Indian Broadband: New Rules, New Game

2004-09-27T02:10:00.000-07:00

Indian Broadband: New Rules, New Game
(A forecast for Q4 2004 to Q4 2005) (By Jeny Elizabeth Sacaria and Aditya Athalye)

The much debated Indian broadband scenario in the next one-year will be chaotic to say the least. But from this chaos will emerge a new order of things. The seeds for this have been sown to some extent and the next year will see more developments to this end. This section takes a look at four areas of broadband in India and these are: Access, National Backbone, International Bandwidth and Regulation.

Access

Broadband is really an access side game and we’ll look at access on two fronts: Enterprise segment and Consumer segment. We expect aggressive moves on both these fronts. The enterprise segment is likely to be dominated by Reliance with its ambitious FTTB project and the consumer segment by BSNL and MTNL because of their control over nearly all the copper in the last mile. The enterprise segment will particularly benefit from a significant slash in domestic leased line prices from across the board due to surplus international bandwidth becoming available on both trans-Atlantic and trans-Pacific routes from Q4 2004 through to Q4 2005. So the game will revolve around value added services such as Managed Services, On Demand Services and tactics of ‘Proactive Consultancy’ from the service providers’ end.

The growth in the Consumer segment will by far be driven by deployment of ADSL by the BSOs because of the stay on LLU. So the other operators will have to rough it out with a franchisee model to share copper or deploy their own wireless infrastructure. However this growth will be restricted to a few top cities only. Furthermore, we think, DTH and Broadband over Cable will be a distant second. The reason is that DTH has run into regulatory trouble with the Department of Space putting it’s foot down against the proposed ‘Open Sky Policy’ citing National security as a concern. The present Cable infrastructure in the access is not reliable enough to deliver consistently good Internet experience at the new definition of broadband at 256Kbps. Some pockets like the Metros do have superior cable access, but such is not the case across the country.

From a business perspective, the cable market is too fragmented for it to be convenient for a single backhaul Network Service Provider (NSP) to negotiate favourable deals in each local region / area. As such it is unlikely that NSPs will bank on cable as a formula for success. Also, Broadband per se will not really hit mass market unless consumers are comfortable with the price points. The one time fixed charges are still too high, which we feel is a barrier. Besides this, we don’t see masses getting attracted to 256 Kbps broadband services unless monthly subscription charges for the same fall to the Rs. 400 to Rs. 500 price band.

Other technologies such as Metro Ethernet, WiMax, and WiFi will be deployed, in a limited manner, in what may be termed as a ‘soft launch'. The year 2005 is really going to be proving grounds for these emerging technologies.

National Backbone

Expansion of backbone network infrastructure by NLD operators will continue. Overall, this will be boosted by the Government’s plan for a 60,000 Km national backbone. This expansion process is also very likely to include the acquisition of local players by the big five to expand reach faster inorganically.

Realignments are expected in the big five businesses, which will bring benefits to broadband; an example of which is BTVL’s recent move to bring all its divisions under the single umbrella of its Airtel brand. The move will allow Bharti to pass on the advantage of Airtel’s strong brand image to make its broadband services more visible.

International Bandwidth

The international bandwidth scenario has witnessed a nearly 40% fall in prices for IPLCs near the beginning of Q3 of 2004. The trend of falling prices will continue, as mentioned earlier, with increase in available capacity on both eastbound and westbound routes.

Regulation

Unfortunately, regulation has run into many problems with the much-anticipated Broadband Policy getting delayed again. The DoT and DoS have both taken a hard-line stance against LLU and ‘Open Sky’ proposals. What is worse is that the Finance Ministry has summarily rejected all the proposals, aimed at cost reduction, of tax sops and relaxation in duties. So the new broadband policy is definitely not going to be as consumer friendly as the Regulator originally envisioned it to be. We feel this will be a drag on the mass uptake of Broadband services over the next year.

In conclusion, 2005 will be an interesting year for broadband with many scenarios being played out. Out of which will emerge key trends that we have discussed. All in all the next year will show that Broadband in India is going to be about new rules and a new game.

numbah wun

2004-09-19T13:28:00.000-07:00

hey yall... this my blog posting no 1... it's the mornin of Sep the 20th (0202 hrs to be precise :) and i'm doin this over a dialup connection and wonderin' when will we ordinary people get 256K of undiluted broadband indulgence at a price that doesn't blow holes in our pocket... well i guess it's happy dreaming for now... coz i'm feelin pretty drowsy now... am off to dreamland. cyal8r

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Indian Broadband: New Rules, New Game

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