With a broadband user base of 13.13 million as of November 2011, India now ranks thirteenth in the world in terms of overall subscriber numbers. The broadband growth rate, though sluggish as compared to that of the mobile segment, is the third fastest in the world. And while broadband penetration at present is merely 1 per cent against the teledensity of 76 per cent (as of November 2011), the scenario is changing rapidly with the launch of 3G services, ongoing rollout of broadband wireless access (BWA) networks, and increasing government focus on this segment.

The year 2011 was marked by several developments in the broadband space. The National Broadband Plan was floated and is awaiting cabinet approval. Under this plan, a National Optic Fibre Network (NOFN) would be built at a cost of around Rs 650 billion to extend broadband services to all villages and towns in India by 2016-17.

The creation of this network and sharing it with other operators would help lower the connectivity costs of companies. The network would help the government achieve its broadband penetration target. In December 2010, the Telecom Regulatory Authority of India (TRAI) had set a target of 75 million broadband connections over two years and 160 million by 2014.

Moreover, the National Broadband Plan proposes to define broadband as a data connection using any technology that is able to support interactive services, including internet access, and support a minimum download speed of 512 kbps. The upload speed should be at least half the download speed. So far, broadband has been defined in India as a connection that supports a minimum speed of 256 kbps. Going forward, a stipulated download speed of 2 Mbps will be effective from January 1, 2015.

Another government initiative that could prove to be a key enabler for broadband growth is the unveiling of the Aakash tablet. The world’s cheapest mass market computing device at $35, Aakash could help meet the connectivity demands of rural and semi-urban regions, even though it lacks the features of high-end smartphones/laptops.

Among the other key developments in the industry was the deployment by Ciena Corporation of the country’s first 100 Gbps transport connection. This was significant considering that Indian telecom operators are generally perceived to be somewhat behind in the deployment of new technology as compared to their global counterparts.

While the private players were busy rolling out BWA networks, the government-owned Bharat Sanchar Nigam Limited (BSNL) took the unprecedented step of returning a part of its BWA spectrum. BSNL has been recording losses for the past two years and it was important for it to put its finances in order. Its request has been accepted by the ministry, which now plans to auction this lot of spectrum to private operators.

Expectations from 2012

With the expected launch of BWA services, 2012 is likely to be a year of faster, wireless broadband connectivity.

Reliance Industries Limited (RIL), Bharti Airtel, Aircel, Tikona and Qualcomm are working aggressively to launch 4G services. A look at the plans and strategies of the six BWA licensees...

Infotel Broadband: At present, the company is in the second phase of its technology trials and is yet to select the vendors for network rollout. RIL’s initial plan for 4G, expected to be launched in mid-2012, is to offer plug-in USB modems, set-top boxes that combine TV channels, on-demand video and videoconferencing, and a few tablet PCs, in 35 towns in the first year itself.

The company’s trump card, as usual,  is likely to be pricing. The speculation is that RIL will shake up the data/broadband services market with tariffs of just Rs 10 per GB. It had used a similar strategy, to great effect, with voice services in 2003. The price undercutting helped the company quickly build operating scale and volume of minutes.

Bharti Airtel: In October 2011, the company reportedly awarded network rollout contracts to ZTE, Huawei, Ericsson and Nokia Siemens Networks for the Kolkata, Karnataka, Punjab and Maharashtra circles respectively. While Bharti Airtel has signed a non-disclosure agreement with the four vendors, market estimates indicate each contract to be in the range of $75 million to $100 million.

In line with TRAI’s recommendation that operators should offer minimum speeds of 2 Mbps by 2015, Bharti Airtel plans to upgrade all its wireline broadband subscribers across 14 top cities to a minimum speed of 2 Mbps. These cities are Delhi, NCR, Lucknow, Chandigarh, Bangalore, Chennai, Hyderabad, Coimbatore, Mumbai, Pune, Ahmedabad, Indore, Bhopal and Kolkata. The operator has about 1.4 million wireline broadband subscribers, of which 85 per cent are in these cities. Consumers will have to pay between Rs 50 and Rs 100 for the upgrade.

In the 80 other cities where Bharti Airtel offers the service, the consumers will get a minimum speed of 1 Mbps. The upgrades are being undertaken in phases and are scheduled to be completed by end-January 2012.

In other markets, where customers are being upgraded to a speed of 1 Mbps, Airtel is not levying any additional charge for now.

Tikona Digital: Tikona Digital Networks, which owns BWA licences for five telecom circles, brought in Deloitte Touche Tohmatsu in September 2011 to chart its strategy for the enterprise segment.

Augere Holdings: In October 2011, Augere awarded an LTE TDD network rollout contract to Ericsson for an undisclosed sum. According to the contract, Ericsson will install its RBS6000 radio access network equipment, microwave backhaul kit and evolved packet core  equipment in the Madhya Pradesh circle, besides managing services for an initial period of three years. Augere is aiming for a soft launch of its service, under the brand name ZOOSH, during the second quarter of 2012, with a phased rollout covering an initial 14 cities in the circle. Its target market is the youth sector.

Qualcomm: The US-based company won BWA spectrum in four circles – Delhi, Mumbai, Haryana and Kerala – in the auction held by the Department of Telecommunications (DoT) in June 2010, for Rs 49.12 billion. Qualcomm partnered with Indian firms Tulip Telecom and Global Holding Corporation in July 2010 to form a separate entity, Wireless Broadband Business Services, to run the BWA business. However, Qualcomm's efforts at getting an ISP licence, which is crucial to starting its BWA services, have been plagued with problems right from the beginning. Earlier, DoT threatened to cancel their BWA slots claiming that Qualcomm had applied through multiple entities. The issue was finally resolved after Qualcomm agreed to merge all the entities into one company. In a new development, its BWA licence now hinges on Tulip’s ability to pay certain dues (Rs 1.46 billion), which it owes to the telecom department.

Aircel: The operator has BWA licences in eight telecom circles and is reportedly planning to roll out services by mid-2012. It would invest about $10 billion by 2014 in service rollout as well as network expansion.

Meanwhile, Aircel has been actively making its way into the Wi-Fi market, as part of its data offload strategy. In February 2011, it launched 50,000 Wi-Fi hotspots across the country, and brokered partnerships with Wi-Fi specialist O-Zone Networks and wireless ISP Tikona Digital Networks to offer public Wi-Fi services to its subscribers. The company is charging just Rs 15 per hour, which is less than what many internet cafes charge.

Upcoming data revolution

Although spectrum auctions were delayed by more than two years, perhaps the market is now better prepared than ever before to seize the broadband opportunity. With an installed base of over 75 million personal computers (desktops and notebooks) and the sales volume growing at 22-25 per cent annually, more households and businesses are going to be computer and internet enabled than ever.

What makes this data revolution exciting is that it may be different for other reasons; the dominant internet access device would no longer be a computer, but rather a smartphone or other mobile internet devices. According to a recent survey conducted by market research firm Nielson, Indian smartphone users spend more time on the internet than on traditional voice calls and SMSs. In 2011, smartphone shipments to the country were estimated to have crossed 12 million.  This segment is likely to witness a compound annual growth rate of 68.4 per cent during the period 2010-15 and to achieve shipments of 81.5 million by 2015.

In terms of investments in the broadband space, with mobile data traffic headed for exponential growth, mobile backhaul networks will prove to be a lucrative segment, attracting a significant amount of investments. Government-driven pan-Indian initiatives, including the NOFN, will act as the primary growth drivers for this investment. On the access front, the  majority of the investments are likely to be made by BWA licensees in LTE TDD-based networks.

Conclusion

For a country of its size and stage of economic growth, India is lagging behind its peers in broadband penetration. Clearly, a coordinated approach between the industry and government is required to remove the existing barriers and drive more widespread adoption of broadband services.