Thinking Workable Broadband

You know Mr Sharma, don’t you? Every month he pays around Rs 200-400 per
month to his cable operator for the privilege to watch some 70-odd television
channels. Depending on his usage, he also pays a total of Rs 500—3,000 per
month to his ISP and phone provider, for dial-up Internet access. So you figure,
he is spending around Rs 700-3,400 on just cable and a  slow Internet access that
doesn’t even work for an audio conference with his colleagues in the office or
elsewhere, let alone a video chat he wants with his cousin living abroad.

Now imagine the delight of Mr Sharma if he were to pay a mere Rs 500—800
per month–to the same cable guy, or to the phone provider–to get access to
not only thousands of television channels and radio station broadcasts around
the world, but also to do rich video and audio conversation with friends and
colleagues (a possible case for teleworking) and graphics-intensive online
gaming, not to mention a high-speed Web access.

That’s the promise of broadband, and the above-mentioned scenarios could be
part of the new vision that’s taking shape, with increasing broadband
penetration in India.

So Far, not so Good

Eight years after the country began its Internet journey, and five years
after the national ISP policy, the number of Internet subscribers is still
languishing in the country with a current subscriber base of 39.8 lakh users in
September, 2003, according 

to latest TRAI data. The number of broadband
subscribers is even marginal. And this is when National Telecom Policy 1999 (NTP
’99) has specified targets for providing high-speed data and multimedia
capability to all towns with populations greater than 200,000 by the year 2002.

Chasing the Fat-pipe Dream

Target: Broadband access at Rs 500-800 for end-consumers Need to sort out international and domestic bandwidth pricing and availability Need for a national broadband plan Rationalization of taxes and duties required Need to learn from Korean, Japan and UK examples

For Internet access, dial-up remains the primary mode for almost 90%
subscribers. Although there are service providers who are providing high-speed
access through means like leased lines, DSL, and cable access, the twin issues
of quality of service and pricing remain the biggest hurdles in mass adoption of
broadband.

The leased-line connectivity is preferred by enterprises. As of September
2003, a total of 8,109 subscribers availed of leased-line connectivity, as per
TRAI data. Companies like Dishnet DSL have been in the arena for many years but
with limited success–the number of DSL subscribers still lurks around 60,000,
and DSL is still being used primarily to provide wideband (64—128 kbps) access
over DSL.

For a country with 40 million cable TV access subscribers, only around 52,000
subscribers use the cable network for Internet access. And since cable access
works in the shared-bandwidth mode, the quality of service is even more
difficult to maintain.

The distressing state of Internet and broadband penetration is a cause of
concern, even as the benefits of high-broadband penetration are widely
recognized and documented (see ‘What Broadband means to India’).

However, as India sets its sight on achieving mass broadband-penetration, the
new initiatives from industry and government could well bring affordable,
high-speed connectivity within the range of most consumers and go on to herald
the next wave of computing among Indians.

The Industry is Ready to Go

One of the key reasons for the dearth of broadband services is the heavy
infrastructure cost that is required to set up the services. A recent discussion
paper prepared jointly by CII, Department of Telecom (DoT) and Department of
Information 

Technology estimates that capital costs for a broadband network
during the first three to five years after the rollout may range between $400 to
$1,000 per subscriber. To match costs against revenues, many broadband providers
have so far been primarily selling wideband connections–which is finally
changing for good.

There are new broadband initiatives from many companies using a range of
technologies from DSL to WiFi, and cable to Ethernet-to-home. Reliance Infocomm
has announced plans to enter the market with its fiber-Ethernet solution focused
on the enterprise, commercial and high-rise residential markets. The service
will be available with a pan-India presence, thanks to company’s own
nationwide fiber backbone. Dishnet too has tied up with Tata Telecom for
providing DSL-based broadband access.

A provider like Sify is also looking at leveraging the cable network to
deliver broadband services. Sify has tied up 12,000 customers in Delhi and
Mumbai alone by December 2003, and plans to roll its services in 12 cities,
including Bangalore, Hyderabad, Pune and Chandigarh, by March next.

Sify has also expanded its broadband cyber cafes across 40 cities in India.
Interestingly, cyber cafes may play a significant role in bringing broadband
access within reach of millions of people with no PCs. Already, some of them are
equipped to provide facilities like video-conferencing and Internet telephony.

In wireless access, Bharti Infotel has begun bundling a WiFi access point
with its DSL connection. In later phases, the company intends to deploy WiFi at
public places including airports, exhibition centers, restaurants, etc.

But even as the services proliferate, the key concern remains the pricing of
the services if they were to achieve mass penetration. The CII discussion paper
points out that broadband market across the world really takes off when the
pricing comes within range of 1.5 times the narrowband charges. In the Indian
context, it may mean that monthly broadband access in the range of Rs 600—800
per month will be the driving factor for mass adoption.

For prices to fall to that level, there is a need for a concerted effort by
both industries and the government.

On the content side, it is critical for customers to be provided value-added
content right from day one of their signing up, if the broadband industry is to
remain viable. And it is equally critical for content to be localized and made
available in local languages for it to be successful.

The flexibility of a broadband connectivity allows different types of content
services to be provided. The primary among them can be video/audio channels,
interactive gaming, distance education on the consumer side, and e-commerce
applications and Web applications on the enterprise side. International
experience also shows that video-on-demand is successful in Japan, Korea and
China. Gaming is a huge application in Korea.

There are a few other hurdles facing the industry though, and
"availability of affordable international bandwidth continues to remain a
major concern", according to Sify. Even the last-mile access is a big
bottleneck for a pure-play broadband operator. Rustom Irani, CTO at Sify, points
out that providing affordable, and dependable end-user access is proving
elusive, "because of factors like the fragmented nature of the cable
market; the high cost and inconvenience of laying cable or fiber at street
level; phone operators refusing to unbundle the last mile copper; restrictions
on spectrum availability and use; and so on." And this is where the
government needs to step in and make a significant contribution.

What the Govt Needs to Do

The fact that government initiative in terms of a proactive broadband policy
is a basic requirement for increasing broadband penetration is a given as per a
recent TRAI discussion paper on ‘Accelerating the Growth of Internet and
Broadband Penetration’. "To complement and advance the policy initiatives
in the area of telephony, the next initiative, perhaps even stronger than the
previous ones, must come in the form of promoting penetration of the Internet
and broadband", says the TRAI paper.

South Korea is the country with the highest levels of broadband penetration,
and behind its success it had everything from a national plan for broadband,
Internet penetration policy and reasonably proactive management of the industry
and market by the government.

Both CII and TRAI papers debate the presence of a national broadband plan for
guiding the country towards higher broadband penetration. In any case, there are
three distinct areas where government needs to play its role in helping the
industry grow.

Formulation of policies, rules and regulations to govern the broadband
industry is the foremost task confronting the government. The task encompasses
everything from creation of an industry regulator, on the lines of TRAI, to
ensuring fair competition, and settling issues like licensing, right of way,
radio spectrum allocations, etc. An operator like Sify points out the pricing of
international bandwidth as a major hurdle in bringing end-user access charges
down.

While mandating of prices and charges for broadband access is not quite
necessary, if we refer to the experience of mobile telephony in the last few
years, quality of service is definitely to be regulated to protect the interests
of customers.

On the pricing issue though, there is a lot desired from the government. To
help service providers reduce access charges, the government can provide direct
or indirect subsidies–in the nature of abolishing taxes and duties or
providing funding for 

infrastructure rollouts. Even the abolition of taxes and
duties can have a major impact on end-user pricing. For example, a customer’s
broadband bill of Rs 1,785 per month in present-day environment can fall to less
than half at Rs 800 per month, provided all taxes and duties are waived off. The
taxes and duties are primarily import duties on broadband infrastructure
(including DSL modems/set-top boxes), apart from entertainment and service
taxes.

In addition, there has to a comprehensive copyright framework, including IPR
and digital rights management (DRM) laws, if the content industry is to take off
in a big way. The availability of international content is dependent on a big
way on existence of these laws.

With adequate backing from the government, there is no reason why India can’t
enter the next generation of communication revolution–the broadband.



Rishi Seth in New Delhi

The Global Broadband Brigades

Broadband is increasingly recognized as a key catalyst of a nation’s
socioeconomic growth. Interestingly, the comparison of broadband markets
worldwide shows that the presence of a national plan or policy for broadband is
a vital ingredient for a successful business to emerge.

South Korea, with its whopping 57.5% broadband penetration is the biggest
case in point. This growth has been a recent and accelerated phenomenon. In
1995, Korea had less than one Internet user per 100 inhabitants, but it
surpassed the developed nation average of approximately 25 by 1999. By the end
of 2002, it became the world’s fifth largest Internet market, with the third
highest penetration (highest in Asia).

To attract consumers, ISPs in South Korea have favored flat-rate pricing,
based on the bandwidth required, and the tariff in Korea today is among the
lowest in the world–at $30 per month for 10 Mbps downstream. The industry
there augments its revenues through other means–a good $148 billion, nearly
30% of GDP, was transacted on the Internet last year in Korea.

Another Asian country with a broadband policy, Malaysia is also possibly the
only country to have mandated USO in broadband. As part of the Malaysian
government’s overall objectives for ICT growth, it has stated that universal
access includes access to data at 128 kbps, as well as a telephone line.

The Chinese government too has set a target of 200 million Internet users by
2005, or a density of 15.6 users per 100 inhabitants. Additionally, the goal
there is 30—40% of broadband access.

The British government unveiled its own broadband master plan in July-end
2003. The government is setting up nine regional access bodies (RABs) across the
UK to drive the aggregation of public-sector broadband demand–a move that it
believes will play a major role in closing the high-speed digital divide–according
to a ZDNet report.

Each RAB will bundle together total demand for broadband from the public
sector–schools, hospitals and other institutions–in its area, and telecom
operators will be invited to pitch for the contract to satisfy this demand.
According to the government, once public sector buildings have been upgraded to
broadband, it will be cheaper for telcos to offer high-speed connectivity to
nearby residents.

Britain’s broadband industry, which has enjoyed impressive take-up of both
ADSL and cable broadband services thanks to a series of price cuts and
aggressive advertising campaigns since early 2002, reached a critical mass of
three million users early in December 2003. Analysts estimate up to 49,000 new
connections are being added each week in Britain.