The Indian broadband segment has been struggling to replicate the success of mobile telephony in the country. As per data realeased by the Telecom Regulatory Authority of India (TRAI), the broadband subscriber base stood at 14.88 million in November 2012 as against the total telecom subscriber base of 921.47 million. Challenges such as limited wireline infrastructure, low computer penetration, unavailability of additional spectrum and last mile access issues continue to impede broadband adoption. However, the segment started gathering momentum with the launch of 4G services, the emphasis on broadband growth under the National Telecom Policy (NTP), 2012 and the progress in the implementation of the National Optical Fibre Network (NOFN). Going forward, government support and greater industry participation along with the surging demand for data services are expected to drive growth in the segment.

tele.net takes stock of major developments witnessed in the broadband segment during 2012, key growth drivers, challenges and future expectations…

The launch of the NTP, 2012 was a key milestone achieved by the sector during the year. The policy recognises the importance of broadband for the country’s growth and addresses several aspects that are critical to provide broadband for all. The government has set ambitious targets for increasing the broadband subscriber base to 175 million connections by 2017 and 600 million by 2020. However, given the current uptake of broadband services, dedicated efforts are required by the industry to achieve these targets and to strengthen backhaul and access networks. Moreover, improving the affordability of services and increasing the availability of relevant local content will be the key focus areas during 2013.

The NOFN project is another key development that will facilitate broadband adoption in the country’s rural areas. Entailing an investment of Rs 200 billion, the NOFN aims to provide broadband connectivity to 247,864 village panchayats in the country by 2014 and all villages by 2020. The government plans to offer non-discriminatory network access to mobile operators, internet service providers, cable TV operators, content providers, etc. in order to promote e-health, e-education and e-governance services in the rural areas.

Besides helping the government to achieve its policy targets and extending operators’ reach to rural areas, the NOFN project is expected to sharply reduce network connectivity costs. A government-owned special purpose vehicle (SPV) – Bharat Broadband Network Limited (with equity participation from the government, Bharat Sanchar Nigam Limited [BSNL], RailTel and Powergrid Corporation of India Limited) has been established for project implementation. The SPV has already undertaken three pilot projects in Ajmer, Visakhapatnam and North Tripura, where it is providing a network speed of 100 Mbps. It has also signed project deals for laying fibre on ground in 13 states and is expected to sign agreements for the remaining projects by end-February 2013.

In a bid to improve the quality of broadband services being offered, TRAI has recently amended the quality of service regulation for broadband services and has implemented a stringent penalty system for operators failing to meet the benchmarks set by the regulator. Some of the key highlights of the amendment are:

Operators are required to meet service activation requests within four hours

They must ensure that 75 per cent of the subscribed speed is actually delivered to the subscriber and the data drop rate must be below 5 per cent.

Market composition

There were 159 licensed broadband service providers in the country as of November 2012. However, the market was largely dominated by only a handful of players including BSNL, Mahanagar Telephone Nigam Limited, Bharti Airtel and Reliance Communications that constituted 95 per cent of the total broadband subscriber market share. Broadband services in the country are deployed through several platforms such as cable modems, digital subscriber line (DSL), optic fibre and wireless. Of these, DSL has been the most dominant technology so far. As of September 2012, 84.6 per cent of the total internet and broadband subscribers accessed broadband services through the DSL platform.

However, wireless broadband is expected to be the key driver for broadband growth in the coming years, as it offers ease of access besides addressing the challenges related to fixed infrastructure deficit and high right-of-way charges associated with its deployment.

The adoption of mobile broadband has increased considerably over the past few years and this is likely to continue in the future. Further, the launch of 4G services will play a crucial role in this and will make mobile devices the primary and perhaps the only method of accessing services in rural areas. Indian telecom operators have unanimously chosen the long term evolution (LTE) technology platform to provide 4G services. It offers high speed, which supports bandwidth-intensive applications like video, music, online gaming and other on-demand services. LTE is expected to bridge the gap between rural and urban users as it will drive internet penetration and solve last mile connectivity problems for the former while catering to the latter’s surging data demand.

However, the delayed launch of 4G services has prevented Indian consumers from availing the benefits offered by this technology. Bharti Airtel is the only player amongst the eight broadband wireless access (BWA) spectrum holders to have launched 4G services in the country. The company introduced services in April 2012 for its customers in Kolkata followed by Bengaluru and Pune. However, the response to Bharti Airtel’s 4G services has not been outstanding, with the company registering just over 4,000 subscribers. This is due to the high cost of these services as well as the limited availability of devices.

Evolving 4G landscape and expectations

The expected action on the 4G front was missing during the year. The 2G licence cancellation and related controversies proved to be a dampener for BWA service roll-outs. There were several other challenges that led operators to shift their roll-out plans to 2013. The time division duplex (TDD) variant of the LTE technology, which Indian players opted for, is a relatively new version of LTE that has been deployed only in China and Japan. Currently, only 100 carriers are deploying LTE-TDD as against over 400 global telecom operators worldwide who are supporting the frequency division duplex (FDD) variant. Consequently, most of the leading networking equipment makers are focusing on developing FDD-compliant devices. Though LTE-TDD data dongles and customer premises equipment (CPE) are available, handsets supporting this technology are still not readily available. Further, the Indian players have been allocated spectrum in the 2300 MHz band, which is considered to be less efficient for deploying LTE services.

Also, overhauling of the underlying network is a prerequisite for the successful uptake of the LTE technology. This includes deployment of new antennas and optic fibre cables as well as the upgradation of transmission and deployment facilities. While the incumbent operators are expected to utilise their existing data pipes, unused bandwidth of their 3G networks and existing billing and value-added services (VAS) systems, the eventual shift to IP-based core networks is inevitable. As for new players in the domain, they need to install the entire system, comprising radio and core networks, operations and business support systems, and VAS.

Challenges notwithstanding, 2013 will witness the mass adoption of 4G technology. BWA players have firmed up their plans and are aiming to launch services within this year. Reliance Industries Limited (RIL)-owned Infotel Broadband Services, the only player with pan-Indian BWA spectrum, is planning to introduce services in early 2013 in the Delhi and Mumbai circles. According to industry estimates, RIL will spend $6 billion-$10 billion over the next three to five years for rolling out broadband infrastructure. The company has also signed agreements with several global vendors for equipment procurement and network roll-out. Samsung is responsible for radio access and packet core network; Cisco for IP routers; Alcatel-Lucent for metro and access segments, and fibre optic technology; Infinera for long haul; IBM for billing and system integration; HP for data centre integration; Ericsson for Wi-Fi; and Himachal Futuristic Communications Limited for tower and fibre optic roll-out. RIL has already completed technology trials in Jamnagar in Gujarat. It is also in talks with SPIRIT for deploying software products for voice and video calls over LTE.

Tikona Digital Networks, which won licences in five circles, plans to roll out 4G services by mid-2013. It is likely to focus on Tier 2 and 3 cities during the initial phase and will offer services at Re 0.02-Re 0.05 per MB. Currently, Bharti Airtel is offering the high speed data services on the 4G platform for Re 0.13-Re 0.15 per MB (excluding the cost of dongle or data card). Thus, by launching these services at rock-bottom rates, Tikona could trigger a price war in the data market. The company has planned investments of over Rs 10 billion for the next two years in this space.

Aircel with BWA licences in eight circles is also aiming at a mid-2013 launch. It has earmarked an investment of Rs 27.57 billion for network roll-out and is likely to initiate the launch in the Tamil Nadu circle. The company has already placed the orders for equipment and is currently testing the product and service configurations. It is in the process of setting up new electronic systems at the cell towers, rolling out optical fibre networks and addressing issues related to 4G device availability.

Further, Bharti Airtel’s acquisition of 49 per cent stake in Qualcomm’s BWA business will allow the operator to launch 4G services in Qualcomm’s circles (Delhi, Mumbai, Haryana and Kerala). Airtel is looking to launch a service in the Delhi and Mumbai circles in the coming months.

Videocon Telecommunications plans to launch LTE services soon using the spectrum that it won in the recently concluded auctions. This is possible as the auctioned spectrum is liberalised, which means that it is technology neutral and any kind of services can be offered through it. The operator, whose licences were cancelled by the Supreme Court, won fresh licences for the Gujarat, Haryana, Madhya Pradesh, Uttar Pradesh (East), Uttar Pradesh (West) and Bihar circles during the November 2012 auctions.

With BWA players gearing up for the 4G launch in 2013, the industry is expecting a mass uptake in the next two to three years. Being viewed as the technology of the future, it will address the issue of low broadband penetration in the country. On the one hand, 4G will allow rural users to gain increased broadband access, and on the other, urban users will be able to access speeds of up to 100 Mbps, a threefold jump in internet speeds as compared to 3G. 4G also offers several advantages like affordable high speed broadband and support for basic connectivity to customers as well as data-intensive applications such as pay TV platforms and high-data video downloads.

The way forward

The next few years are expected to witness the uptake of 4G services, which will give a major fillip to the broadband segment and enable subscribers to benefit from data services and their applications. The creation of an ecosystem to support the roll-out of wireless broadband; availability of access devices like USB modems/dongles, PC cards, routers, personal Wi-Fi hotspots, smartphones and tablets; and adoption of gaming and other high speed applications are the factors that will set the pace for the growth of broadband services. Further, the industry has made considerable progress in developing relevant content in local languages and improving access device availability and affordability.

Moreover, the government initiatives such as the NOFN and the NTP, 2012 will act as primary growth drivers for investment in the broadband space. Several wireline and wireless broadband projects under the Universal Service Obligation Fund, which will facilitate broadband penetration in rural areas, are also under implementation. Finally, with the government expected to auction spectrum in the 700 MHz band in 2014, the segment’s future looks promising. Most of the incumbent players are looking forward to acquiring substantial spectrum in this band which is considered to be highly efficient for deploying 4G services.