The communications ministry has pegged broadband growth in India at 20 million by 2010. It has also reiterated its stand on pushing broadband as a key driver of economic growth. This is reason enough for telecom service providers to be bullish and customise broadband packages for individual and enterprise needs.
Of course, the increasing demand for high speed, "always-on" connectivity in urban areas is also fuelling this growth. Since January 2005, when state-run Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) launched 256 kbps speed broadband services, for less than Rs 500 a month (Rs 399 by MTNL and Rs 500 by BSNL) for home users, competition in this sector has been warming up.
Bharti Tele Ventures Limited (BTVL) joined the fray with a broadband package of Rs 349 a month and recently, MTNL announced a new DSL plan that combines a wireline and broadband connection for a monthly rental of Rs 500. The plan offers customers 200 free local calls and 250 MB of download.
Today, wireline operators find broadband a much better selling proposition, with the average revenue per user at Rs 600 for companies like MTNL.
Subscriber base
The Telecom Regulatory Authority of India (TRAI) defines broadband as a connection with the capacity to transmit large amounts of data at speeds beyond 256 kbps.
As on September 30, 2005, the total number of broadband connections in the country crossed 610,000 which represents a 15 per cent growth over the previous month.
BSNL alone added 50,000 subscribers in August and currently has a subscriber base of 1.2 million. MTNL follows closely with a subscriber base of 73,000 in the two metros (39,000 in Delhi and 34,000 in Mumbai).
Future projections
The broadband policy announced by the Department of Telecommunications (DoT) in October 2004 projects a total of 3 million broadband subscribers across the country by the end of 2005, 9 million by 2007 and 20 million by 2010.
The Confederation of Indian Industry (CII) has its own projections. According to a CII report, "India's broadband economy: Vision 2010", there should be a minimum of 3 million broadband subscribers by 2006, 10 million by 2010 and 35 million by 2020 in urban India across homes, enterprises and public kiosks. In addition, the CII estimates that nearly 50 per cent of the rural population will have a broadband connection by 2010 and 100 per cent by 2020 through 100,000 rural broadband kiosks.
What will spur broadband uptake, according to both DoT and CII, is the spread of e-education, e-health, e-governance, entertainment and e-commerce services, besides employment generation opportunities.
Leading players
The leading broadband operators in the country today are BSNL, MTNL, Sify, Videsh Sanchar Nigam Limited (VSNL), Reliance Infocomm, BTVL and Tata Teleservices Limited (TTSL).
All these operators, private and incumbent, are flooding the market with a bouquet of new offers aimed at weaning away subscribers from the more prevalent dialup connections and other narrowband access applications.
For instance, MTNL's Rs 500 combo offer not only offers 250 free calls and specified download limits, it also allows additional downloads at only Rs 1.20 per MB and additional calls at Rs 1.20 per minute. The company has also reduced its modem charges for Triband (its broadband service) to Rs 800 from the Rs 1,300 charged earlier. Plus, it has removed the registration charge of Rs 500.
For its enterprise customers, MTNL offers business plans of 512 kbps speed at an attractive rate of Rs 1,200 per month with free downloads of 2.5 GB.
BSNL, the other key player in the broadband segment and the largest internet service provider in the country, launched its "DataOne" broadband service in January 2005. In August, the company undertook a downward revision in tariffs. It currently provides home plans starting from Rs 250 per month instead of Rs 500, with minimum modem charges of Rs 1,200.
For businesses, BSNL offers a 512 kbps connection for Rs 3,000 with 10 GB of download while for plans with speeds of 256 kbps, the tariff is Rs 1,200 per month.
Private operator BTVL is also competing on a low-tariff platform. A 256 kbps connection from the company's Airtel broadband and telephone service costs Rs 349 per month. For the "economy" and "flexi" combo plan (broadband along with fixed line connection) with a speed of 256 kbps, BTVL charges Rs 550 a month. For the business segment, its tariffs start at Rs 2,495 for a 512 kbps connection with 8 GB download.
CDMA-based operator TTSL not only offers low tariffs (the cheapest is Rs 375 for a 256 kbps connection with 500 MB download), the plan also has a provision to carry unused MB forward to the next month on renewing the account.
Problems and pitfalls
While it is true that the broadband subscriber numbers are rising, the target is still far from being met. For the broadband subscriber base to reach the target of 3 million by December 31, 2005, over 600,000 subscribers need to be added every month, starting September. This, according to the Internet Service Providers' Association of India (ISPAI), is way too ambitious. A target of 1 million broadband subscribers by December-end is more realistic, which would mean adding around 100,000 new customers every month.
One of the key concerns is the huge capital investment required to meet the broadband targets. The overall capex requirement for 2006 is estimated at $2.6 billion while that for 2010 is $5.3 billion.
Further, the broadband market cannot be truly competitive as long as bandwidth prices remain high. The cost of bandwidth is directly related to the cost of providing broadband services, as bandwidth, especially international bandwidth, is a major propeller of broadband services. Bandwidth prices are much higher in India compared to elsewhere in the world. In fact, internationally, India compares poorly with economies like the US, Japan and Korea. While in Japan a 2 Mbps connection costs Rs 100,000, the same costs Rs 130,000 in India. In South Korea, a 45 Mbps line costs Rs 4.4 million, but in India it costs over Rs 10 million. Similarly, a 155 Mbps line costs Rs 13.2 million in Singapore and Rs 13 million in Hong Kong but costs more than Rs 20 million in India.
Although there has been an increasing demand for bringing down bandwidth prices in the country, the TataownedVSNL, which controls more than 80 per cent of the bandwidth market, has been opposing the move.
TRAI did reduce IPLC tariffs recently. But despite this, bandwidth prices in India continue to be far above international standards. According to TRAI, bandwidth tariffs can be brought down to the levels prevailing elsewhere in the world only through price regulation, which can be phased out over time as the market becomes more competitive. For example, the Hong Kong government had price ceilings in place till as late as 2002. They were removed only after the market had no dominant player and there was enough competition.
New investments
Still, the mood in the broadband segment is upbeat with operators drawing up big investment plans. BTVL has announced that it will invest Rs 15 billion in 2005-06 to expand its broadband and telephone services in 14 more towns, across 10 circles. The new towns in which Bharti will set foot are Chandigarh, Mumbai, Ahmedabad, Hyderabad, Kochi, Kolkata, Lucknow, Ghaziabad, Pune, Agra, Meerut, Ludhiana, Jaipur and Jalandhar.
According to company officials, BTVL is looking to net over 2.5 million subscribers by March 2007. It also hopes to connect 5,000 small towns and villages through wireless.
The railway ministry too has undertaken a major initiative targeting an eightfold increase in its bandwidth business to Rs 2.5 billion in fiscal year 2005-06. For this, it has agreed to lease out its bandwidth to Zee TV in the Mumbai-Surat region, Hutch in Mumbai and ETV in Jalandhar to provide last mile connectivity to customers.
Most operators including BSNL, MTNL, Bharti and Reliance are looking at offering "triple-play" services within a year. This combines phone, internet and entertainment services. In fact, US-based UTStarcom has signed deals with several telecom companies to launch internet protocol television in India.
With new investments flowing into this segment, the future of broadband in India seems to be bright. Considering the country entered this arena much later, its progress so far has been good. Of course, a lot still remains to be done.