Broadband in India

The Times of India has a commentary by Pradip Baijal, who is the chairman of TRAI (Telecom Regulatory Authority of India), on what needs to be done to accelerate the process of broadbanding India:

The main reason behind our poor penetration is the abominably high subscription rates. In Korea , charge per 100 Kbps is a quarter US dollar per month. In India , the consumer pays 60 times more for the same speed. Korean GDP per capita is $10,000 against India ‘s $50.

Thus, on an affordability basis, the Indian consumer pays 1,200 times more. We must ensure that the charges are drastically reduced if they are not, the problem of low connectivity will never be overcome. Until last year, telecom tariffs in India exceeded those in China by a factor of 1.5, even though the GDP there was double that of India .

Before we plan for higher broadband penetration, we must analyse the present hindrances to growth. Of course, the current rates for consumers are very high. Growth cannot obviously happen unless these rates are brought down to nearer the Korean levels. There are other constraints as well. Broadband cannot be viably delivered by anyone other than the incumbent since the entire last mile connectivity is with him. Today, the local loop is not available to other operators. DTH, VSAT and wireless can deliver the last mile connection, but the costs of both DTH and VSAT are kept artificially high and wireless data networks are yet to spread. Since “within city” networks are solely with the incumbents, there is no competition despite the fact that there are many bandwidth suppliers.

National Internet Exchange of India was set up to ensure that local Internet traffic does not have to go through US, etc. However, the costs are very high in this network for smaller operators and inter-operator problems are not yet sorted out. Laying new last mile connection, always a problem, has been rendered impossible due to problems of right of way. Taxes and duties for broadband equipment are very high and there are few incentives for faster growth.

Business World had a detailed story recently:

After over Rs 51,000 crore of investment, the dozen or so companies involved don’t have much to show. All they have is about 100,000 subscribers who think broadband means just faster Internet access. In some of the world’s largest broadband markets – Korea, Japan, and to some extent the US – it is household penetration that set the broadband market on fire and made it profitable. In these countries, demand for entertainment in the form of either cable TV or gaming created a demand for fatter pipes at home, and therefore broadband. In Korea and Japan, telecom operators fulfilled this demand. In the US, cable operators did it.

Yet in India, hardly any push has happened to make telecom operators offer cable TV, or vice versa. Both have made some half-hearted forays, promising a lot but delivering just net access. “Our broadband penetration is just two per 10,000 people (0.02%), and we say we are a knowledge-based society,” exclaims Pradip Baijal, chairman of Trai and now the country’s broadcast regulator.

Baijal is communications minister Arun Shourie’s man in the field, and kick-starting broadband penetration is one of his priorities. He thinks that broadband can play a vital role in prodding GDP growth. The availability of the net, telephony and video on demand at low prices means that distance education, tele-medicine, tele-working, and research become easier. It means transaction costs for businesses go down, and overall gains in productivity.

two small paragraphs in two unheard of reports are broadband’s new hope. One is in a Confederation of Indian Industry (CII) discussion paper on the India Broadband Economy, and another is in a Telecom Regulatory Authority of India (TRAI) consultation paper. Both papers recommend that state-owned Bharat Sanchar Nigam (BSNL) and Mahanagar Telephone Nigam (MTNL) open up their last mile access to other companies.

Will it work? Maybe, just maybe, unbundling could trigger a fresh spurt of investment by telecom companies into the last mile. That, in turn, could push cable companies to offer more than just cable TV, regulation permitting. That, in turn, could push prices down, and so on. Whatever happens, there will be lots of confusion over the way it will work. There will be fights over who will invest and who will get a larger share of revenues. There will be endless debates on the technologies best suited to do this – DSL, cable or wireless – and more regulation may be needed in the initial phases. But for India’s frustrated broadband dreams, any hope, however slender, is welcome.

Bandwidth in India is expensive and still in the world of narrowband for the most part. Broadband has to become an integral part of India’s digital infrastructure.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.