India has done well on voice telephony, but we still have a long way to go in broadband. In terms of numbers, we have achieved 884 mn SIMs on mobile, whereas broadband stands at 13.13 mn (as on November 2011). On an average, the country is adding 0.15 mn broadband connections every month, which is abysmally low considering the fact that India is still adding 2.74 mn SIMs per month on mobile and of this less than 5percent use wireless broadband though the service is not near to the broadband speed of 256 Kbps.
In terms of voice telephony, we have achieved a tele-density of 73.44percent, whereas broadband penetration is still very low and there is a lot of opportunity. It's a virgin market and the field is wide open. The question is not only about broadband numbers but also about quality of broadband services which still needs a lot of improvement as we move forward. Presently, we are focusing on 256 Kbps and above as broadband and even this is not available on a consistent basis, whereas worldwide countries have been focusing on 2 Mbps and above. So, India needs to move up from 256 Kbps to 512 Kbps and above and also provide a consistent speed for both uplink and downlink.
The revenue numbers for broadband services are very encouraging and there is a lot of scope for these services in the future. According to VOICE&DATA, the Indian telecom services industry is around '166,168 crore in FY11, and is growing at the rate of 15percent which shows there is lot of scope for services be it broadband, enterprise, or value added services. If one looks at broadband numbers, the market in FY11 was at around '6,846 crore. In terms of growth, the industry has registered 22.4percent, which is higher than telecom industry growth of 15percent. RIL would like to multiply this market, so that it can get a larger share of this pie.
RIL's Broadband Strategy
Operator: Acquire or Align
RCom's support can help in faster rollout of 4G broadband services. Also, RCom can provide 3G handoff wherever 4G services are not available
Acquisition of 2G/3G operators (old or new) for market consolidation and better margins
BSNL acquisition can give access to broadband customers, rural network, tower infrastructure, and key government clients
Backbone: Multiple Strategies
Fiber backbone for building a robust backbone
RCom backbone network can be leveraged for carrying high-capacity data and video content
Reliance Infratel can provide 58,000 towers for leasing of eNodeB sites
Cable infrastructure to be leveraged, as they have good metro fiber connectivity
Hotspot players need to be leveraged, as subscribers can toggle between 4G/3G and Wi-Fi operators
Content: Attractive Mixed with Localization
Agreement with TV18 and Network18 for preferential access
Investment in ETV channels for vernacular and localized content
Leverage TV18, Network18, ETV, Reliance Entertainment, and others for entertainment, news, and music
Investment in Extramarks Education for leveraging school education on digital learning mode
MoU with Siemens for jointly developing security solutions for safe, secure, and smart cities, highways, and homes
Develop VAS ecosystem with focus on innovation
Device: Multiple Options
Should provide multiple device options to subscribers by offering services through dongle, tablets, smartphones, Wi-Fi, netbooks, and laptops
Can start with dongle, tablet, and Wi-Fi and later introduce smartphone, netbook, and laptop
Tablets should be made available between '3,000 and '3,500 and also on affordable monthly installments
Device should be bundled with attractive mix of content to make the package look attractive
RIL can leverage its retail network channel for selling products and solutions to an end-consumer
RCom's retail network can also be leveraged for selling products and solutions to end-consumer
For devices, RIL should focus on UI (user interface)
Pricing: Replicate Monsoon Hungama
Replicate Monsoon Hungama for 4G broadband services since this was a very successful brand campaign
Pricing should be around '500 per month for broadband services with right mix of content
Monthly Plan should be fixed price plan and should be transparent
Services should include a whole bouquet right fron internet, TV, movie, music, and games
Reliance Broadband Vision
Leadership in a new frontier of knowledge economy
Pan-India presence providing seamless service
State-of-the-art technology platforms leading to maximum capacity and efficiency
Focus in both rural and urban markets, propelling India into global data leadership
Create end-to-end solutions that address the entire data value chain, serve business enterprises, social organizations, educational and healthcare institutions, and Indian consumers
Asset light approach, in collaboration with strategic partners like global technology players, service providers, infrastructure providers, application developers, and device manufacturers.
On the other hand, the entertainment industry has also shown a lot of optimism in terms of future growth. According to PwC's India Entertainment and Media Outlook 2011, the Indian entertainment & media industry is estimated to grow from '64,600 crore in 2010, at a CAGR of 13.2percent for the next 5 years, to reach '119,890 crore. Of this, TV, film, radio, and music contribute a total of '41,430 crore; and by 2015, Indian media industry is estimated to grow to '78,640 crore.
Although telecom and entertainment market is small for any operator, but if one can mix broadband with entertainment, the market increases by many times and this is very lucrative for broadband wireless access (BWA) players like RIL. So, one has to see what is the business model that BWA operators focus on for offering wireless broadband in the country.
The task for BWA operators is not easy, as they have to build a pan-India information superhighway. Even in the case of mobile telephony, it wasn't easy in 1994 and operators took almost 10 years to crack the mobile telephony success code. The country saw an upsurge in mobile numbers, thanks to the removal of calling party pays (CPP) and drastic cut in mobile telephony tariff. These steps helped in bringing momentum, leading to increase in monthly subscriber additions to the tune of 20-24 mn lines per month. On the broadband front, we still have a long way to go; and it seems, RIL is moving slowly in the right direction to come up with a success formula to boost wireless broadband in the country.
Presently, 3G operators-be it Bharti airtel, Vodafone, Idea Cellular, BSNL, Tata DOCOMO, Aircel, and RCom-have been struggling to capture the wireless broadband market. And, their single-point agenda presently is to capture internet access through data card. The data card uptake has not been encouraging in 3G space, as CDMA operators like RCom, Tata Teleservices, and MTS have also been offering data cards for an internet access. Therefore the big question is what should be RIL's strategy to give a tough fight to its competitors for capturing a larger share of broadband pie?
VOICE&DATA has gone through in detail about different steps that RIL has taken or will take to be successful in wireless broadband. For wireless broadband, RIL's strategy should focus on the 5 key mantras: Operator strategy, backbone strategy, content strategy, device strategy, and pricing strategy. All these strategies have to work in tandem for a positive result. These strategies will definitely help the company to change the broadband scenario by enlarging the broadband market and also help RIL to get a majority share. And, this exactly fits into RIL's vision of creating end-to-end solutions that address the entire data value chain.
Also, RIL has an advantage this time as it's working in a market where BWA services are yet to be launched by any operator. In mobile telephony, the company was not at the same pedestal as Bharti airtel, Vodafone, Idea, and Aircel had started long back and Reliance and Tata were the late entrants. In the past, the company has done well in a monopoly environment; so chances are that it plans to do well even in a broadband wireless market where it would be a monopoly. This time RIL will have a monopoly as BSNL, another close pan-India operator, is already planning to surrender BWA license, which would be a great advantage to RIL.
Already, the company has invested around $2.8 bn in terms of pan-India BWA license, and is the only BWA player with license to operate in all 22 circles. One of its group companies, Rancore Technologies, a fully owned subsidiary of RIL is focusing on research and development for 4G network and services. Rancore has close to 350 engineers comprising core product designers, systems QA engineers, telecom experts, and business analysts. The company has been focusing on standardization, technology evaluation and validation, acceptance testing, planning & engineering, operations, and management. This will help the company to come up with a world-class network and system design for a pan-India broadband network.
Also, Reliance is seeking help of Alcatel-Lucent who have been providing infrastructure to the biggest LTE operators like Verizon Wireless in the US. The company also has a joint initiative with Alcatel-Lucent, headed by Kenneth Frank and has been asked to come and provide help for a broadband project. This will help in bringing the expertise of Bell Labs and US operators to the Indian market. This is an interesting idea whereby knowledge gets merged with other pockets of knowledge. So, the knowledge of operator, knowledge of a technology company, and the knowledge of application provider will definitely help to do things faster and better.
Operator: Acquire or align
There has been lot of talk about the coming together of both the brothers-Anil Ambani and Mukesh Ambani. We believe without this alignment, it would be extremely difficult for RIL to roll out broadband services at a fast pace, since it has to start right from the scratch. It would not be easy for Mukesh Ambani to create a information super highway without the support of RCom network. So, the coming together of the 2 brothers is a win-win for both and is also a market necessity. At the same time, RCom's close proximity will help RIL in services, tower sharing, OFC backbone, content, and others. It will also help in providing 3G handoff wherever 4G services of RIL is not there or are not available. This will help the customers to get an ubiquitous coverage and also help in leveraging each others strength.
Presently, RCom offers CDMA and GSM based wireless services on a nationwide basis and has started 3G services in 13 circles. In terms of coverage, RCom services are available in 24,000 towns, 6 lakh villages, and all major railway routes and highways thereby covering 90percent of the country's population. On CDMA platform, RCom offers Netconnect Broadband+ services in over 1,000 cities with seamless handover to 1x service across 20,000 towns.
The coming together of the 2 brothers will definitely give RIL an access to RCom's network, which can be leveraged thereby making Mukesh Ambani's job a lot more easier. It should also give RIL a head start vis-à-vis with other operators in BWA space.
Even the merger & acquisition policy of the Department of Telecom (DoT) looks favorable towards Reliance which will help mobile operators to consolidate whenever the need arises for the company. This is also beneficial for RIL and they can acquire lot of old or new 2G/3G operators as they have exceptionally solid balance sheet, strong liquidity, and superior cash generation. All this provides it the ability to fund new businesses and maintain financial flexibility for a pan-India broadband project.
With respect to acquisition, there has been some talks going on in the background but nothing is official. It seems this will gather steam only after 2G scam verdict is out. According to industry sources, RIL is also looking at BSNL disinvestment in the long term, as this will assist the company gain access to large rural network, 45k towers, key government clients, big wireline base, copper network, and large base of broadband customers. The acquisition would not be easy, but whenever it happens it would definitely give a lot of strength to RIL and would be helpful in the second phase of consolidation.
Backbone: Multiple strategies
In case of backbone, RIL is still in a dilemma, as this is the most difficult strategy for them to crack. To build a robust backbone, the company needs to create an OFC backbone, and for this they can leverage on RCom's OFC backbone, but this needs to be augmented so that it can carry both 3G and 4G traffic. The long distance network is not a problem, but the problem is in metro network. To address this issue, the company is aligning up with large cable operators like Hathway and DEN Networks. To make the network look more robust, the company will also have to lease OFC from other operators.
On the backbone front, RCom has a large inter-city long distance network with over 190,000 route kilometers of ducted fiber optic cables. Also, the company has an asset of over 25,000 route kilometers of ducted fiber optic cables installed in the leading cities in India. Simultaneously, the company also has metro fiber optic networks in 44 cities in India, with close to 1,134,000 buildings connected.
With respect to cable network, India has around 94 mn homes cable connections-of which 88 mn are analog and 6 mn are digital connections. Initially, RIL can focus on 6 mn digital connections for providing internet access and IP-TV services. Also, RIL can plan to use cable network more as a franchisee for their services, as they have a large base of customers and they are in direct touch with them every month.
RIL can also use Reliance Infratel 58,000 towers for loading their eNodeB sites as presently they have a tenancy ratio of 1.74. The company can also leverage 45,000 towers of BSNL, as the company is in the process of renting it out to other service providers. All of this will help them in faster rollout of broadband services. This will only happen once they finalize the infrastructure partners.
On international bandwidth front, the company can leverage Reliance Globalcom, as the company serves over 2,100 enterprises, 200 carriers, and 2.5 mn retail customers in 163 countries. The company also owns the world's largest private undersea cable system spanning 65,000 km with a robust global service delivery platform connecting key markets like India, the Middle East, Asia, Europe, and the US.
LTE customers in US experience average data rates of 5-12 Mbps on the downlink and 2-5 Mbps on the uplink. When customers travel outside of a 4G LTE coverage area, they are automatically connect to 3G network or Wi-Fi network, enabling customers to stay connected. Using this handoff, customers can enjoy the best experience in video and other wireless data usage. In terms of hotspots, some operators provides access to more than 29,000 hotspots.
Another concern area for RIL would be hotspots as there are not many hotspot operators in the country and also number of hotspots are also limited. The company can tie with players like O-Zone and Spectranet for Wi-Fi connectivity. Whenever the user is within the Wi-Fi hotspots developed by the company, hotspot operators will enable seamless migration of subscribers from their existing 4G networks to Wi-Fi. O-Zone claims to have 5,000 Wi-Fi hotspots in its list, out of which 3,000 hotspots are operational. By 2012, the company plans to create 20,000 Wi-Fi hotspots in India.
Content: Attractive Mixed with Localization
BWA network will open up a host of services such as high speed internet access, video on demand, video conferencing, streaming music, 3D gaming, and full motion video. This will help in enabling rapid growth in data usage, in both rural and urban markets, propelling India into global data leadership. So, RIL is looking at content very aggressively. The focus is on TV channels, movies, education content, and security solutions.
The combo of Network18, TV18, Eenadu, and Reliance Entertainment gives RIL a distinct edge in comparison to others on the content part. In the first phase, it seems RIL will focus on an end-consumer for helping the company to get the requisite number of subscribers. Later, the company will focus on enterprise services with vertical-wise offerings. The focus is on verticals like government, health, and education. Initially, RIL is focusing on content related to entertainment, education, and vernacular content. The company lacks on sports-related content for which the company can go for a tie-up.
In this regard, the company through investments of about '2,600 crore, by its group companies, currently holds interest in various ETV channels being operated and managed by Eenadu Group which includes: ETV Uttar Pradesh, ETV Madhya Pradesh, ETV Rajasthan, ETV Bihar, ETV Urdu, ETV Marathi, ETV Kannada, ETV Bangla, ETV Gujarati, ETV Oriya, ETV Telugu, and ETV Telugu News.
In order to get the content piece, Infotel Broadband Services, a subsidiary of RIL, has entered into a Memorandum of Understanding (MoU) with TV18 and Network18. This MoU will enable preferential access to the content of all the media and web properties of Network 18 and its associates and programming and digital content of all the broadcasting channels of TV18 and its associates on a first right basis, as the most preferred customer for broadband network.
With this MoU, RIL will get bouquet of around 25 channels for providing Live TV experience to broadband customers pan-India. The customers can also leverage Network18's web portals and e-commerce thereby creating differentiating services for Infotel.
The company can also leverage on Reliance Entertainment network as the company focuses on internet & new media, film entertainment (film production, distribution, and exhibition) and broadcast channel featuring locally relevant content around humor, Bollywood, movies, and music. The company has also built an impressive film production bouquet in Hindi, English, and other Indian languages. The company is also also associated with TV programming through Reliance Synergy. Even Reliance MediaWorks would prove handy for digital mastering.
The company has also acquired a 38.5percent stake in Extramarks Education, a company focused on school education (10th and 12th). Extramarks' digital distribution model will help in providing student community across age groups education support and study help at affordable prices. Even this can be leveraged through 4G broadband network.
The Indian security market is expected to be one of the largest growing markets in the world, and India plans to use 4G networks for law-enforcement purposes. In this regard, Reliance Security Solutions, a subsidiary of RIL, has partnered with Siemens to bring state-of-the-art homeland security solutions. The 2 companies will jointly develop homeland security solutions for safe, secure, and smart cities and highways in India.
All this will definitely give an advantage, but one needs to see how it's packaged and at what price it's made available to the end-consumer.
Device: Multiple Options
In the US, LTE operators offer a great selection of devices be it smartphones, tablets, mobile hotspots, netbook, laptop, and USB modems for broadband services. RIL should also offer the same flexibility whenever it launches services as it will help in providing services to all customer groups and the focus should be on affordable devices for mass market and providing the end-user experience through better UI (user interface).
To start with, Reliance can introduce dongles, tablets, and Wi-Fi and products like netbooks, laptops, and smartphones can be introduced at a later phase. On the tablet front, the company should price it at '3,000-3,500 or on affordable monthly installments, but it needs to be bundled with a good content package. So, the packaging will help in creating demands for these services, and this is where the company needs to innovate.
The devices can be marketed through RIL-organized retails which has a presence across 100 cities and operates over 1,100 stores. The company also has more than 7.5 mn loyal customers, which can be leveraged for attractive broadband services. Also, the company has strategic partnerships with world-class brands like Apple, Marks & Spencer, ASICS, DIESEL, Paul & Shark, Timberland, Pearle Vision, and Hamleys, which can be leveraged.
Not only this, RCom network can be even utilized for marketing of an entire range of products and services as and when they are launched in the market.
Pricing: Monsoon Hungama
In Monsoon Hungama scheme, Reliance offered a multimedia mobile phone with a connection for an upfront payment of only '501. Under the scheme, the customer has to choose from the 3 monthly plan options on offer-Budget 149, Budget 249, and Dhirubhai Ambani Pioneer Offer. And this was a great hit. The company needs to just replicate it with an attractive bouquet of services which includes internet, TV, movies, music, and games.
The company should focus on providing an unlimited experience of entertainment-led broadband penetration, with focus on data, movie, music, and games. And, price such schemes at '500 or '600 per month, which would be a win-win experience for all consumer.
So, the big question is when will the broadband services get launched? As per the insiders in the industry, we will see a large-scale launch of these services by RIL in FY 2012-13, as they need to do a lot before it looks attractive to the majority of consumers.