In April 2015, India achieved a major milestone when the broadband subscriber base crossed the 100 million mark. This was a big feat for the Indian broadband industry as it indicated a shift towards a high-growth path. Realising the potential of data as the strongest driver of future business growth and profitability, operators have been focusing all their energy and resources on developing a robust broadband ecosystem.

Affordable devices, low data tariffs, increased awareness and content localisation have been encouraging users to subscribe to broadband services. Moreover, next-generation services have started gaining traction, with 3G now reaching maturity levels in urban pockets. The 4G space, too, has been receiving a major fillip, with more and more operators announcing plans to enter the segment. The government’s push in the form of its landmark National Optical Fibre Network project, now rechristened BharatNet, is also a step towards ensuring broadband ubiquity in the country. A strong broadband ecosystem will be central to the success of projects like Digital India and Smart Cities.

tele.net takes a look at the current status of the broadband market in India, along with the key trends, challenges and the way forward…

Numbers gains

As per the Telecom Regulatory Authority of India, broadband users in the country stood at 104.96 million by end-May 2015, registering a monthly growth rate of 4.17 per cent. This was primarily led by users accessing broadband services through phones and dongles. In this regard, there was a growth of 4.91 per cent, from 84.79 million to 88.96 million, between April 2015 and May 2015. Meanwhile, the fixed wireless subscriber base stood at 440,000 users (including Wi-Fi, Wi-Max, point-to-point radio and VSAT), reporting a minor decline of 0.17 per cent. Wired subscribers went up from 15.52 million to 15.56 million, signifying an increase of 0.23 per cent.

The top five service providers accou-nted for 83.75 per cent of the total broadband market share at the end of May 2015. Bharti Airtel led the pack with 23.39 million subscribers, followed by Vodafone India with 21.27 million, Bharat Sanchar Nigam Limited (BSNL) with 18.5 million, Idea Cellular with 15.76 million and Reliance Communications (RCOM) with 8.99 million.

As of May 31, 2015, the top five wired broadband service providers were BSNL (9.9 million), Bharti Airtel (1.45 million), Mahanagar Telephone Nigam Limited (1.14 million), Atria Convergence Technologies (0.66 million) and YOU Broadband (0.45 million). Meanwhile, the top five wireless broadband service providers were Bharti Airtel (21.93 million), Vodafone (21.27 million), Idea Cellular (15.76 million), RCOM (8.88 million) and BSNL (8.59 million).

Key trends

• High growth in the rural market: As urban markets get increasingly saturated, operator focus is set to shift to rural areas. The increase in literacy rates and smartphone penetration points to great potential in the segment, with the availability of local language content, increased affordability and higher disposable incomes adding to operator revenues. As of March 31, 2015, the rural broadband internet subscriber base was 25.51 million. Karnataka led the way with 2.77 million rural broadband users, followed by Kerala (2.52 million) and Tamil Nadu (2.27 million).
• Content and applications drive growth: Relevant localised content and applications have been instrumental in encouraging customers to switch to feature-rich phones and access broadband services. According to a report published by the Internet and Mobile Association of India in conjunction with the Indian Market Research Bureau, 127 million of the country’s total of 269 million internet users consume content in their local languages.
• Affordable handsets to fuel demand: The falling prices of access devices, particularly smartphones and tablets, will fuel the demand for broadband devices in the future. In India, over 50 per cent of shipped smartphones are expected to be under $100 by 2017. The entry of new Chinese players has made the handset space more competitive by further driving down prices.
• 3G leads mobile broadband segment: After a rough take-off, 3G services are finally gaining ground among Indian users. In fact, 3G is being used as the primary technology for providing mobile broadband services. As per Nokia Networks’ mobility report, mobile data traffic generated by both 2G and 3G mobile broadband services increased by 74 per cent at the end of 2014 as compared to the beginning of the year. This growth was driven primarily by strong 3G uptake that grew by 114 per cent compared to a 41 per cent growth in 2G uptake during the same period.
• Activity in the 4G space: 4G has the capability of opening up a new world of mobile broadband. It is expected to deliver speeds that are about 10 times faster than those offered by 3G. In add-ition, it promises faster connection times and assures an always-on service experience. Over the past year, several players have shown interest in entering the 4G market, with some even conducting trials for the same. The liberalisation of spectrum has enabled players that could not acquire broadband wireless access spectrum in 2010 to offer similar (or better quality) services in another spectrum band. Operators like Vodafone India, Idea Cellular and Videocon Telecom, which had managed to win spectrum in the 1800 MHz band, recently strengthened their plans to capture the 4G market in a better manner. Meanwhile, Bharti Airtel has launched these services across the country. The segment will get a further boost with Reliance Jio Infocomm’s launch of long term evolution (LTE) services later in 2015.
• OFC gains traction: Operators have expeditiously ramped up their networks to ensure their compatibility with next-generation technologies. A large part of annual capex goes towards expanding the optical fibre cable (OFC) network for catering to the surging bandwidth demand from individual users, households and enterprises. With its infinite capacity, OFC is emerging as a preferred service delivery medium for operators since spectrum acquisition has become a costly affair in recent times. Investments in OFC networks are being driven by the proliferation of next-generation broadband technologies like LTE, increasing backhaul deployments and last mile networks, as well as by government initiatives like BharatNet and cable TV digitisation.
• Government push: Apart from being a backbone for several ongoing e-governance projects, broadband services will be the key anchor for the successful implementation of the Digital India initiative as well as the Rs 70 billion mega programme for building 100 smart cities. BharatNet is a joint effort between the centre and the states that is aimed at delivering high speed broadband connectivity to 250,000 gram panchayats through OFC by December 2016. Considered the world’s largest rural broadband connectivity project, it is expected to bring about a digital revolution in India by providing e-governance services like e-education and e-health in rural regions.

The way forward

While the country is optimistic about the growth of broadband, realising this potential is going to be a daunting task. A little over 100 million broadband subscriptions seem to be a very small number when compared to the billion telecom users in the country. Although broadband subscriptions have increased, broadband penetration continues to be abysmal while the infrastructure is inadequate and concentrated in urban pockets. BharatNet is also yet to bring about any extraordinary results. Rolling out a fixed broadband network, which is the ideal platform for delivering high speed services, is both difficult and expensive.