in the entry of new players such as Infotel Broadband, Aircel, Augere Wireless Broadband and Qualcomm in the Indian broadband space. Other companies in the BWA space include Bharti Airtel and Tikona, which acquired spectrum in select circles; and BSNL and MTNL, which already had pan-Indian Wi-Max spectrum. Currently, Bharti Airtel is the only BWA spectrum holder to have launched 4G services in the country. The operator has launched services in Kolkata, Bengaluru, Chandigarh and Pune on the long term evolution (LTE) platform; however, service uptake has not been very impressive. The company now plans to launch these services in the Delhi and Mumbai circles where it recently acquired spectrum through the buyout of Qualcomm’s Indian broadband venture. Other players are in the process of finalising their service launch plans. Meanwhile, BSNL and MTNL have already surrendered their BWA spectrum as there were no takers for Wi-Max technology – the platform selected by these operators to offer 4G services. The move was also aimed at generating additional funds to improve their financial position.

Further, with the implementation of the unified licence regime in the telecom sector, the broadband space is likely to witness the entry of more players, specifically in the 4G segment. For instance, Videocon Mobile Services, which reacquired some of its cancelled 2G licences in the November 2012 auction, plans to use liberalised spectrum for providing LTE-based 4G services. Also, the long-awaited auction in the 700 MHz spectrum band would attract several existing and new players for buying 4G spectrum.

 Key trends and growth drivers

•    Emergence of mobile broadband: Wireless broadband is emerging as the dominant platform for accessing broadband services. From the users’ perspective, accessing high speed data services on the move through handsets is probably the most convenient and preferred medium of broadband usage. The availability of affordable smartphones and a reduction in 3G tariffs have driven mobile data uptake. 3G operators have been doubling their data user base every year since the launch of these services in 2010. Idea Cellular, for instance, registered 6,344 million MB of 3G data volumes during the quarter ended June 2013, a growth of 95 per cent over the corresponding quarter in 2012. Bharti Airtel also reported a 117 per cent increase in data usage (comprising 2G and 3G data) during the period under consideration.

The demand is primarily driven by the high uptake of applications related to social networking, entertainment, sports, etc. Bandwidth-intensive video-based applications are also gaining adoption. While the demand for mobile broadband is largely driven by urban India, these services will have many takers in rural areas as well. E-governance applications in the areas of health, commerce and education will drive rural broadband demand.

Also, from an operator’s perspective, offering mobile broadband services makes more business sense in the short run vis-à-vis deploying wireline networks. Issues related to right of way (RoW) such as multiple clearances and exorbitant charges are the key roadblocks to fibre network roll-outs. However, given the growing data demand and the limited wireless spectrum availability, wireless networks alone will not be able to cater to the increasing broadband requirements in the long run. Operators will be required to set up strong fibre infrastructure to offer bandwidth-intensive applications in the future.  To this end, they have requested the government to standardise RoW processes and rates, which vary across states and have been impeding operator initiatives in the fibre segment.

•   Government push: Over the past few years, the government has taken several initiatives to provide a fillip to the broadband segment. The Universal Service Obligation (USO) Fund has been providing financial assistance for establishing broadband infrastructure in rural areas. These include subsidies for establishing telecom towers, providing broadband connectivity through DSL and rural wireline exchanges, and laying optic fibre cable networks in the north-eastern states. The NOFN is the biggest project to be set up through the USO Fund and is aimed at bridging the gap in terms of broadband access between rural and urban areas. The project claims to have delivered broadband speeds of up to 100 Mbps at the gram panchayat level under three pilots completed in October 2012. Currently, site survey at all villages is in progress and the government aims to cover 100,000 villages by 2014.

Besides rolling out broadband infrastructure, the government has taken several initiatives towards improving access to and affordability of these services. The launch of an ultra-low-cost tablet, Aakash, in June 2012 was a key milestone. So far, three iterations of the tablet have been introduced and the fourth one will be launched in the near future. Besides, several rural e-governance services are being provided through statewide area networks.

•   4G gains momentum: While LTE was expected to bring about a major breakthrough in the Indian broadband space, the delayed service launch has proved to be a damper. Currently, Bharti Airtel is the only player offering these services in the country. However, the ambitious operator plans suggest that 2014 could be the year of 4G in India. Reliance Jio Infocomm, the only operator with pan-Indian BWA spectrum, has been making significant investments in developing 4G infrastructure. The player is expected to launch services by March 2014. Other players will launch these services in end-2013 or early 2014.

However, according to analysts, the technology would take time to mature in the Indian market. From the users’ perspective, availability and affordability of LTE devices will be key issues. Operators will face resource constraints as 20 MHz of 4G spectrum will be inadequate to meet the future demand for these services. Besides, they will be required to enhance their backhaul capacity significantly to cater to the data volumes that LTE is expected to drive.

•    Ecosystem development: The broadband ecosystem has come a long way in terms of content development and device affordability. Smartphone prices have dropped to Rs 5,000, mobile banking services have gained momentum and several applications are now available in vernacular languages. However, there still exists a major gap in terms of relevant and localised content.

•   Focus on fibre: Operators have realised the importance of fibre as a medium to deliver high speed broadband services. The government’s objective to connect gram panchayats through fibre underlines the importance of this medium in facilitating broadband access in the long term. While the NOFN aims to provide fibre connectivity in rural areas, several operators have been deploying fibre-to-the-x (FTTx) technology for urban agglomerations. However, the adoption of FTTx services has been far from impressive, primarily due to the high cost of consumer premises equipment. Government support will be key to promoting fibre deployment and FTTx uptake.

 The way forward

The demand for broadband services is growing rapidly and the corresponding requirements are unlikely to be met in the near future. 3G services are proving to be a game changer for the broadband segment, which will take off once LTE services witness mass adoption. The government is focusing on broadband services and has set ambitious targets for the segment. Besides the timely completion of the NOFN, allotting additional LTE spectrum to operators would provide a fillip to broadband growth in the country. Therefore, steps are being taken to strengthen the overall broadband ecosystem. It is now a matter of time before broadband services gain traction, which will add a new chapter to India’s telecom growth story.